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What is a microloan?
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The Small Business Administration provides loans to new and growing businesses by making f
unds available to nonprofit intermediaries which, in turn, make the loans to eligible borrowers. These intermediaries are community based lenders, each with its own lending and credit requirements. All lenders will require some type of collateral, and a personal guarantee from the business owner.
Microloans are made in amounts up to a maximum of $35,000 with the average being $13,000. The maximum term is six years. Interest rates and specific loan terms vary by lender. Generally rates will range between 8 percent and thirteen percent. Businesses and individuals thinking about applying for a loan may be required by their lender to complete training or planning requirements before their loan application will be considered. Intermediaries are required to provide such training and assistance.
So far, 46 states, District of Columbia, and Puerto Rico have microlending intermediaries. A list can be found online.
The loans may be used for working capital, inventory, supplies, furniture, fixtures, machinery and equipment. They are a good choice for small and startup companies that don’t need large sums of money. While rates tend to be higher than for other business loans, say from banks, the borrower also gets the benefit of the business expertise of the microlender.
For more information:
SBA MicroLoan Forms
Need more money? Get down to business
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