Microloans are an often overlooked source of funding for small businesses.
They are a great option for business owners who don’t have the time to apply for a standard business loan, or for those who need substantially less money than what normal business loans provide. As with any business loan, what matters is how you can successfully utilize the loan to grow your business.
What are microloans?
Microloans typically involve lower amounts of money (can range from $500 to $50,000, but on average are about $13,000), but a savvy business owner can turn even $10,000 into great gains for their business.
That’s why in this post we are going to give you 7 ideas for ways you can utilize a microloan. We’ll also give you some ideas of what not to use microloans for, to give you a better idea of whether a microloan is the best option for you and your business.
7 Great Uses For Your Microloans
Microloans are typically considered working capital, which means they are used to cover more short-term expenses instead of longer-term investments.
Here are 7 ideas of what you could use your microloans for:
1. Buying Extra Inventory
In most businesses, there tend to be certain periods that become incredibly busy and require more resources. This could be holidays for retailers, tax season for accountants, or even a yearly promotion that your business runs.
During these periods it often helps to purchase extra inventory to avoid running out during the busiest times of the year. Depending on the amount of inventory you need, microloans can be a great help.
2. Repairing or Upgrading Equipment
You more than likely rely on certain technologies in your day to day operations. This could be something simple like computers for payroll and inventory management, or more complex machines used for production, welding, repairs, etc.
No matter what sort of equipment you have, it can’t work perfectly all the time. Having faulty equipment can lead to inefficiency and can even be dangerous.
If you need some extra capital to put towards repairing equipment, a microloan could be your best bet. It could also be used if your technology is dated and needs to be upgraded to a more modern model.
3. Bridge Payment Delays
It often happens that big clients or customers may not pay you upfront for your services. In some cases, capital that you were relying on getting could be delayed due to unforeseen circumstances.
In this case, you could get a microloan to cover any necessary operating expenses while you are waiting on receiving the payment. This can help push your business forward while waiting on delayed payments that would otherwise hinder your business.
4. Pay Your Lease/Utilities
There are certain things you need to run a business, like office space and electricity.
If you find yourself in a dire situation and know you won’t be able to pay for your business location’s lease or you won’t be able to pay for utilities, it might be worth it to get a microloan to cover those costs.
This should be a last resort as these costs should factor into your business plan, but it is good to know your options if these bad situations arise.
5. Hiring Temporary Workers
As we talked about in point number 1, sometimes your business can get so busy that you and your workers are completely overwhelmed. This could be the time to looking into hiring temporary workers.
There are temporary workers for all kinds of jobs, ranging from physical labor to office tasks like archiving, answering phones or even doing things like data entry, inventory management, etc.
Getting a microloan can give you enough funds to hire a significant amount of temporary workers that can help you get through the busiest times of the year (your employees will probably thank you too!).
6. Fund Employee Events/Fairs
Everyone knows a happy worker is more productive and efficient. This is why many business owners tend to put on lunches/events for their employees once or twice a year. Other employers might even put on events for their customers or to recruit potential employees.
No matter what the occasion, these types of events can be quite expensive when you add up renting out a location or buying lots of food. If you don’t have the funds to cover an upcoming event a microloan could give you what you need.
If your business is booming, you may start feeling cramped in your current space. Customers, clients, and employees tend not to be too happy crammed into tiny rooms.
If you are looking to renovate your current workplace or even add some expansions, a microloan could be a big help. You’ll have more space for an ever-expanding customer base, and your employees will have more room to work.
What Should You Not Use Your Microloan For?
Because microloans tend to be lower amounts of money, there are a few things you should stay away from when thinking about how to utilize your microloans.
Tasks that require substantial amounts of money might not be a great fit for a microloan. This includes relocating to a new building, hiring on higher-level full-time employees with six-figure salaries, replacing expensive equipment, paying substantial business loan debt, etc.
These things are better suited for standard business loans that can be taken out for larger amounts.
Are You Ready for a Microloan?
We hope that this article has given you a better idea of how you can utilize a microloan to help your business.
If you think a microloan may be right for you, why not apply for a Camino Financial Microloan.
We always strive to fulfill our motto: “No Business Left Behind”, and a big part of that is helping small businesses by providing financial resources that will help business owners succeed.