When to use microlenders for a business loan:
- You have terrible credit or no credit history.
- You are a new business.
- You are unable to obtain a typical loan.
Microlenders are non-profit organizations that make short-term loans of less than $50,000. These loans often have higher interest rates than bank loans. A detailed business plan, financial statements, and a description of how the loan will be used may be required, making the application procedure time-consuming.
Furthermore, the loans are, by definition, “micro.” However, these loans may be beneficial for smaller businesses or startups that are unable to obtain typical bank loans due to a lack of operating history, bad personal credit, or a lack of collateral.
Collect your paperwork.
Make sure you have all of the necessary papers before applying. Locating and making these files available now will help to speed the process of obtaining a small-business financing.
Depending on the lender, you may be required to submit a mix of the following documents:
- Personal and business tax returns
- Bank statements for both business and personal use.
- Financial statements for a business.
- Legal documentation for businesses (e.g., articles of incorporation, commercial lease, franchise agreement).
- Business strategy.
Request a business loan
You did it! It’s time to apply now that you’ve established which form of loan and lender are best for you.
Begin by comparing two or three similar loan terms and annual percentage rates, or APRs. APR is the easiest way to comprehend the overall cost of a company loan for the year because it includes all loan fees in addition to the interest rate.
Choose the loan with the lowest APR (as long as you can afford the loan’s regular payments) and apply with the documentation you’ve acquired.
It’s worth noting that credit bureaus don’t distinguish between business and personal queries. When applying for a small business loan, your credit score may be damaged if you utilize your personal credit history, which is why it’s crucial to go with your best bet.