Business Loans

What if you can’t make your dream come true – start your own business? Entrepreneurs often lack their own funds. For financing, they contact banks and other financial institutions that offer various credit programs.

An excellent alternative to bank loans – loans from MFIs

Microfinance institutions (MFIs) have long become a good and proven alternative to bank loans. It is much easier and faster to get the necessary funds in this way. And despite the fact that most MFIs provide business loans only up to $1,000, today some organizations increase the amount up to $5,000.

At the same time, clients of MFIs must typically  meet the minimum set of requirements to get approved for a business loan:

  1. be a legal US citizen/resident;
  2. be at least 18 years old;
  3. have available liquid assets;
  4. provide a relevant and understandable business plan that proves the success of your future enterprise;
  5. have no third-party debt obligations (desirable).

Is it worth taking a loan to start a business?

Many people do not understand why their friends buy furniture sets on credit. Subsequently, they have to overpay a very significant amount. This money can be earned in a few months, and buying the same headset is much cheaper.

But there are different rules in business. Loan money invested in a business can pay off in a very short time. Therefore, some entrepreneurs prefer to borrow money. At this time, there is a growing demand from buyers, which can be used to make a profit.

For example, you are the owner of a grocery store. Before the holidays, the demand for confectionery always grows. Therefore, you buy a large batch of sweets in advance. On December 31, many buyers are just starting to buy food for the festive table. The owner of the store sells the entire batch of sweets quickly enough and makes a good profit.

Features of loans for medium-sized businesses

Before taking a business loan, you should compare the offered loan programs. To do this, you can use a calculator. However, please note that the lender may reject your application. This may be due to additional requirements to the borrower.

You must be able to correctly predict your potential profit. Otherwise, you will have to calculate losses instead of income. Most often, representatives of medium-sized businesses contact the lender to expand production or open another enterprise.

Pros of business loans

Firstly, if money is needed immediately, then the period for collecting and submitting the necessary papers is very limited. An online business loan in Staunton, IL can be obtained on the day of applying with minimum paperwork, while you do not need to own property that could act as a highly liquid collateral. Secondly, when concluding an agreement with an MFI, interest rates must be as transparent as possible, there must be no additional fees. Thirdly, loan applications in microfinance organizations are approved very quickly – within 24 hours, while a bank may process your application for several days or even weeks. Fourthly, MFIs are usually very client-oriented, therefore they allow their borrowers various options for cashing out funds and repaying debts (using bank cards, payment terminals, electronic money, communication shops, etc.).

Cons of business loans

You will have to return the borrowed money with interest. And this is the main disadvantage of the loan. Entrepreneurs invest in the construction of new production buildings or the purchase of equipment. The payback period is of great importance.

Businessmen get the return on their investment by increasing productivity and sales. This takes some time. The minimum loan term for industrial enterprises is 6 months. Service companies are in a more difficult position. Loans to such firms are given for 3 months.

In case of late repayment, the business owner will face fines and penalties. And this is a stop sign for many entrepreneurs. Before approving a loan, lenders may require companies to provide documents confirming their financial well-being.