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What are Micro Loans
What are Micro Loans
Micro loans are “very small” loans that are given either to existing small businesses or to start-ups that need a small “take-off” or consolidation loan.
There is a difference between regular small loans and micro loans – micro loans are typically given to very poor unemployed people who may not have a proper credit history.
These loans are mostly given to very poor entrepreneurs who have the ideas, but no money or collateral to pledge. In fact, the idea behind giving micro loans is to motivate entrepreneurs. TheseMicro loans are part of a larger micro financing concept, which also includes micro savings and insurance plans.
What is a micro loan used for?
A micro loan can be used to start a new business, for working capital, to buy raw material or office equipment or machinery. The purpose behind a micro loan must be to spur business.