Searching for a small, short-term loan designed for a mom-and-pop business or a small businesses with credit challenges? Sounds like you need a microlender.
Step One: Research Alternative Lenders
The first real step is to research alternative lenders in your area or those that lend online without regard to geographical location.
They are nonprofit economic development organizations approved by the SBA that offer small, short-term loans to neighborhood, mom-and-pop-type businesses, or those small businesses that have credit challenges.
Look for an established government agency or nonprofit, such as Community Development Financial Institutions and credit unions. Some city and county governments run microloan programs.
Talk with your local economic development or business development agency. Other good sources for loans referrals are Small Business Development Centers and micro enterprise development organizations. While most of them don’t lend money, they are often connected to the capital resources in their communities. Opportunity Finance Network also maintains a free locator service for member programs on its website.
Step Two: Be Loan Ready
The second step to finding a small or micro-business loan is to make sure that you are loan-ready, i.e. that you meet the criteria. That means that you have satisfactory answers to the following:
- What is the purpose of the loan?
- How the loan will be repaid?
- What is Plan B for repayment?
- Do you have a business plan?
- Do you have financial statements? (Cash flow and P & Ls)
- What is your collateral?
If you don’t meet the criteria, then seek out help from a local entrepreneurial training provider. Not only will they help a business obtain a loan, but they will help locally-grown small and micro-businesses become successful.
Step Three: If They Ask For It… Give it to ’em
Finally, be prepared to give the lender what they ask for.
Entrepreneurial training organizations often can help you with loan packaging, such as putting your documents in order and making sure the lender has all the information that they need to consider your loan application.
Learn More About Microlending
Our book Finance Your Own Business: Get On The Financing Fast Track details the power of business credit, how to get an SBA loan, the secrets of micro lenders, the benefits of crowdfunding and more.
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About the Authors
Garrett Sutton, Esq., author of Start Your own Corporation, Run Your Own Corporation, Loopholes of Real Estate, The ABC’s of Getting Out of Debt, Writing Winning Business Plans and Buying and Selling a Business in the Rich Dad Advisors series, is an attorney with over twenty-five years experience in assisting individuals and businesses to determine their appropriate corporate structure, limit their liability, protect their assets and advance their financial, personal and credit success goals.
Gerri Detweiler is the author of four books, including the Ultimate Credit Handbook (named one of the top five personal finance books of the year when it was released), and a media favorite quoted in publications like USA Today, The Wall Street Journal and featured on The Today Show and CNN. A credit educator since 1987, she’s served on credit reporting agency Experian’s Consumer Advisory Council twice.