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Microloans Program Can Provide Very Small Loans To Start Up
The Microloan Program provides very small loans to startup, newly established, or growing small business concerns. Under this program, the SBA makes funds available to nonprofit community-based lenders (intermediaries) which, in turn, make loans up to a maximum of $35,000 to eligible borrowers; the average loan size is about $10,500. Applications are submitted to the local intermediary and all credit decisions are made on the local level.
Terms, Interest Rates, and Fees
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. Interest rates vary, depending upon the intermediary lender and costs to the intermediary from the U.S. Treasury.
Collateral
Each intermediary lender has its own lending and credit requirements, but business owners contemplating an application for a microloan should be aware that intermediaries will generally require some type of collateral as well as the personal guarantee of the owner.
Technical Assistance
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.
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Financial Markets
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