What is a Micro Personal Loan?

Small business owners, self employed persons, micro enterprises and others who have low capital requirements or lesser access to lending institutions can avail a smaller loan for their requirements. This sort of a small, short term personal loan is termed a micro personal loan .

A micro personal loan is aimed at providing financing to un banked or under banked persons, especially in rural areas where loans and financial assistance is not readily available. Let us have an in-depth look at micro loans, their purpose, objectives and who can avail.

A Micro Loan is a small, short term loan that can be availed by startups, micro enterprises, small businesses and self employed individuals. Those individuals who do not have access to a business loan or lending institutions can make use of a micro loan for their immediate business needs.

A Micro Loan can be availed by the following and other similar entities:

• Self-employed individuals or professionals
• Sole proprietorships
• Small retailers, raiders and manufacturers
• Startups
• Consultants
• Women entrepreneurs
• Unemployed persons
• Workers with minimum wages
• Minorities

Not all business owners, especially small retailers and manufacturers have ready access to a business loan. But they do have cash flow requirements to run their business. Hence they have the option of availing a micro loan or micro financing in order to keep their business functioning smoothly. Microloans can be used for many business operations such as:

• Meeting working capital requirements
• Maintaining Cash Flow
• Starting a new business
• Paying salaries to employees
• Consolidating debt
• Managing day-to-day expenses

Mainly, those small-time businesses that are unable to secure business loans look towards micro loans or micro financing for financial support.

• To encourage and advance socioeconomic development among under-banked or un-banked groups of people.
• To empower self help groups (SHGs) and allow them to contribute towards the growth and development of the country.
• To support women entrepreneurs and startups across the country.

Many banks and NBFCs in India provide micro financing for the above entities. If you wish to avail a micro loan, simply visit the website of a suitable microloan lender and fill out the form. The MFI (Micro Finance company) representative will contact you and take the process forward. You can also walk in physically to a local branch of the lender and fill out an application form for the microloan. You will, of course, need to submit all relevant documents to support your application.

Thus, the RBI and the Government of India, along with various Microfinance Companies, banks and NBFCs have come together for this great initiative to empower the underbanked with small loans to boost their businesses. Those self employed individuals, small business owners, traders, retailers, consultants and other similar entities who cannot avail a business loan can make use of micro financing by applying for such micro loans.It is, however, advisable to apply for a business loan first since the interest rates for business loans are lesser as compared to Micro Loans. Only if you’re unable to secure a business loan should you opt for micro financing due the higher interest.