Best Small Business Micro Financing

Micro financing is a small loan that can be secured by a business without the complexities that come with traditional financing methods such as bank loans. Micro financing options are typically easier to qualify for and provide more flexible funding amounts for small business owners who don’t need a minimum of $100,000 in capital. There are several options for obtaining this kind of small business financing, and each comes with its own benefits depending on each situation.

Small Business Association (SBA) Loan

An SBA loan offers financing up to $50,000 with repayment terms that vary based on the loan amount and use. While SBA loans have less stringent eligibility requirements compared to traditional banks, they often require collateral or a personal guarantee. Additionally, SBA funds cannot be used to pay off existing debt, and the approval process may take longer than other micro financing options.

Line of Credit

Online lenders can often provide a line of credit with 24-hour funding and no collateral requirements, offering quick access to funds for urgent needs. However, they usually come with higher interest rates and fixed repayment terms, regardless of fluctuations in the business’s revenue. This can be challenging for small businesses, which can often experience an unexpected slow period and decreased revenue over the course of repaying the loan.

Revenue Based Financing

Revenue-based financing is a type of funding for businesses that provides access to an upfront sum of working capital in exchange for a portion of the business’s future revenue. The business then remits a percentage of its receipts as payment to the financing provider according to a payment schedule (typically daily or weekly), until a total amount, agreed to upfront, has been paid in full. And the total amount is fixed, even if it takes longer to pay. This can be appealing for small businesses, because payments can fluctuate to match revenues. That means you’re not stuck making larger payments if your business goes through a slow period.

What Financing Is Right for Your Business?

The micro financing option that best suits your needs depends on many of the factors mentioned above. For most businesses that have been operating for at least 12 months, make a minimum of $10,000 in monthly revenue, and have a personal credit score of at least 500 – revenue-based financing may be the best option for short-term business needs.

There are some experienced, reputable revenue-based financing providers, like Forward Financing, that can help you access working capital. To learn more about this fast, flexible funding solution, visit What Is Revenue-Based Financing.