By financial definition, Micro loan is a short term credit lending program that provides loans up to $35,000 to small entrepreneurs for to start their business. The concept of micro loan was first introduced in 1976 by Dr. Muhammad Yunus, founder and Noble award winning economist from Bangladesh. Now it is very popular in Asian and African Countries.
There are a couple of major reasons behind micro loans fast increasing popularity. Among them the most active 3 ones are:
- Generally, if you need a small amount to borrow from a bank then you should go for a micro loan organization rather than a commercial bank.
- If you don’t have the sufficient security or sufficient documents to apply for a commercial loan, then going for a micro loan should be your first preference.
- If you are a new entrepreneur and looking for ways to get a good amount of financial backup with minimum amount of risk than applying for a micro loan would be the best thing to do.
The process to apply for a micro loan is different. It is true that while applying for such a small amount of loan, you will have to go through less hassle and will get the loan easily; but there are some rules that you need to go through to prove that you are legally eligible to borrow a loan. Here are some of the rules or activities which you have to go through to apply for such loan:
- As micro loans are mostly given to small entrepreneurs, you need to have a good business plan to prove that you can make money from your business with the money that you are borrowing from the institution.
- Depending on micro loan organization, you need to have the minimum amount of collateral (things legally owned by you that you need deposit to the institution for a certain time period as a guarantee for the loan) to become eligible for the loan.
- You need to sign an agreement to assure that you will pay the bank interest per month and you will follow all the legal procedures as the loan borrower.
If you think that you are fit to go through these procedures, then do call your nearest micro loan institution and they will hook you up with a micro loan within next 2-4 weeks.
Do remember that the main concept of micro loan is to help you to become solvent and become an entrepreneur. So, come up with the best business plan to ensure that you get the highest amount of loan from the micro loan organization.