If you are in need of startup capital for your small business, microfinancing may be your best bet. In fact, according to a small business lending index created by Biz2Credit, small business lending to small businesses amongst big banks dropped to 18.8% in March 2014 from 19.1% in February 2014. Big banks are continuously choosing to lend to big businesses (with $5+ million in revenues) over small business (even though small business create the most jobs in our society and contribute greatly to the overall health of the economy). Since you have a better chance of getting approved for a small business loan through a microlender than a big bank (as a startup business), it may serve you well to know how to get approved for a microloan.
Microlenders Have Less Stringent Approval Criteria Than Big Banks
Most microlenders specialize in lending to startup business owners who have less than perfect credit. As a startup business, if you were to go to a bank to apply for a small business loan, you would need to have a well-established, stellar credit history. Microlenders lend to those that often won’t qualify for big bank financing. The standard requirements for approval with most microlenders include the following:
- Minimum 500 credit score (depending on the microlender – some require a minimum of 525).
- Very little past due balances (usually no more than $500-$3,000 depending on the microlender).
- Bankruptcies must be discharged for at least one year and/or no foreclosures in the last 2 years.
- No recent late mortgage payments.
- Several forms of personal identification.
- Your most recent utility bill (from your home or business).
- Most recent bank statements (from the last three months – business and/or personal).
- Last two years of tax returns (business and/or personal).
- Proof of employment (must be employed for at least 6 months — outside of the business).
In addition to meeting the above criteria, you will also need to submit a full business plan (with marketing plan and financial projections) along with your microloan application.
How to Get Started
Applying for microloan on your own can be an extremely daunting and confusing task. The requirements for approval I have outlined here are the standard requirements that you need to get approved for a microloan with most microlenders but it can vary. Due to the fact that you must meet a variety of different requirements and submit a number of documents (including financial statements and a business plan), I recommend that you seek expert help. Working with an expert who is familiar with the microloan lending process may serve to benefit you. It could make the process go much quicker and smoother. If you’re a startup business owner in need of capital and you’re interested in applying for a microloan, I suggest contacting QT Business Solutions for further assistance. They not only specialize in working with startups (and business owners with less than perfect credit), they also focus largely on helping small business owners obtain microfinancing. They have assisted over 100+ small business owners with applying for microloans up to $50k over the last several years.