The Best Microloans For Small Businesses Explained
Credibly is based in Michigan. This online lender provides short-term financing such as business loans and merchant cash advances. Credibility boasts relatively easy qualification criteria. Typically, you only need to have been in business for six months or have a credit score of 500.
- Low credit score criteria
- Discounts for early repayment
- Financing is tailored to business growth needs
- Fast and easy application process
- Clear and informative website
- Rates might be expensive
- Some additional charges
- A blanket lien is required
Credibly offers the following loan types:
- Working Capital Loan - Up to $400,000 with 6 to 18-month anticipated term
- Merchant Cash Advance - Up to $400,000 with 3 to 18-month anticipated duration
- Business Expansion Loan - Up to $250,000 with 18 or 24-month anticipated term
- Other Financing Options - Up to $5,000,000 with various terms
Credibly provides short-term business loans and merchant cash advances for small businesses that are just starting out or looking to expand. Credibly is great if you require funding as soon as the same day you apply. Read the full Credibly review for more details.
Kiva is an important microlender to look at. Kiva works both domestically and globally. They offer interest-free microloans of amounts as great as $10,000. You will need to pay back their loans from between three to 36 months.
- Suitable for new businesses
- No interest rates or additional fees
- No credit score requirements
- No prepayment penalties
- Great customer support
- Not tailored to large businesses
- Lengthy application process
- Typical funding time: 1 - 3 months
Kiva exclusively provides mircoloans under the sum of $15,000. You may require a larger loan and would therefore need to look to a lender other than Kiva. If you are looking for a small loan with the best interest rate - 0% - then Kiva is a great choice. There is a long funding process and you will need your friends and family to contribute to your loan before they will help you crowdfund the remainder.
Our verdict: With 0% interest rate, Kiva is a great crowdfunding platform for entrepreneurs that need small loan sums. Read the full Kiva review for more details.
Accion is a non-profit organization that works around the world. The aim of Accion is to provide people with the financial backing they require to develop successful businesses. Accion USA forms the biggest network of microlending organizations. It boasts offices in almost 30 cities in the USA and has given out approximately 50,000 loans, equaling more than $450 million.
- Lends to businesses that can’t qualify for other loans
- Provides financial education
- Maximum term length of 5 years
- Loan offerings tend to be more expensive than others
- Very strict eligibility requirements
- Personal guarantee is necessary to qualify
- Very long application period
Accion loans are offered in amounts as large as $1 million, so they don’t only provide microloans, although microlending forms a large portion of their business.
To be eligible, you need a credit score of more than 575, no bankruptcies in the last year, no foreclosures over the past two years, no court judgments, and no more than $3,000 in unpaid taxes. These requirements can differ a bit according to the branch you apply to.
Microloans gained through Accion work much like SBA microloans, however, the funds are received via many different avenues.
Our Verdict: If you have a startup that requires a loan, Accion will likely be the lender you want. Read the full Accion review for more details.
Fundera is similar to Lendio. It is a lending marketplace that allows you to compare loans. The only difference is that Fundera’s marketplace also features personal lenders.
- A easy and transparent process
- Great customer support
- The entire process is completed online
- No extra costs or hidden fees
- APR can be high for specific loan types
- Not available in all states
Certain businesses (particularly newer ones) will find the process for applying for a personal loan easier than the process of applying for a business loan. As personal lenders don’t mind how long or short a time you have been in business. The income requirements they have may also don’t necessarily need to be derived from your business revenue.
Nevertheless, it is often better for businesses to apply for business loans rather than personal loans. Luckily Fundera offers both loan types.
Our verdict: If the idea of a lending marketplace appeals to you, and you may want to go for a personal loan, you should look into Fundera. Read the full Fundera review for more details.
Headway Capital offers small business owners lines of credit from $5,000 to $100,000. Their line of credit is suitable for small business owners in search of financial flexibility. A line of credit lets you draw funds when you require them the most (up to the maximum available credit limit), and you will only need to pay interest on the amount you borrow.
- Quick funding
- No prepayment penalties
- Speedy and simple application
- Draw fees apply
- High APR rates
Headway Capital offers the following funding options:
- Business line of credit - a loan where capital can be drawn upon when required to meet a number of business needs
- Self-service line of credit - a loan where capital can be drawn upon when required to fulfill various business requirements
Headway Capital provides businesses with access to fast funds and manages their current finances. If you need fast funding for your business and want to save on interest, Headway Capital is a solid choice. Read the full Headway Capital review for more details.
The Top Microloans for Small Businesses
There are several options of microloans for small businesses. Our experts have created the table below so that you can easily compare them and choose the best solution for your business needs.
What Are Microloans?
Microloans are funding options that provide $50,000 or less in financing. They’re an excellent option - if your business only needs a small amount of cash.
Microloans typically need to be paid back on a short-term basis, ranging from three months to seven years. Interest rates, for these loans, usually fall between 12 and 18%. While these numbers may appear high, remember that microloans have a short term, so you may end up paying less interest overall.
As with traditional loans, you may need to put up collateral to receive financing. For example, personal assets, business equipment, or real estate can serve as a guarantee that you’ll repay the loan.