Microcredit for Small Businesses

Microcredit for Small Businesses

From the moment when the market economy in The USA reached a dominant level, the development of small business began to gain momentum.

The origin of microcredit business

When lending to small businesses just got started and began to develop, many small business owners were not able to enlist the support of credit institutions. The main factor hindering the development of microcredit was related to the structures of financial organizations, where there was no place for credit programs that would Finance small businesses. The absence of loans among Bank loan products to support small businesses forced business owners to seek financing from individuals who, due to good demand, set a fairly high percentage.

After the credit institutions began to develop special programs for financing entrepreneurs and small business owners, everything changed dramatically, and overnight. In the late ’90s, thanks to banks, which borrowed a credit service from foreign credit institutions to Finance small organizations, the country began to develop and improve the practice of such programs. Banking organizations have the opportunity to lend even to those business owners who did not pay too much attention to reporting.

Distinctive features of existing business loans

Under the micro-loan provided for business entities, first of all, it should be understood the opportunity for small businesses to attract additional capital, through which it can enter into operation at a higher level. It turns out that loans for small business are provided exclusively for the development of existing business, and therefore it is impossible to take funds for its opening under this program. Thus, only the owner of the operating enterprise (business) can be the borrower on microcredit.

To send an application you do not need to comply with any special conditions. Moreover, the requirements regarding the financial capabilities and abilities of the potential borrower, also cannot be called toughened and overstated. If we take into account such conditions as the amount of micro-credit, it usually should not exceed, as well as in lending for needs, 300 thousand. As for the process of analyzing the application for a loan requested for business, it has some differences from other forms of credit financing. Credit organization, considering the application of the owner of a small business, first of all, analyzes the income of the applicant, because for any Bank it is important, at the expense of what funds the borrower will pay the debt.

The provision of micro-loans to businessman

To take part in lending for business development, a potential borrower must be a small business entity. The financial structure can issue funds only for the purposes aimed at the development of business or enterprise. This can be the purchase of equipment, the product of the calculation of the seller for the goods of higher quality, as well as services and more. Most often, businessmen who apply for a microloan, a month have a profit, the size of which does not exceed 100 thousand. In terms of the personal composition of the enterprise any restrictions are not set, but the business itself must exist before filing at least 3 months, a specific period of each Bank establishes its own.

The possible amount of a microloan for a business is determined not only depending on the lender, but also the selected financing program. At the moment, the issuance of such a product, as practice shows, is carried out in quite small amounts, which often amount to 10-20 thousand.

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