Did you know the SBA has a Microloan Program?

Posted by Michael Hartzell on Tue, Jan 21, 2014

Microloan Program

The Microloan program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. The average microloan is about $13,000.

The U.S. Small Business Administration provides funds to specially designated intermediary lenders, which are nonprofit community-based organizations with experience in lending as well as management and technical assistance. These intermediaries administer the Microloan program for eligible borrowers.

Eligibility Requirements

Each intermediary lender has its own lending and credit requirements. Generally, intermediaries require some type of collateral as well as the personal guarantee of the business owner.

Use of Microloan Proceeds

Microloans can be used for:

  • Working capital
  • Inventory or supplies
  • Furniture or fixtures
  • Machinery or equipment

Proceeds from an SBA microloan cannot be used to pay existing debts or to purchase real estate.

Repayment Terms, Interest Rates, and Fees

Loan repayment terms vary according to several factors:

  • Loan amount
  • Planned use of funds
  • Requirements determined by the intermediary lender
  • Needs of the small business borrower

The maximum repayment term allowed for an SBA microloan is six years. 

Interest rates vary, depending on the intermediary lender and costs to the intermediary from the U.S. Treasury. Generally, these rates will be between 8 and 13 percent.

Application Process

Microloans are available through certain nonprofit, community-based organizations that are experienced in lending and business management assistance. If you apply for SBA microloan financing, you may be required to fulfill training or planning requirements before your loan application is considered. This business training is designed to help you launch or expand your business.

Find a Microloan Provider

To apply for a Microloan, you must work with an SBA approved intermediary in your area. Approved intermediaries make all credit decisions on SBA microloans. For more information, you can contact your local SBA District Office or view the list of Participating Microloan Intermediary Lenders in the Attachments list below.  

Ask a Question in the SBA Community

If you have questions about applying for an SBA microloan, you can post it to the SBA online community. 

Download the Intermediary List here.

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Tags: Banking, Business Loans, SBA

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