How to Get a Small Business Loan Or Microloan When You Have Very Little Collateral

Small businesses that are just starting out are often caught in a catch-22 situation where they need a small business loan or Microloan to purchase equipment but they need equipment to put up as collateral to get a Microloan. The bank or lending institution may allow you to put the new purchase up as security but they will usually look for an existing asset before they will even negotiate terms with you. How do you get your new business off the ground if you need to be established to get funding to do it?

This is the dilemma that is faced by small business owners when they are first starting out. You can't really do anything without working capital and you can't get working capital unless you can show that you have something already. To get a new business loan or Microloan you need to go someplace where the lender is willing to take a chance and you'll pay a high price for it. The interest rates on first time unsecured loans can be pretty high.

With that said, the economic climate that we are currently living in is actually more conducive than prohibitive to getting an unsecured business loan or Microloans that are not backed by assets. The banks aren't doing much better than anyone else right now and they need your business. If you put together a solid business plan and can show that you know what you are doing they will most likely take that chance and give you the money you need to get started.

Financial institutions are well aware of the obstacles that are faced by new businesses and have seen successes and failures in equal doses over the years. In an economy where unemployment is low and foreclosures are rare it would be difficult to get them to lend money to a small business owner just starting out with limited assets. In this economy, where unemployment is at 10% and the bottom has dropped out of the mortgage market, financial institutions need to lend money of they are going to survive. Remember that when you go to apply for a loan and use it to negotiate from a position of strength.

Source by Robert A Wagner

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