Editor’s note: This article was first published in November 2010. The microcredit amounts (EUR 10,000–25,000), interest rates (4–6.5%), repayment terms (3–5 years) and 6-month grace period it cites are 2010 figures for Spanish microcredit schemes; current conditions will differ.
Among the ways to finance setting up our company or business idea are microcredits, which are aimed at micro-enterprises, self-employed people, women and immigrants, and which stand out because they require no guarantor or collateral. That is a clear advantage, since our only guarantee will be our business plan.
A microcredit ranges from €10,000 to €25,000, with an interest rate of between 4% and 6.5% (depending on the bank or institution). It is repayable over 3 to 5 years and usually comes with a 6-month grace period. Without a doubt, it is a great opportunity to finance your business, since with those amounts you can cover practically the whole investment your business idea needs.
That said, because no collateral or guarantor is required, our business plan has to be perfect, clear, professional and, above all, realistic. If we manage to fool the bank, we may well have fooled ourselves, and we won’t make the profits we need to pay back the small loan.
As with any application for a loan or credit, we will need to carry out a market study and look at the competition, costs, business strategy, action plan and so on. All of this is what is called a business plan, and if we have no experience in drawing one up, it would be better to put it in the hands of a professional.
To see the structure of a good business plan, you can read our earlier article, where we explained clearly how it should be done: The structure of a good business plan. And although it may sound repetitive, I will insist once more: if you don’t think you are ready to do it properly and professionally, ask your adviser or someone who specialises in preparing business plans to do it, because it will be your only card to play in getting the loan, credit or microcredit.
Further reading
- How to start a business with no money
- Should you start a business or buy one?
- Why new businesses fail
- Ten tips for taking your business idea forward
- Advertising systems for your business
Featured image: Enric, CC BY 4.0, via Wikimedia Commons.
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