Microlending is a recent innovation made possible by technology and global interconnectivity. It allows people looking to invest to fund borrowers that otherwise may not be able to secure credit. Both parties can benefit from this arrangement, but each also should be aware of the specific terms and conditions that apply.
Microloans are generally available at a lower credit limit than SBA business loans and may have a shorter payback term. They also may have higher interest rates than other forms of small business financing. Most microlenders do not use credit scores as a screening tool for loan applicants. However, serious financial issues can disqualify a borrower from receiving funding. Some lenders, such as the 소액대출 Foundation, require borrowers to deposit a percentage of each payment in an account that cannot be accessed until the loan is fully paid off. This raises the effective rate of the loan by a factor of around 2 to 3 times the nominal gross portfolio yield reported by Mix Market.
In addition, many microlenders charge other fees to cover expenses related to managing a loan portfolio or collecting payments from borrowers. These fees, including a one-time fee for processing each application, the flat rate of interest charged on a loan and bundled credit life insurance, can raise the actual cost of a microloan significantly.
Many microlenders charge a variety of fees to make loans. These include a loan origination fee, which is usually a percentage of the borrowed amount; an application fee, which covers the cost of reviewing the borrower’s financial records; and administrative fees for processing payments, which are often included in the loan’s total interest rate. Borrowers should consider all of the fees associated with a microloan before applying for one. The amount of these fees may significantly increase the loan’s effective rate of interest.
Some small business owners turn to microloans as an alternative to traditional credit cards or personal loans. The loans are available through microlenders, community development finance institutions and minority deposit institutions, as well as online lenders like Kiva. Because these loans aren’t guaranteed by banks or other lenders, they’re subject to more economic risk than secured loans. This can be mitigated to some extent by spreading the loan portfolio across a large number of loans, but it’s not always possible to diversify enough to completely hedge against global or regional economic factors.
Many microlenders don’t require excellent personal or business credit to qualify for a loan, so these loans may be a good option for small businesses and entrepreneurs with average or below-average credit. However, some lenders may require collateral or a personal guarantee from the borrower as well. Nav can help you compare different lender periods of time so you can find the right one for your business needs. Sign up for a free Nav account to see which business loans you’re most likely to qualify for.
A microloan 예금계산기 can help borrowers and lenders review their options. It can show them how much a loan may cost when fees are included. This can help borrowers understand whether it is worth seeking a microloan, or if they would be better off with another type of small business financing.
Other types of small business financing include business credit cards, which offer higher limits and lower rates than SBA microloans. These are also available from other lenders, including Community Development Financial Institutions and Minority Deposit Insitutions, as well as from online and mobile lending platforms. Borrowers can also use unpaid invoices to secure invoice factoring or financing, which advances cash against those invoices.
Some small businesses opt to take out microloans from peer-to-peer lending companies, such as Prosper. These loans do not require collateral and may have more flexible repayment terms than a traditional bank loan.
Let’s say a beauty salon owner finds the perfect spot for her new location and needs to secure a deposit. She may be able to use her microloan funds to cover that expense. Lenders looking to earn higher returns on their investments fund borrowers through microlending platforms. This is a popular way to raise funds for small business.