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What is a Microloan? Is it Right for My Business?

In the world of lending to small businesses, microloans have become a hot topic. These small loans are defined by their purpose and meaning. Many lenders use the word for loans that do not fit the original definition. You’ve come to the right place if you want to know “what is microloan?” We’ll look at the meaning of microloans at home and abroad, and see if they are right for your company.

What Exactly is a Microloan?

A microloan refers to a particular type of loan. Microloans are defined by a few factors:

The Amount Lended

A microloan can be for a small amount. In developing countries where the concept was first introduced, funds could be as little as $25 or $50. It is usually enough to start a small business or meet a financial need.

In the U.S., microloans are usually for higher amounts due to the high cost of goods and service in the country. They tend to still be smaller amounts. The U.S. Small Business Administration manages a microlending programme where, for example, the average amount of a loan is approximately $13,000.

Types of Lender

Microloans are not provided by a bank, alternative lender or any other type of company. Individuals or nonprofits are the ones who provide them.

Investopedia stated that individual lenders use microloans to earn high returns for small initial investments. Some lenders may be motivated to assist entrepreneurs, particularly in developing countries. This drive to help small business owners is also the reason why nonprofits provide loans. This is true both in the U.S. as well as abroad.

Types of Recipient

Two categories of microloan customers tend to be found:

The Balance explains 1 – Entrepreneurs from developing countries who may find it hard to obtain traditional loans.
Residents of the United States who are starting a new business or owning an existing one, but do not qualify for a loan from a bank or only need a small amount.

Microloans can help meet the needs of both these underserved market segments. The answer to the question, “What is a Microloan?” is determined by this distinction.

Microloans and Small Business Loans from Banks

A microloan is a good option for a business owner who wants to finance a small opportunity or project but cannot get the money from a traditional lender due to the lending limit being too high. A borrower who has a poor credit rating or is concerned about other factors may also turn to a Microloan provider if a traditional bank loan does not work.

Alternative Lenders: Their Value

It’s important that you understand the limitations of a microloan and know there are other options available. Alternative lenders, such as QuickBridge, are more flexible when it comes to providing funding for business owners. When you partner with an alternative lender, you can:

You are not restricted by bank regulations and rules.
You don’t need to stick within the microloan limits. Instead, you can ask for and receive smaller loans.
* You can build a relationship that is solely focused on small businesses, like yours.

Before applying for small-business loans, you should ask all the questions that you can. QuickBridge partners tend to be satisfied with the answers that they receive. We spend the time necessary to create loan agreements that are tailored to your specific needs. This builds a relationship between us that is mutually beneficial.

Contact us to learn more about our services and how they can benefit your business.

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