Micro Loans

What Are Micro Loans?

Small-value business loans are offered to individuals or very small businesses to help them sustain their income-generating activities. These business loans are used to fund basic, short-term financial needs of these individuals without pledging collateral.

Micro Business Loan Interest Rate

The interest rate of micro loans might vary across lenders depending on many factors, including the credit profile of the borrower, loan tenure, existing debt obligations, etc.

Micro Loan Eligibility Criteria

While most micro loans are unsecured, applicants have to fulfil some basic eligibility criteria set by lenders. These typically include:

• Age: Between 18 and 65 years old.
• Citizenship: Indian citizen.
• Business requirement: Should either be running a micro or small enterprise, shop, service activity in trading, manufacturing, service or allied sectors.
• Repayment ability: Lenders check for the repayment ability of the applicant (income, business plan or past business receipts).
• Credit history: A strong credit record helps get the loan approved; lenders often offer special loan schemes for first-time borrowers.
• Not a defaulter: You typically should not have defaults on existing loans.

Benefits of Micro Loans

Micro loans help provide access to funds to self-employed or very small businesses that face difficulty in getting traditional loans. Other benefits include:

• Help first-time borrowers avail credit
• Help businesses meet their working capital or other financial needs
• Offer flexible repayment options
• Offered without collateral
• Help build credit history
• Support financial inclusion

Purpose of Microloans

Microloans can be used for various business-related activities, including:

• Meeting working capital requirements
• Maintaining cash flow
• Managing day-to-day expenses
• Paying salaries to staff
• Debt consolidation