Microloans
Microloans:
Loan options for small businesses may be as varied as the day is long but one sure bet is the Microloan. The Microloan Program is funded by the Small Business Association (SBA) and channeled through non-profit community intermediary lenders. These organizations were chosen as lenders by the SBA because of their experience in lending and offer management and technical assistance to the small businesses applying for the Microloans. In fact, each intermediary lender is required to provide technical assistance and business training to its micro-borrowers. Each borrower is required to fulfill training and/or planning requirements before a loan application is even considered. Since the application process itself is oftentimes stressful, assistance in filling out the application is also available. The training classes and personalized attention often prove beneficial to the small business owners and are greatly appreciated.
Microloan funds may be used for working capital, purchase of inventory or supplies, furniture or fixtures and machinery or equipment. Many of the startup funds normally required by small businesses are covered under the loan agreement but specifics should be discussed with each lender as terms may vary from lender to lender and from state to state. The funds cannot be used for the purchase real estate or to pay existing debt. The maximum allowable loan is $50,000. The average Microloan is approximately $13,000.
The terms, interest rates and fees vary according to the size of the loan, planned use of the funds, requirements of individual intermediary lender, needs of the small business owner and costs to the intermediary from the U.S. Treasury. Generally the interest rates run between 8 and 13 percent. The rates are usually found to be more reasonable than some of the larger banking institutions. Typically the intermediary will require some type of collateral in addition to the personal guarantee of the business owner. The maximum term allowed for the microloan is six years.
Since all credit decisions are made at the local level, businesses seeking to apply for the Microloan Program should contact their local intermediary. The program is available in selected locations in most states. Contact your local SBA District Office for more information.
Helpful websites:
SBA District Offices