Even though some microfinance institutions offer different types of microloans, the methodology, philosophy and objective of the microfinance programs is to help microentrepreneur either with microcredit or financial training.
Microentrepreneurs usually do not qualify for any bank loan from the formal banking sector because: they typically have no credit history, and some are not employed in the formal sector, so there is no record of employment, but like everyone else, they need access to financial services to run their businesses, manage risks, and plan for a more stable future.
Any person with a business that has been running for over 6 months; if less, then the client must be able to prove vast experience in the field, have a valid social security number, and older than 18 years old.
This type of loan differs from bank loans in:
Requirements: no minimum credit score is required, all the analysis and the decision are based on the ability to pay, the client references and the performance of the business.
Method of qualification and clientele: microcredit clients spend all their time taking care of their businesses themselves given that often time, they have less than 5 employees. In that regard, microfinance methodology is based on a very personalized service in which the loan officers go to the client and guide and assist in putting the loan package together, rather than making the client come to the office to do all the paperwork.
Conditions: interest rates according to the risk of the market attended.
Terms: significantly shorter than the traditional bank loans.
- Detailed analysis of the business and the customer.
- Analyzed ability to repay the micro loan
- Establishment of a personal relationship with the customer
- Knowledge of our clients’ needs
Step lending scale, which consists of increasing the amount of the loans and its terms, while simultaneously reducing charges (interests) and fees when the client fulfills his/her commitments, is one of the basis of microcredit methodology.
OUR MicroLending provides very small, short-term loans at interest rates that reflect the cost and risk of lending.
Microcredit methodology has been designed to both meet the needs of microentrepreneurs and microbusinesses and to ensure that the microenterprises organizations we work with become financially profitable.
OUR MicroLending considers microentrepreneurs skilled business people, not objects of charity.
Like traditional banks, OUR MicroLending evaluates potential borrowers. However, the methods of accessing business and personal financial data to measure financial indexes are much flexible than traditional or conventional banks.
Our loan officers meet potential borrowers in their places of work, where we also weigh intangibles like references from customers and neighbors.
There is no penalty for pre-payment of loan.
A microcredit consists of making very small loans to individuals or corporations, usually women, to expand or develop a micro, self-sustaining business, and occasionally to establish a microbusiness.