How to Start Up a Microfinance Company
Microfinance companies provide much needed help to less-fortunate individuals in our society. They offer financial services to individual entrepreneurs who have little money and cannot provide collateral for loans. They provide favorable lending terms in order to assist these borrowers in starting businesses and becoming self-sufficient.
- Get the necessary legal documents. Before you can legally operate a business, you need to obtain the necessary permits and licenses from the appropriate office in your area. Find out what the requirements are for starting a microfinance company in your area and comply with the rules and regulations. You can contact your county clerk's office or Secretary of State's office to get the information you need.
- Determine your target customers. You can target small business operations such as fishery, agricultural or textile-based businesses. You can also decide to cater to gender-specific operations, such as the Women Self-Employment Project, which helps women transition from welfare to work to start their own home-based businesses.
- Obtain sufficient capital. The amount of capital required will depend upon the amount and projected annual lending. Sources of financing a for-profit organization include your own personal money, venture capitalists and small business loans. Sources of financing for a not-for-profit organization are federal grants.
- Develop lending terms. Credit approval for micro financing enterprises is not similar to traditional banking credit system. Approval of loans or credit is based upon the ability of the applicant's business to repay the loan. Evaluate the applicant's business plan to determine whether he has the capability to make his business profitable enough to repay the loan.
- Hire qualified staff. Hire employees that are knowledgeable and experienced in small business assessment and financial lending. Look for the kind of staff that have good customer service skills and will bring respect and creativity to the company's mission.