No matter what size your business is, there are a variety of lending options to choose from when you need funding, like microloans and commercial loans.
Finding the right business loan depends on factors like the amount of capital needed and the specifics of the business. Understanding the differences between microloans and commercial loans can help determine which option is most appropriate for your business.
Differences Between a Microloans and Commercial Loans
Generally speaking, commercial loans are often a good fit for established businesses who need a larger loan, like a commercial equipment or commercial real estate loan.
Microloans are often a good fit for newer or smaller businesses who may not need as large of a loan, like funding to help buy inventory. Microloans are typically only available through community-based organizations that are experienced in lending.
Another difference between the two types of loans is that microloans are designed to support businesses that may not be able to qualify for larger commercial loans just yet. So the business lending requirements for a microloan may allow for lower credit scores or shorter time in business.
Here is more information about each loan type to help you determine what option would be right for your business needs.
What is a Microloan?
A microloan is a smaller business loan that helps entrepreneurs and existing small business owners get the funds they need.
The loan amounts are smaller than traditional commercial loans, but they have less stringent lending requirements. For newer businesses who may not be eligible for commercial loan requirements, this makes it easier to get funding for things like new vehicles or lines of credit to support daily operations.
Microloan programs also often offer resources to help nurture and support business owners. These may include technical assistance such as business training, personal development, financial counseling, and access to other professional services.
Check Out Our Upcoming Business Events
Suncoast’s Micro Enterprise Development Program offers a number of events to help business owners get skills training, learn from expert speakers and network with their peers.
Microloans may be the right option for:
- New entrepreneurs who haven’t been in business long enough to qualify for a traditional commercial loan
- Small business owners with lower credit scores who need smaller loans
- Small business owners who need funding and want access to helpful business resources
What is a Commercial Loan?
A commercial loan is a traditional loan option that offers financial support for business owners who need funds as their business grows.
Commercial loans allow for higher loan amounts than microloans, so the lending requirements are better suited for established businesses. The age of the business, annual revenue, and purpose of the loan are among the factors that are considered when applying for a commercial loan.
There are a number of different commercial loan options, depending on the needs of a business. Commercial loan options may include:
- Commercial real estate loans for business owners
- Line of credit for business owners with short-term needs or seasonal capital needs
- Commercial equipment loans for business owners in need of new equipment
How to Find the Right Business Loan
Finding the right business loan depends on things like how long you’ve been in business, what your current financials look like, and how much funding you need.
A newer business that can’t qualify for a traditional commercial loan may be able to start with a microloan to help with immediate needs. As the business gets more established over time, it may eventually be ready for larger growth with a supporting commercial loan.