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Microloans: Bringing New Opportunities for Small Businesses in Need

Why are microloans important? According to the Small Business Administration, 20% of small businesses go out of business in the first year with only about 33% making it to their 10th anniversary. 

This shows the difficulty that small businesses experience when staying open long-term, and sometimes it can be as simple as needing a small loan to stay afloat. This is where peer-to-peer microloans come in to save the day. 

Microloans are smaller loans borrowers take directly from investors. It is changing how people can invest to help others. Small businesses can look to microloans as their saving grace when they need to borrow small amounts of money. With microlending growing in popularity, it can be a very viable option for small businesses to explore. 

Microloans Vs. Traditional Bank Loans

Microloans

Microloans are different from traditional bank loans. As mentioned, microloans fall under peer-to-peer lending where an investor is directly giving money to the borrower. That is among the main differences between microlending and a bank loan. Another main difference is the amounts that are lent out. With microlending, the amounts stay under $50,000 in the largest form and are usually under $1,000. Typically, banks try to focus their lending on higher amounts while microloans thrive in keeping the amounts small.

These loans also require less to borrow compared to traditional loans. Since the investor is giving the borrower the money directly, websites such as Lendee help develop a new kind of scoring system for borrowers. This helps investors decide if they want to lend the person money or not, leaving the decision to the investor. This means that the investor can decide how much they want to charge in fees and who they want to lend to, but they are willing to lend to more people than banks would. 

Traditional loans

A traditional loan from a bank is very different from a microloan. Traditional loans are difficult to secure and are for financing large amounts of money. This is partly because it takes a bank the same amount of work to finance $2,000 as $50,000, so they will not lend you a personal loan below a certain amount. Small business loans from typical lenders can be difficult to be approved for, especially if your business is not doing well. This is where microloans are needed because sometimes a personal bank loan is just too large. 

Why Small Businesses Need Microloans

Microloans can make a big difference for those businesses that need a quick and small loan. 

Sometimes, a small business needs a small loan to get them through the next few bill cycles or help to cover some production costs for a product. Small businesses get loans only if they are using them for specific reasons. So, it is difficult to secure larger bank loans. If a small business needs $900 to pay for some production costs and other expenses, microloans would be perfect. 

A bank loan would not be able to help them with this, making businesses destined to fail. This explains why many of them fail within the first year. Sometimes, they need a small line of credit and without microloans, there aren’t many other options. 

Here’s a more specific example of small businesses needing a small loan. A business was surprised with a repair or large bill like that. Now they don’t have the money to keep producing the clothing that they sell. So, it was impossible for them to make money to pay their bills. The next order they need to put in will cost $500. They will also need another $200 to help them pay for other things they need. They can find an investor through Lendee who is willing to loan them $700 with small fees. Then, the business can get up and running again, paying back the investor as soon as possible.

This is where small businesses in need can find the money they need. It is as simple as finding a peer-to-peer lending site that will link the investor and borrower so a loan can be established. These sites can be the link that helps keep a small business in need alive.

How Lendee Can Help Businesses Today

Lendee is a peer-to-peer lending site that helps investors find borrowers who need the money. 

Lendee specializes in small loans that are typically under $1,000 and provide an easy way to borrow any of the money needed. When someone wants to borrow with Lendee, they input their personal information and Lendee performs a credit and income check. The borrower gets a Lendee score out of 850, much like a FICO score. This allows all investors to see the scores of potential borrowers, making it easy for them to establish a connection and help those who need it. 

Using Lendee, small businesses can secure the money they need to carry certain costs and stay afloat through tough times. Check out Lendee today if you want to learn more!

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