What is a Micro Business Loan?

Sometimes it does not take a large amount of money to start a new endeavor. A micro business loan helps new business owners buy what they need to build products or offer services. The repayment of the loan occurs in small, manageable payments.

Overview

A micro business loan is typically a loan less than $25,000 made to a business that has only a handful or fewer employees. The concept arose due to a pressing need for smaller loans on the part of people who couldn't or didn't feel they would qualify for a bank loan. 

Reasons for a Micro Loan

Some aspiring business owners don't have access to funds. They may have bad credit, no credit or live in a country with limited resources. Some individuals who want to start a business need only a small amount of money and do not feel comfortable asking a bank for such a small loan. Micro loans allow aspiring entrepreneurs to get started on pursuing their dreams.   

Institutions and Individuals

Micro business loans are issued by individuals, groups and institutions. These are generally conscientious people or groups that are invested in helping others. Some have websites that entrepreneurs can visit for the purpose of posting their business needs. With an entrepreneur's explanation of how much is needed and how the money will be used, financial contributors can select which projects to support.

The loans are then repaid in small installments that allow the borrower time and resources needed to build a business. In many cases, borrowers are expected to submit regular updates about business progress.