The SBA Microloan Program

For entrepreneurs seeking minimal financing, the SBA Microloan Program may provide the answer, even for startup businesses.

Online business, home based business, and other business opportunities requiring minimal initial investment are ideal candidates for the Small Business Administration Microloan Program.

The SBA Microloan Program is not a direct loan to companies. Rather, the Small Business Administration makes funds available (via loans and grants) to non-profit organizations. These non-profit organizations lend the funds to qualified small businesses.

First, the funds are minimal. A small business must be small. A $35,000 loan is the maximum available under this program, and an average loan is about $10,000. The small business could be either a new company, or an existing one.

As an added bonus, there is also management and technical assistance available to the recipients of the loans.

What Companies Qualify for the SBA Microloan Program?

Nearly any small business will qualify -- any type of business and any form of business (sole proprietorship, corporation, etc.).

The Microloan Program is NOT available everywhere. Check with your local SBA office to determine if it is available in your area. See the link below for a listing of organizations that are currently SBA Microloan intermediaries.

The funds may be used for working capital, or to purchase inventory, supplies, furniture, fixtures, machinery and equipment. (No real estate transactions are allowed.)

What are the Terms of the Loan?

The terms are established by the non-profit organization and include consideration of:

Length of loan is a maximum of six years, and may be less, depending on need of the borrower, use of funds, etc.
Interest rate. This varies.
Credit history of borrower. The borrower is expected to demonstrate that he can and will repay the loan.
Character of the borrower. The borrower must demonstrate a strong commitment to the business and be of good character.
Experience of borrower. The borrower must be experienced; or, if not experienced, she must be willing to participate in training programs.
Collateral requirements. Generally, this is the least significant part of the application process. The non-profit organization will often accept collateral that banks typically refuse, such as contracts, supplies, etc.
Personal guaranty. Each borrower will be required to personally guarantee his loan.
Special qualifications may apply in your area. Contact your SBA office to determine if your company will qualify.

Where Do I Get More Information on the SBA Microloan Program?

There are presently a number agencies that participate in this program. The SBA has published a Directory of Microloan Participants that you can download for free. It lists all participating agencies, broken down by state. Even if one is not within driving distance for you, there is contact information including phone numbers and email addresses.