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Microloans Could Help Build Entrepreneur Credit
Published on Oct 30, 2012
Read 'Microloans Could Help Build Entrepreneur Credit' at 'Time to Start Up,' the small business blog by BizFilings.
Although most entrepreneurs have their minds set on big money, microloans are one tool some small business owners use to raise capital when starting a business. They can be particularly useful for individuals with poor credit.
Entrepreneurs who have poor credit might find that banks and other major lending institutions are reluctant to extend them a small business loan. That's where microlending agencies come in. Non-profit, community based lenders receive funding through the U.S. Small Business Administration to make loans to eligible local borrowers, and some lenders have special programs designed to help small business owners build or repair their credit.
According to the SBA, microloans may be used for the following purposes:
Day-to-day operating expenses
Buying supplies or stocking up on inventory
Machinery or equipment purchases
Buying office furniture and fixtures
Proceeds from a microloan cannot be used to pay existing debts or to purchase real estate. The maximum term for a microloan through an SBA agency is six years.
Chicago-based Accion is one microlending agency that provides small loans to area businesses. Startup businesses can qualify for a loan of up to $20,000, while established businesses can receive up to $50,000. For those with bad credit, Accion provides loans between $500 and $2,500 to help build credit.