Business loans are a reality of running a business. They can help you get things done. What you must remember is that small dollar business loans are used far less often than you might think. Small businesses usually prefer to pick up larger loans to completely transform their companies.
But small dollar business loans are making a comeback, and here are the reasons why.
It’s Harder to Get Traditional Loans
It used to be the case that a small business would take out a business loan of $25,000 – $50,000 without any problems. They’d use that to support themselves during the first three to five years of operation. However, traditional lending institutions are no longer doing this following the 2008 crash.
They’re much more skittish about lending, and for most small businesses they don’t stand a chance of getting accepted for a loan.
More Businesses are Bootstrapping
There’s a trend of businesses deciding to bootstrap instead of going the traditional route. Companies are deciding to trade goods and services in exchange for what they need. They’re working on extremely small budgets which mean they can’t go out and spend a lot of money on testing and promotion.
Small dollar business loans are perfect for bootstrapping businesses. These loans are small and immediately give businesses what they need and nothing more.
They suit this style of business. The bootstrapping style is in, and small dollar loans have come along with it.
Small Emergency Loans Companies are Helping Businesses
Small emergency loans used to be aimed at the personal finance market. They were there for people who needed to fix the car or repair a broken washing machine. Businesses are increasingly turning to them, and the industry has responded by providing tailored services to them.
These small dollar business loans are available without a high credit score and without the need to secure any of your personal assets against the loan.
The folks over at emergency loans company Cashry said, “We’re seeing a surge in the number of businesses desiring to borrow money for short-term emergency situations. It’s become a significant part of our business in recent years, and we want to make sure that people who are in need of emergency cash, are borrowing responsibly.”
However, emergency loans do have to be paid back much more quickly than conventional loans. For most companies, they’ll pay the money back within a few weeks of taking out the loan.
Small Dollar Business Loans are Easier to Get
Another reason small dollar business loans are making a comeback is because they’re much easier to get than conventional loans. Many companies don’t require a credit score to get the money. They also don’t require you to take out a secured loan.
You do have to pay higher interest rates in exchange for these perks, but for most businesses this isn’t a problem. You’re not going to get burned with slightly elevated interest rates if you have a firm financial plan in place. Finding funds for marketing, for example, is far more important than some extra short-term liabilities.
Do Small Dollar Business Loans Come with a Risk?
All loans can potentially be your downfall. That’s not unique to a small dollar loan. You need to make sure that you’ve done your financial calculations and you’re aware of the financial impact of taking out the loan. Small dollar business loans are a perfectly valid method of driving forward your future success.
Last Word – The Comeback is On
Small dollar business loans are making a return and they’ve proven to be a useful tool to have for many small businesses. With the increase in bootstrapping and the reduction in the number of opportunities for businesses to get small loans, small dollar loans have taken up an ideal place.
What do you think the future holds for small business loans?