Macro Versus Micro Finance

Small business loans are often considered micro finance.
Small business loans are often considered micro finance. (Image: Comstock/Comstock/Getty Images)

Business encompasses operations of all sizes. Although people often think of mega-corporations in large towers, most of the world's businesses are medium to small size, including independent contractors, food stand operators, artisans and self-employed professionals. There are financing options for each of these business types. Small one-person businesses may need very small loans or investments, known as micro finance whereas entrepreneurs trying to spin startups into multinational companies rely on macro finance.

Micro Finance

Some businesses don't require a tremendous amount of money to get going or develop further. Someone going into business making designer clothing from her home may only need a few thousand dollars for start-up materials and marketing. An entrepreneur opening a hot dog stand too may require only a small loan for a cart, permit and initial supplies. In America, micro finance can come in the form of credit cards, small business loans, home equity lines of credit, loans from family and friends, or partnerships.

International Micro Finance

Nonprofit programs throughout the world support micro finance for people in poor and developing nations to become self-sufficient. Micro finance helps landowners buy cattle and seeds to create functioning farms and villages to develop handmade arts and crafts to sell in the tourism industry or to art collectors. Through small, low interest loans of often less than $10,000, micro-finance helps people develop small businesses that create local jobs where none existed before.

Macro Finance

When a developer wants to build a 100-story office tower, he or his company will probably seek funding. Several options exist. The developer could look for investors to share in the costs and the profits of the new venture. Alternatively, the developer could turn to a bank or finance company for a large-scale loan. Both options are examples of macro finance because the amounts of money involved can easily involve multimillions.

Macro Finance Requirements

Macro finance projects have significant risks. If something goes wrong, investors and lenders face tremendous losses, which is why obtaining financing poses difficulties for some. Financiers assess the likelihood of a project's success including consumer demand, business plans, market feasibility, legalities, and the credit worthiness of partner companies and individuals involved. Those seeking financing must usually have a record of accomplishment of business successes and ventures. Before proceeding with macro finance, investors and bankers must believe that a large project like a massive office tower must yield equally massive returns to make the financing worthwhile.

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