Whether you’re considering investing in the advertisement, marketing or simply expanding your promising business, you cannot escape the subject of adequate funds.
The same case applies when you realize your finances aren’t adding up and the cash flow gap might cause delays of salaries/wages.
When this happens, it’s normal if you want to consider various funding options to ensure everything continuous running smoothly, at least until you can get on your feet again.
One of such options is the microloan. But before you jump into the idea, you need to evaluate your situation to be sure if that’s the correct path to take.
Find out below;
As its name depicts, a microloan is a small loan that normally ranges from between $600 to around $50,000. And due to their nature, they are meant for start-ups to help them in their early operation stages such as in dealing with inventory bills, supplies, tools, and general running capital. And they can be accessed through Small Business Administration(SBA), within your location.
Why Will You Need A Micro Loan
Although everyone has easy access to microloans, you should consider it only when it’s necessary. And the criteria to use include;
You Don’t Have Enough Collateral
Getting a loan from a bank requires some sort of collateral as security and that could include properties or assets. Since most small businesses don’t have this, they’re normally turned down, hence the need for other options.
Bad Credit Score
If you’re planning on applying for financing from a banking institution, then your credit history must be good. They will run you through a credit history and check out your score and this will determine how much you get and the interest to incur.
But since you’re starting out, you might not have to build a good score for yourself due to weak cash flow or missed payments and this could get your application denied.
And it’s during those times of financial hardships that you can apply here for various SBAs such as the Payday loans or popularly refer to as bad credit loans. Most of them come with favorable interest rates, thus preferred during such hardships.
Less Cash Flow
This is when your business is struggling and there’s barely monthly enough revenue generation.
You want Small Loan Amounts
When your startup business needs only a small financial boost, there is no need to go to the bank for that, microloans sound like the ideal option.
When Should I Not Consider A Micro-loan
You can consider a greater financial boost, such as one from a bank if your credit score is perfect, you have enough collateral, your business’s cash flow is at its peak and you want a big loan. Another reason could be because you have enough funds to keep operating if you find an investor or family and friends decide to chip in.
Getting a loan to boost the operations of your small business is a great way to stay in business. But before you apply for one, it’s always good to know if actually, you need one or not.
And that is by knowing your credit score, collateral capability, the amount of money you need and how well you’re doing as a business. Getting the perfect loan for your current situation should be the goal.