Could You Finance Your Start-Up with a Microloan?

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Could You Finance Your Start-Up with a Microloan?

By Caron_Beesley, Contributor
Published: September 24, 2012 Updated: September 3, 2015

Not sure you have enough money to start a business? Before you raid your life savings or remortgage your home, you should know about some possible alternatives.

According to the Kauffmann Foundation, the average cost of starting a new business from scratch comes in at just over $30,000. Of course, the actual number depends on many factors, such as your industry, business model, and even the state where you’re located. To help you ascertain what it will cost you to start your new business, take a look at this earlier blog: How to Estimate the Cost of Starting a Business from Scratch.

If you determine that your start-up venture is going to cost you somewhere between $500 and $50,000, and your savings just aren’t enough, you might want to consider a microloan. Why? Many start-ups and new small businesses often find they may not qualify for a traditional small business bank loan.  Without a proven track-record of 3-5 years under your belt and/or established business credit, many banks simply won’t take the risk.

What is a Microloan?

So how is a microloan different? Microloans are typically offered to businesses with smaller start-up capital needs (usually less than $50,000). Unlike traditional bank business loans, funding is typically provided via community-based, nonprofit microfinance institutions.

Anyone can apply for a microloan, although these loans often favor people with low cash reserves or poor credit as well as those in rural or disadvantaged communities. However, many micro-financing institutions also offer specific micro-financing programs for women-owned businesses, environmentally responsible businesses, veterans and specific business-types.

How to Find Microloans

Microloans are available from a variety of institutions dedicated to helping entrepreneurs and start-ups, including:

o   Working capital

o   Buying inventory or supplies

o   Buying furniture or fixtures

o   Buying machinery or equipment

Local SBA Offices can provide more information about how to apply. Read more about the SBA Microloan Program and find out who’s lending.

Before You Apply for a Microloan

Don’t overlook the importance of a business plan when it comes to applying for any type of loan. Your lender will expect to see that you’ve done your research, understand your market, have a clear plan for success, and that you can demonstrate how and when you will repay the loan. SBA’s Writing a Business Plan guide can help.

You should also make sure you are aware of your credit score, and once you are up and running, take steps to establish your business credit score as soon as possible. For tips read: 6 Ways to Establish and Maintain a Healthy Credit Score for Your Startup or Small Biz.

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About the Author:

Caron Beesley


Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley


I am trying to obtain a small start up business loan to open up a franchise business. I started researching how to go about obtaining a small business loan for people with bad credit. I read about obtaining a microloan. Is this my best chance for getting the start up capital that I need to open up my franchise?????
I am looking for help with finding a loan that will help me start my small business. I do have a financial investor but would like to invest some money so I feel that I have a part in the actual business. He is willing to co-sign for me but again I want to try to do this on my own, have poor credit due to student loans ( have repaid some of them and currently paying on 4 of them) but some I had to let go. Please help!
Would anyone happen to know any good companies or websites for micro loans for folk with not so perfect credit?
I think you can finance your small business with microloans, but I would rather say with 2-3 microloans to be mor confident and pobably save some time. This post will be very useful for small business owners or for those who ar about to start up their business.It certanly has some good tips and advices.
I am looking into a micro loan for my existing business.
We provide microloans and have done for just under 12 months now. They are a fantastic way to help small businesses buy stock or even pay for advertising and we are so pleased with the response that we are going to launch in Australia very soon as well. If only banks had the same pro-active approach then we wouldn't be in the mess we are in currently.More power to the microloan companies and the entrepreneurs behind them.
I am looking into business loans for my 18 yr old son who obviously doesn't have a credit score or anything as such. He wants to restore cars but doesn't have the capital to begin. His father does this on the side as a hobby but our son wants to start a business right from the beginning. He can show on paper the profit of doing just one car to be able to show how he will be able to pay back the loan. Is there any chance he would be eligible for a micro loan through you?
Thanks Caron for the wonderful writing. Great post for the small business owners. Microloan helps to the businessmen and it is easy for them to start a business.
It seems that in USA is much easier to start a business. You can find help so easy if you have a good business plan. Here, in Romania, we don;t even dream about this. Not even the government is offering facilities for start-up business. I don't even talk about banks. Thank you for this information. If someday I'll go to USA, at least I have a source of information to start from. Best regards!
Well,I am also from Romania and I would like to inform you that is a great grant scheme for less than 10,000 euro under implementation. At the beginning it was a really good surprise for me to see that a flexible instrument was designed last year. I already assisted many young entreprenauers to start their businesses. It is an excellent opportunity to start your own company. Did you know about it? Please let me know if there is any chance to help you. Meanwhile, Good luck!


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