The Microloan Program provides very small loans to starting up, newly established, or growing small businesses. Under this program, SBA makes funds available to nonprofit community-based lenders (intermediaries) which, in turn, make loans to eligible borrowers.
Terms, Amounts, and Interest Rates
The maximum term allowed for a microloan is six years. However, loan terms vary according to the size of the loan, the planned use of funds, the requirements of the intermediary lender, and the needs of the small business borrower.
The maximum loan amount is $50,000; however, the average loan amount is around $13,000.
Interest rates vary, depending upon the intermediary lender and costs to the intermediary from the U.S. Treasury. Generally these rates will be between 8 and 13 percent.
Applications are submitted to the local intermediary and all credit decisions are made on the local level.
Each intermediary lender has its own lending and credit requirements. However, business owners contemplating application for a microloan should be aware that intermediaries will generally require some type of collateral, and the personal guarantee of the business owner.
Each intermediary is required to provide business-based training and technical assistance to its microborrowers. Individuals and small businesses applying for microloan financing may be required to fulfill training and/or planning requirements before a loan application is considered.
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.
How to Apply
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.
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.
Special Purpose Loans
In our previous posts we have covered the 7(a) loans (Basic, Advantage, Express/Patriot Express), CDC/504 Loans, Disaster Loans, MREIDL Loan, and finally Microloans. However, the SBA offers various special purpose loans that can assist you and your business. This includes loans to help you grow your business to meet international demand, to aid business that have been impacted by NAFTA, to assist you in implementing employee ownership plans, help implement pollution control mechanisms, and more. Within Special-Purpose Loans you can take advantage of these programs:
• Export Working Capital
• Export Express
• International Trade Loans
• CAIP Program
• Employee Trusts
• Pollution Control
To learn more about each, go to http://www.sba.gov/category/lender-navigation/sba-loan-programs/7a-loan-programs/permanent-7a-loan-programs.