SBA Microloan Program
SBA provides microloans for any small for-profit and select not-for-profit businesses who are interested in applying for a small, short-term loan (less than a year). In order to make the funds available to businesses, SBA works with a intermediary nonprofit community-based organization. Intermediary is responsible for processing the applications, making sure that the applicant is eligible and making credit decisions. They are also responsible for closing, disbursing, and servicing microloans. The most the intermediary can lend for a microloan is $50,000 and the average microloan is $13,000.
Funds: The microloan funds are used for money on hand, buying inventory or supplies, buying furniture and fixtures for the office, and buying machinery or equipment to perform necessary duties. The microloan cannot be used to pay current debts or to buy real estate.
Technical Assistance: The intermediary is responsible for educating the micro-borrowers with business training and technical assistance. This includes accounting, marketing, basic business management, and employee concerns. There are specific instances where if you apply for microloan financing, you must fulfill training and/or planning requirements before your loan application is considered. These trainings help entrepreneurs and small businesses to advance and expand the business.
The microloan terms may vary depending on the size of the loan, what the loan will be used for, requirements of the intermediary lender and specific needs that the small business borrower has. The maximum amount of time allowed for a microloan is six years. The interest rates change depending on the intermediary and costs charged to the intermediary from the U.S. Treasury. Interest rates normally are between 8 and 13 percent. Loan repayment begins on the thirteenth month from the first day of disbursement.
Collateral: The intermediary lender determines the collateral necessary for the loan. Intermediaries normally need some type of collateral and the personal guarantee of the applicant.
If you are a startup or small business, and are interested in applying for a microloan, then contact an intermediary in your area. The microloan program is nationwide and is in most states.
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