If your small business needs just a small loan, the Small Business Administration's (SBA) popular SBA Microloan program might be able to help you out. Since coming online 1992, the SBA Microloan program has awarded over $112 million in more than 12,500 loans and established itself as one of the most popular of all SBA loan programs.
Who is Eligible for an SBA Microloan?
SBA Microloans, are most useful to businesses with smaller needs for capital. While there are no specific eligibility requirements, SBA Microloan lenders generally coordinate loans only for business located in their area, and these lenders are not located everywhere. SBA Microloan lenders are currently located in Puerto Rico all states except Alaska, Rhode Island, Utah, and West Virginia. In areas not served by an SBA Microloan lender, business should look to their state governments for similar programs.
How Much Can Be Borrowed?
Up to $35,000 can be borrowed through an SBA Microloan. According to the SBA, the average SBA Microloan is about $13,000. The SBA does not allow lenders to make SBA Microloans over $20,000 unless the borrower demonstrates that the business has been unable to obtain credit elsewhere at comparable interest rates and that the business has good prospects for success.
How Can the Money Be Used?
SBA Microloans may be used only for working capital and acquisition of materials, supplies, furniture, fixtures, and equipment. Loans cannot be used to acquire land or property.
What are the Interest Rates and Terms?
Interest rates on SBA Microloans vary, but average between 8- and 13-percent. SBA Microloans must be paid back within 6 years, but lenders can vary the payback period depending on the size of the loan and the borrower's needs and intended use of the proceeds. Lenders will typically require some type of collateral, and the personal guarantee of the business owner. In addition, Microloan borrowers may be required to complete a free business training session conducted by the lender. Lenders also provide technical assistance to borrowers during the life of the loan.
How Can I Apply for an SBA Microloan?
SBA Microloans can be applied for only through the applicant's local SBA-approved lender. SBA Microloan lenders are currently located in Puerto Rico all states except Alaska, Rhode Island, Utah, and West Virginia. In areas not served by an SBA Microloan lender, business should look to their state governments for similar programs.