In these current times, the person who has an idea to establish a small or medium business, but does not have the financial resources to do so. You can go to the banking agency where you save your income and carry out the approach to that innovative idea with the intention that the bank can grant you a microcredit that can help you start that project. However, exactly what is a microcredit .
Microcredit is a type of financing granted by financial entities to natural persons , who present a business project such as setting up a bakery, but do not have enough capital to execute it. Next, in this informative article, I will tell you everything you need to know about microcredit .
Microcredit and its use
Microcredit is a type of loan granted by the bank that does not require as much documentation. It is created by the financial institution with the intention of favoring that part of the population that does not have a fixed income but whose goal is to create a business to get ahead on their own.
It is mostly requested by young people , women , pensioners or people with a physical disability . Microcredit, as its name indicates, is a minimum percentage of money that the bank gives as a loan to the applicant.
Therefore, the main function of microcredit is to serve as a support tool for new entrepreneurs who, due to their condition, do not meet all the requirements to access the traditional financing system, that is, they cannot access a loan of a large sum of money.
In general, the people who request this service from the financial institution are entrepreneurs, but it is also usually requested by the owner of a small or medium-sized company who needs it to be able to pay for any company expenses such as investing in the purchase of material premium for the production of the merchandise that the company offers to consumers.
When a natural person ventures to request a microcredit from the financial institution , it is because they do not have the capital to develop that new idea of economic initiative that they have in mind . Therefore, microcredits are usually used by entrepreneurs or micro-business owners to acquire new technological or production equipment, carry out a remodeling or expansion of the premises, settle a debt , among other utilities that the person who requests it can give .
Characteristics of microcredits in New York
Microcredits was an initiative adopted by Spanish financial institutions with the aim of helping those people who do not have the resources or are unemployed , but have the vision of creating their own business to generate income . Banks make this kind of loan in order to avoid a social and labor exclusion.
One of the characteristics of microcredit in New York is that the amount to be requested must be between a minimum of 500 euros and a maximum of 25 . 000 thousand euros . This type of loan has a preferential interest rate. That is, the interest rate is lower than usual . Due to the fact that the amount of the microcredit is low, the terms to cancel it is also a short period , generally the time is from 3 months to 36 months .
Commonly this type of loan is special for self-employed or entrepreneurs , who need financing to start up their innovative idea that will generate more income, or for those who have already started their company but need the capital to cover its expenses. .
Another characteristic is that when the person goes to request the microcredit, they do not need to have an endorsement or guarantee , because the bank will require as documentation the proposal of an explanatory project that indicates what is the use that is to be made of it. you will give the money you request .
Advantages of microcredit
The main advantage that the person has when applying for the microcredit , is that since it is executed by a person who needs to start up the idea of a business according to the job they know how to perform, the person finds more motivation when planning everything related to it. to your company. This type of loan allows the family to take the initiative to get involved in the company, thus forming family businesses.
Another benefit is that the interest rate is the lowest used by the financial institution, apart from according to the income the bank will place the fees to be paid by the entrepreneur. According to studies, as the person has less monetary capacity, the better they pay. Therefore, a microcredit is that the person remains solvent with the payment of the monthly fee. In this way, they will already have much clearer what a microcredit is and its advantages .