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Microcredit Business Idea

Give your fellow budding business owner a step-up by learning how to start a microcredit business. If this is an unfamiliar term, microcredit involves providing very small loans to people who would like to start their own business on a very small scale, but lack the credit rating or the resources to obtain a standard small business loan.

The applicant may be below the poverty line and lack a reliable income. As a financing tool, microcredit has allowed many impoverished individuals to turn their life around by giving them an opportunity to start their own business and become self-employed.

When you learn how to start a microcredit business, one of your first decisions will be to decide on a location. Because you are attempting to help the poorest sector of society, it would make sense to locate your offices within a neighborhood that you would like to target. Minimize expenses by investing in comfortable, but inexpensive furnishings.

Your offices should include a reception and waiting area, several offices and meeting rooms, and computer equipment to process loans, payments, and to store records.

If you’re learning how to start a microcredit business in the United States, you will need to comply with all of the Federal, state, and local laws that regulate any other financial institution.

Depending on the terms of the loan, you may also need to comply with payday loan regulations. Many microcredit companies operate in other countries, including the third-world. Each area has their own rules and regulations that microfinance businesses must follow to lend money within their borders.

If you decide to operate an international organization, make sure that your system is capable of handling multiple regulatory requirements. Many microcredit organizations accept donations to fund their programs. File for nonprofit status with the IRS if this is true for your new business.

How To Start A Microcredit Business – Success Factors

To become successful when you learn how to start a microcredit business, it will be important that you can judge each business proposal for its merits and for the applicant’s dedication to their dream.

While most people will follow through with their plans once they’ve been given the funding, others will not be as responsible. In some cases, it might be a good idea to release the funds as expenses are incurred and require proof of payment before the next draw.

Keep in mind that your customers probably haven’t had the advantage of business training. Be prepared to provide advice and direction when they run into roadblocks or become discouraged. Above all else, treat your new clients with the same respect and consideration that you would give to any financially-stable applicant.

Finding Customers For Your Microcredit Loans

As long as you’ve chosen your location well, finding customers as you learn how to start a microcredit business will not be a problem. Many poor people who have had a problem keeping a steady job dream of starting a small business. Adequate signage and word-of-mouth may be all of the advertising that you need.

If you’re still not seeing enough traffic passing through your doors, run a few radio ads and pass out some flyers. The local unemployment agency, welfare office, social services department, and local banks may be willing to tell their applicants about your services. If you’re interested in offering loans on a larger scale, create an easy-to-use website that can be found by popular search engines.

Expansion Opportunities

If you are a success at operating a microcredit business, you may want to expand into other areas where you can help those less fortunate. Here are a few ideas to consider:

  • Job Training & Placement
  • Homeless Shelters
  • Rehab Centers
  • Daycare Centers & Afterschool Programs
  • Motivational Speaker Specializing in Underprivileged Areas
  • Mentoring Program for Teenagers

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