The Microloan Program provides small, short-term loans to small business concerns as well as not-for-profit child-care centers. SBA makes funds available to specially designated intermediary lenders, which are nonprofit community-based organizations with experience in lending as well as management and technical assistance; these intermediaries make loans to eligible borrowers. The maximum loan amount is $35,000; the average loan is about $13,000.

How Funds May Be Used

Microloans may be used for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment. Proceeds cannot be used to pay existing debts or to purchase real estate.

Technical Assistance

Each intermediary is required to provide business training and technical assistance to its micro-borrowers. Those applying for microloan financing may be required to fulfill training and/or planning requirements before a loan application is considered.

Terms, Interest Rates, and Fees

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. The maximum term allowed for a microloan is six years. Interest rates vary, depending on the intermediary lender and costs to the intermediary from the U.S. Treasury. Generally, these rates will be between 8 and 13 percent.

Collateral

Each intermediary lender has its own lending and credit requirements. Generally, intermediaries require some type of collateral and the personal guarantee of the business owner.

For More Information

Small businesses interested in applying for a microloan should contact an intermediary in their area; all credit decisions are made on the local level. The Microloan Program is available in selected locations in most states. A list of approved Microloan intermediaries in your area can be found here.