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How to Jumpstart Your Online Business with a Microloan

August 8, 2016

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girl-791177_640Microloans are small loans designed specifically to support fledgling entrepreneurs and small business owners. While there are numerous organizations around the world who offer microloans, the Small Business Administration’s microloan program is one of the largest in the United States. Through this program, the SBA guarantees loans made by local intermediaries. The loans are worth up to $50,000, but of the $52 million in SBA microloans funded in 2015, the average loan was approximately $14,000.

These loans help a range of business owners, but in particular, lenders focus on women and minority business owners with over 85 percent of loans going to entrepreneurs who fall into these categories. Loans are designed for for-profit businesses as well as for non-profit childcare centers, and they can be used on almost all operating expenses except for real estate and debt consolidation. Wondering how a microloan might support your online business? Take a look at the possibilities:

Start-Up Costs

If you already have a laptop, you can start a blog with just a bit of money to pay for hosting. However, in most cases, you need more than just a host to get started. Ideally, you should have a powerful laptop with a built in microphone and speaker for online chatting and meetings. If you plan to create podcasts, you typically need a better webcam and microphone to safeguard quality. In other cases, you may need a camera, a custom email address, upgraded hosting and possibly guidance from a paid consultant.

Without savings, many small business owners put these expenses on a credit card, a decision that can have consequences that last decades. However, a microloan lets you cover your start-up costs and avoid credit card debt. In some communities, the organizations who administer the SBA’s microloan program pair funding with business mentorships, meaning you receive both cash and guidance.

Expansion Costs

Once your blog is established, you need capital to keep it growing. For example, imagine you start a bare bones operation from the desktop in your house. That works for a few months, but after a while, you have a lot of emails, social media posts and other online responsibilities clamoring for your attention. As a result, you decide that you need a laptop with 4G capabilities so you can stay on top of your blog and online communication while you are watching your kids’ soccer practice or waiting for them to finish piano lessons. A microloan can make expansion possible.\

Ebbs and Flows in Revenue

Just as many businesses are seasonal, so too are many blogs. If you write about seasonal topics such as Christmas baking, summer landscaping, college prep tips or a range of other topics, your blog is likely to get more hits at some times of the year than during others. As a result, your pay from advertisers, commission from affiliate links and other revenue is likely to ebb and flow throughout the year. Supporting your business with a microloan can help you stay on top of your finances as you wait for your cash to start flowing again.

Emergency Repairs and Replacements

What happens if your in-house server breaks down? What if a spilled latte causes your computer to malfunction? What if the washing machine floods your basement office leaving you to choose between wet moldy carpet and expensive repairs? An online blog is not immune to emergencies, but a microloan can help you cover their costs. If you don’t have savings or a line of credit in reserve, this type of funding may be essential.

Staff and Consultants

There may be a time in your blogging career where you determine that your efforts are better spent managing the business, courting advertisers and running social media accounts than blogging. When and if this happens, you may decide to outsource some of your work to an employee. However, before hiring an employee, you may want to consult with an employment attorney, talk with an accountant about payroll taxes and even research setting up a retirement plan. Consulting with experts on all of those matters costs money, but you can use a microloan to help you cover those expenses as well as the other costs associated with hiring your first employee.

Whether you run a blog or a hotdog stand, a microloan may be the tool you need to get your business started. In other cases, a microloan can help you expand, deal with emergencies and hire extra help. Remember, however, to use business financing carefully – always make sure that debt is an investment into your future growth.

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