Usually, micro business is defined as a business leaded solely by an entrepreneur. You even can have no employees and thus your business will still be called a micro business. So when you are considering options and choosing the mentioned one there is a list of questions to be answered and one of those is – whether you need to take a bank loan to start a micro business?
In order to make a decision you need to make sure you have at least some kind of a business plan developed, so that you know your costs and expected income. And you surely need to count your capital investments.
If the sum exceeds the amount of money on your current bank account try to optimize expenses. For example, most of the beginner entrepreneurs are wasting much on office rental, commercial, website etc. Usually you do not need that all to run your business, so these are the bad costs you need to get rid off. Let’s make an example.
For example, you are going to sell designer clothes – all you really need is a sewing machine – that’s all. You do not need an office, you might only need a blog or a website on a WordPress and that’s all. Usually this means you do not need to lend money and pay extras monthly for debts servicing. However, if you see that you need a loan read the section below.
How to Take a Bank Loan for Micro Business?
Consider that banks are only glad to cooperate with you if you are taking large sums with a good securance and credit history. If you come to the bank and say that you need $2’000 to start micro business it is going to be rather hard to get a permission if you have a bad credit history. Moreover, you will have to fill blankets for nothing.
So if the amount of investments you need is less than a couple of thousands of dollars and you do not have a good experience in working with banks it is better to take a consumer loan on what you need for your business or even to open a larger credit line for your credit card.
The thing is consumer loan is considered to be less risky by banks and they are willing to give such loans more than business loans. Moreover, business loans that are considered to be good by banks start from several tens of thousands of dollars.
So if you are going to start a micro business with low capital investments it is better to take a consumer loan instead of business loan. Yes, you will have to pay more to service the debt, but you will also get less paperwork and more chances to get your query approved. And if you got denial upon your request consider peer-to-peer lending as an alternative.