Many startups and struggling businesses have a hard time getting financing from traditional lenders. They may not have the down payment, collateral, or profit margins to qualify for a loan.
One solution is to get a microloan. Like the name suggests, microloans are smaller business loans that range anywhere from $5,000 to $50,000.
Typically, microloans are issued by nonprofit organizations or government agencies like the United States Department of Agriculture (USDA) or the Small Business Administration (SBA).
For example, the SBA microloan program is intended to help women, minorities, veterans and other small businesses get a leg up in the business world. The average SBA microloan is $13,844, and the requirements to get one are generally a lot less strict than those for a traditional business loan.
Despite all the benefits, microloans also have drawbacks. That’s why in this article, we’ll go over all the pros and cons of getting a microloan so you can make an informed business decision:
Table of Contents
First, let’s go over the advantages of microloans. Microloans offer all of the following:
That said, microloans also have the following drawbacks:
Now you know the pros and cons of taking out a microloan!
Just remember that every business is different. Yours may not be at the right stage for a microloan just yet. But if and when it is, you’re now prepared to make the right decision. Carefully weigh your financing options and then help your business leverage debt to grow.
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