The simple truth is this: cities need small businesses to survive.
Without a robust small business scene, cities can quickly fall prey to the sort of empty monoculture that comes with having nothing but giant corporations and mass-produced goods, which slowly drain local economies until they have difficulty ever supporting small businesses again.
But when a community finds itself in decline, how are local entrepreneurs supposed to finance their new business ideas and bring life back to that community?
There’s no one solution to this, as the problem is far too complicated for any one thing to solve it.
However, micro-lending is one way that lots of cities have found access to the capital their local entrepreneurs need to start bringing new businesses into the mix.
Here are just a few of the benefits that micro-lending platforms bring to the communities that are able to take advantage of them.
Getting a loan through traditional sources, like a big bank, can be a fraught and difficult process. There are a lot of big requirements that people with mediocre credit or few resources can have a lot of trouble fulfilling, disqualifying many of the people who need those loans the most.
Microloans, being lower-risk, tend to have much fewer requirements for achieving them. While credit can still be important, having a solid business plan and a supportive following can often be enough to convince micro-lenders that your business is worth the shot.
While banks, in general, are shying away from small business loans, micro-lending platforms are doing a great job at picking up some of that slack.
Granted, there’s a lot of versatility in huge loans worth hundreds of thousands of dollars for those who are able to qualify for them. But the unique benefit of a microloan is often found in just how targeted that loan is for a specific purpose.
Rather than burdening a burgeoning small business with an amount of capital that they don’t quite know how to direct, microloans are typically taken out for very specific reasons. These include anything from purchasing new equipment to covering payroll, all the way to even renting or buying space for the business itself.
The ways that a business can take advantage of loans of this size are legion, and the small size means that the businesses take on a lot less risk of repayment difficulties than they might with a larger loan.
Microloans are, as the name implies, relatively small. Typically, microloans are anywhere below $50,000-$60,000, but as with everything, what constitutes a “microloan” often depends on the person.
Since they’re taken out for a specific reason, micro-loans are easy to track and keep on top of. That means that those with poor or middling credit can use the manageability of microloans to boost their credit to the point that they can take on larger, more comprehensive loans.
For struggling businesses, having the buffer provided by this kind of middle ground can often mean the life or death of the business. It keeps them from expanding too fast, or from suffering sudden problems with repaying when unexpected problems rear their head.
Want to put microlending to work for you? We’ve got you covered. Create a fundraising page with LoanWell that tells your story and makes it easy to share with your networks.
We can help you get low-interest loans, backed by your friends and family, to give you a leg up on funding your tomorrow.