Step by step guide to applying for microcredits for small businesses

Understand how to apply for microcredits for small businesses

When you decide to start a small business, one of the biggest difficulties is securing the financing you need to get the project off the ground, right? And the truth is that large lines of credit are often unaffordable.

But that’s where microcredit for small businesses comes in, a more accessible solution for those who need a smaller amount of money to start or expand their business. Want to know how to apply? Then read on and I’ll show you step by step!

What is microcredit?

Before we start the step-by-step process, it’s worth understanding what microcredit is. In simple terms, microcredit is a line of credit offered to entrepreneurs who find it difficult to get loans from traditional banks.

These are usually smaller amounts (usually up to US$ 50,000), with more accessible conditions, aimed at helping small business owners to grow and consolidate their position in the market.

This type of credit is ideal for those starting a business or for entrepreneurs who have a limited credit history.

In addition, the interest rate tends to be lower and the conditions more flexible. The aim is to give a little boost to those who are starting out but don’t have access to large credit lines. Nice, right?

Step 1: Check if you qualify for microcredit

The first thing you need to do is check if your company is eligible for a microcredit.

Unlike large bank loans, microcredits are more flexible in terms of eligibility, but there are still certain criteria.

For this, you can consult the Small Business Administration (SBA), which offers detailed information on microcredit programs for small businesses, including those that serve entrepreneurs from marginalized or low-income communities.

Step 2: Prepare a solid business plan

Although microcredit is aimed at entrepreneurs with less access to credit, that doesn’t mean you don’t need a well-structured business plan.

On the contrary! Lenders want to understand how your business will generate profit and, if possible, how you will repay the loan.

Make sure your business plan contains information on:

• Your company’s mission and objectives;
• The target audience you serve;
• The differential of your product or service in the market;
• Realistic financial projections (how much you expect to earn and how you will invest the money);
• How you plan to repay the loan.

If you have trouble creating a business plan, you can find free templates and guides at the SBA, which can be a good starting point.

Step 3: Find the financial institution that offers microloans

Now that you’re ready to take the first step, it’s time to look for institutions that offer microloans.

There are several options in the United States, such as community banks, credit unions and non-profit organizations. Each of these institutions has specific criteria, so it’s important to do your research.

Step 4: Gather the necessary documentation

Now that you’ve chosen where to apply for microcredit, it’s time to gather all the necessary documentation for the process. The documents generally require:

• Personal and/or company identification (such as CPF, CNPJ or EIN);
• Financial proof;
• Short- and medium-term financial projections;
• Check with your chosen institution which specific documents are required;
• Each lender may have additional requirements, so make sure you have everything organized.

Step 5: Apply for the microcredit and wait for the answer

Once you’ve prepared everything, it’s time to make the formal application. Fill in the form from your chosen institution, send in the documentation and wait for your application to be analyzed.

The good news is that the analysis process is usually quicker than a traditional bank loan, so you won’t have to wait months for the result.

That’s it! Now you have all the information you need to apply for a microcredit for your small business.

Take advantage of this opportunity to grow and put your ideas into practice. And, as I said, the SBA is an excellent resource to guide you through this process.

If you follow these steps, you can be sure that you’ll be well on your way to giving your business the boost it needs.

Written by

Juliana Raquel