In the past, small businesses relied on bank loans when in need of extra funds. Although new to the scene, microfinancing now offers additional flexible funding alternatives for small businesses.
Originally used to fund entrepreneurs in underdeveloped countries who lacked the resources, credit history and stability to pursue traditional finance options, microloans are now helping small business across the U.S. meet consumer demands and achieve strategic growth.
The average microloan is $10,000. This may seem like a nominal amount, but microlenders are finding that their borrowers often turn small loans into big success with a success rate twice the national average.
But what makes a microfinancing borrower positioned for greater success when compared to those that rely on traditional bank loans or credit cards? It all comes down to relationships, accountability and moderation – elements often overlooked by big banks.
Microlenders typically invest more than just money in their borrowers. They spend more time getting to know their borrowers on a personal level before lending, which often leads to borrowers striving to meet or exceed the lender’s expectations.
Many microlenders lend to lending circles. Groups of small businesses borrow together, support each other and in some cases are even accountable for each other’s loans. There’s nothing like camaraderie and moral support to encourage success.
As the name would suggest, microloans are small, typically capped at $50,000 with an even smaller average. Because of the limited funds being borrowed, small businesses tend to make more careful and strategic use of smaller amounts of money than you might if getting too much money in one lump sum.
Trustleaf.com, PayPal, and Accion USA are all potential places for you to seek microfinancing. In addition, you may want to consider 0% interest business credit card funding.
If you are ready to grow your small business strategically, and identify the best funding sources for your business, start by sitting down with us as your Family Business Lawyer®. We are experienced in helping small business entrepreneurs achieve success through careful financial and legal planning. As your Creative Business Lawyer®, we can establish sound legal, insurance, financial and tax systems for your business so you can focus on increasing revenue and enjoying the benefits of entrepreneurship.
This article is a service of A. J. Yolofsky, Family Business Lawyer®. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.