So you have a great idea for a business, an ideal business model to work from, all crafted from a head full of dreams and aspirations, coupled with the desire to make it on your own and provide well for your family’s future. So what is stopping you?
The Common Problem
For most people, money is the brick wall they run up against. Not necessarily that it isn’t there for them, but rather they believe that they can’t possibly lay their hands on enough dead Presidents to successfully get their business venture off the ground and make a go of it. Lack of funds is the number one reason that many business initiatives rarely see the light of day. Is it really true that only those who are already in an advantageous position financially are able to chase the American dream by starting their own business? The answer may surprise you.
Microloans are now readily available for those seeking to start their own business. As the name implies, a microloan is a loan for a smaller than average amount of money. Most microloans are in the area of $35000 or less, and in many cases, they are much less. Microfinance institutions provide such loan to what is often referred to as the entrepreneurial poor to allow them opportunity to develop and expand formal businesses. Ideally this allows the borrowers to substantially increase their profits. Even if these profits do not immediately free the borrower from a poverty state, it does allow for far more effective coping with the realities of poverty.
In the past, the poor have been written off by most banks as untrustworthy sources, and as such barred from access to loans that might make business ownership a reality. Microloans help those in need by making it possible for them to be able to purchase materials they need for their work such as raw goods, materials, equipment, etc. it can also allow them to better cope with health related emergencies as well as larger expense outlays such as education, weddings, or funerals. It allows them to expand upon their business ideas and work toward a better standard of living.
The Uncommon Solution
Distributed by microfinance organizations, microloans are an invaluable asset for the poor, as well as those groups with irregular and erratic income streams, providing a financial consistency that can be the make or break point for many small business startups. It also provides a manner for these people to move up the economic ladder at a great and faster rate.
Unlike traditional loans, microloan institutions do not make decisions on approval based upon collateral or revenue stream. Rather they assess the applicant’s general character, understand their business, and try to look at their willingness and capacity to use the loan productively and repay it through the success of their efforts. It is a character based decision which is unlike most loan practices found in more traditional lending institutions.