If you are a WAHM seeking to start your own small business, you may be wondering if microloans are a good fit for you. Microloans are loans made through the Small Business Administration through a network of private, non-profit intermediaries. The program started in 1992 and has been in permanent operation since 1997.
WAHMs can especially benefit from microloans, for several reasons. Following are the basics of the microlending process and why it's a good fit for the WAHM:
Microloans are made locally through private, non-profit organizations. Generally speaking, these organizations have a vested interest in their communities and seek to support small business owners in their areas, unlike most banks which are huge corporate institutions. For small business owners, it helps to be able to apply for a loan locally and speak to lenders who are familiar with your community and its needs.
Microloans can range from $100 to a maximum of $130,000, with the average loan ranging from $10,500 to $13,000. The relatively small size of these loans makes it easier for WAHMs with small businesses to obtain and repay.
The average interest rate for microloans varies, but usually ranges between 8% and 13%. This is a relatively low, fixed-rate of interest that will not price the WAHM out of repaying the loan.
The microloan program was specifically developed to loan small amounts of money for start-ups, newly-established businesses, or the growing small business. They are made on a minor scale, locally, to help small business which might otherwise be overlooked by regular banks or lenders. Therefore, microloans are a great fit if your business is new, small, or looking to grow.
However, don't go in to a microloan lender expecting a free handout. Just as with any lender, you will need to prove your credit worthiness. Before applying for the loan, make sure to list your collateral with current appraisals, just in case you will need collateral to secure the loan. Some microlenders require collateral, others do not.
In addition, you will need to be prepared to answer the following questions:
- How much money do you need, and for what purpose?
- Who is managing your business, and what is her level of experience?
- What have you already invested in the business, or are willing to invest?
- Is this business a start-up, or does it already exist?
Once you have spoken to the lender and filled out an application, the lender will pull your credit report and determine whether or not you are eligible for the loan. Depending on the size of the loan, this process could take anywhere from a few days to a few weeks.
The microloan process is an ideal fit for the WAHM who is seeking to grow her own business, or start a new one, because microloans are specifically geared towards the kind of borrowers typically overlooked by large corporate banks. A microloan is definitely worth seeking out in your community. For more information about microloans, check with your local branch of the SBA.
Sarah Baker is a documentary filmmaker and writer currently living in New Bern, NC. Her first book, Lucky Stars: Janet Gaynor and Charles Farrell, will be published December 2009. Read more about her.