It costs money to start and run a small business. Thus, securing adequate financing to enable an enterprise to operate successfully and grow is one of the first and most important actions an owner must take. However, securing financing is often difficult for new and most small businesses. That’s where microfinance in business can offer a beneficial solution. 

The Reasons Businesses Need Financing 

In addition to start-up funding, businesses often need financing for many reasons, including working capital, covering cash flow shortfalls, dealing with seasonal cash flow challenges, asset leasing or purchasing, and obtaining funds for growth.  

Where Can Businesses Obtain Financing? 

There are many sources for business funds, but they may not be readily available to small businesses. Microfinance in business can offer financing when other sources aren’t readily available.

What is Microfinance in Business? 

Microfinance in business is a financial service provided to entrepreneurs who may not have access to traditional funding sources offered by major institutions. A microfinance institution can refer a business owner to an organization that delivers small loans to help start and grow a small business. 

Microfinance institutions are focused on helping small businesses succeed, compared to traditional lending situations, which are primarily concerned with the borrower having enough collateral to cover a loan. Like conventional lending institutions, microfinance lenders charge interest on their loans and define payment terms. Some microfinance institutions can offer savings accounts and insurance policies along with small loans. 

Features of microfinance in business include smaller loans. The amount of a loan or line of credit may vary depending on the type of business seeking funding and the location of the business. Collateral is rarely required. The tenure of these loans is as short as the borrower can repay in smaller installments.

Where Can You Get Microfinancing? 

The Small Business Administration (SBA) offers microfinancing, and financing can be obtained from nonprofit organizations, banks, and alternative lenders. 

How to Get Microfinancing in Business 

As with other types of financing, microlenders want to see a well-developed business plan because they want to work with business owners who are invested in their own success and have a clear pathway to achieving their goals. Prospective borrowers should have and maintain a good credit score. The lender will be more eager to provide funding when they see that the owner has a personal investment in his/her business. 

Depending on your management qualifications and credit history, you may have the potential to pursue many choices of microcredit lenders to pursue. The more years in business and the higher your credit score, the more possibilities you will have to pursue. 

Lenders may charge various fees to provide a microloan, including an origination fee, an administrative fee, and a risk assessment fee. Be sure to know what fees are involved before agreeing to the loan.

Get Expert Alternative Financing Assistance 

Get the right type of funding for your business’s needs. Contact Multiple Financial Solutions to explore your options and discover the right funding solution for you. We offer a portfolio of alternative funding solutions for companies that can’t get funding from banks, including business lines of credit, merchant cash advances, and commercial real estate funding. We focus on businesses that have been active for 2+ years and are looking to grow to the next level. If you are facing a funding deficit, we are ready to help you.