Small loans with a big impact

1. Introduction

Micro-businesses and self-employed individuals are often at a disadvantage with banks when it comes to loans. It often seems as if only those who already have money are able to get more. As a result, micro-entrepreneurs and the self-employed may struggle to expand their business or even start it in the first place. Fortunately, there is a solution that can help — microloans. In this article, we will look at the various aspects of microloans to give you a comprehensive understanding of this financing method.

An overview – What are microloans?

Microloans are small, short-term loans granted to small businesses, the self-employed, or people in financially difficult situations who are often turned down by traditional banks. These loans are usually issued in small amounts and have short terms. They often involve sums of just a few hundred euros that must be repaid in installments. They can be used to finance business or personal expenses.

Microloans are issued by specialized financial institutions such as microfinance banks. These organizations often operate in developing countries where access to traditional banks is limited. However, microloans are also available in industrialized countries, including here in Germany.

How do microloans work?

Unlike traditional loans, borrowers of microloans usually do not have to provide collateral. Instead, lending decisions are based on other factors such as the borrower's business plan or their creditworthiness.

Another important factor to consider with microloans is the low amount of the loans. Most microloans amount to only a few thousand euros, which makes it easier for micro-entrepreneurs and the self-employed to repay them.

Microloans for the self-employed

Self-employed people often have difficulty obtaining traditional bank loans. Microloans, however, offer an attractive alternative for this group of entrepreneurs. With microloans, self-employed individuals can expand their business by obtaining money for marketing, equipment, or goods. Microloans can also help improve the financial stability of the self-employed by bridging short-term liquidity bottlenecks.

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2. Examples and providers of microloans in Germany

In Germany, there are several providers of microloans available to micro-entrepreneurs and the self-employed.

Mein Mikrokredit

Since 2010, the Federal Ministry of Labour and Social Affairs has been offering the "Mikrokreditfonds Deutschland". It is provided as part of the German micro-credit fund and can be claimed at various nationally accredited microfinance institutions. It is aimed in particular at small and medium-sized enterprises in all industries that do not have access to bank financing. The loan may only be used for business purposes and must not exceed 25,000 €. The maximum loan term is 48 months.

Microloans from Smava

Smava is an online credit comparison portal that also brokers microloans. Borrowers can compare various offers here and find the one that suits them. Smava works with a wide range of lenders, which increases the chance of obtaining a suitable offer.

With a selection of more than 20 partners and banks, it is possible to find a particularly favorable loan. Microloans can be applied for quickly and easily at Smava, with loan amounts ranging from 500 € to 120,000 € and terms from 12 to 120 months. Smava also offers support in applying for microloans by providing a personal loan advisor who accompanies the applicant in finding the right loan offer.

There is also the option of applying for a microloan as a couple. This significantly improves the chances of obtaining a microloan. Two incomes are taken into account, which minimizes the default risk and offers the possibility of more favorable conditions.

Indaro Mikrofinanz – microloans from the German microcredit fund

Indaro Mikrofinanz is a German company that has specialized in granting microloans. They offer flexible terms and individual support for borrowers. The website provides information about the microloans on offer, which can be used for various purposes such as business start-ups, expansions, purchases or liquidity needs.

Loans can be applied for online or by telephone, with personal advice and support provided throughout the process. Indaro Mikrofinanz grants small loans from 1,000 € to 25,000 €. The term is 12 to 54 months. It is important to know that more than 90% of inquiries result in a microloan being granted. Around 80% are approved without collateral or guarantees.

The website also offers a loan calculator that allows potential customers to calculate monthly installments for different loan amounts and terms. This enables applicants to find the offer that best suits their needs.

The Investitionsbank Berlin (IBB)

Investitionsbank Berlin (IBB) offers a funding program called "Microloan from the SME Fund". The program is aimed at small and medium-sized enterprises (SMEs), self-employed people, freelancers and founders in Berlin. The main purpose of the program is to facilitate access to financing for these target groups, especially for those who have difficulty obtaining traditional financing.

Microloans from the SME Fund can be used for various purposes, such as start-ups and consolidations, business takeovers or expansions. The loans range from 10,000 € to 25,000 €, with a term of up to 6 years including one repayment-free year. Up to 50,000 € is available for highly innovative or knowledge-intensive companies.

To qualify for the microloan from the SME Fund, applicants must meet certain requirements, such as having their place of business in Berlin, a positive going-concern outlook, and sufficient creditworthiness. Applicants must also submit a fully completed application together with the required documents. IBB offers support in applying for the microloan through personal advice and information on its website.

3. Experiences with microloans

Experiences with microloans are mixed. Some entrepreneurs report that microloans enabled them to expand their business and succeed. Others, however, struggle to cope with the high interest rates and have ended up in a debt trap.

It is important to research the terms and costs of microloans carefully in advance and make sure you are able to repay the loan.

How quickly can I receive a microloan?

For many people who depend on microloans, a fast disbursement of the loan is very important. For this reason, some microfinance institutions also offer instant disbursement. This is an accelerated process in which the loan is paid out within a few hours or days. Instant disbursement is particularly important in emergencies or for urgent investments.

Getting a microloan without Schufa — is that possible?

Yes, it is possible in principle to obtain a microloan without a Schufa credit check, but it is rare. Many providers require a credit check in order to minimize the risk of lending. However, there are some providers that forgo a Schufa inquiry. In that case, the risk for the lender is rated higher, and interest rates may be higher.

5. Conclusion and decision-making aid

Microloans offer a flexible and uncomplicated financing option for the self-employed, small business owners, and private individuals who want to bridge short-term liquidity gaps or finance business ideas.

It is important to research the various providers and terms carefully in advance and to choose the offer that best suits your situation. When making your selection, in addition to interest rates and terms, you should also pay attention to possible fees, flexibility in repayment, and the provider's reputation.

A microloan can be a good solution for overcoming financial challenges or laying the foundation for a successful business. With careful planning and selection of the right loan offer, it can help improve financial stability and achieve long-term goals.