A microloan is a small, short-term loan typically obtained by small business owners who may otherwise fail to qualify for a traditional bank loan. Due to the more relaxed requirements to qualify, microloans are especially appropriate for those individuals with limited resources and little business credit history.
Microloans can be an ideal source of funding for businesses deemed too small to qualify for a traditional bank loan that also don’t want to load up on expensive credit card debt. Some of the benefits include access to capital for those with poor credit histories and the ability to receive funds quickly. Higher interest rates than traditional bank loans and short payback periods can be considered drawbacks.