Financing Your Small Business With a Microloan

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Financing Your Small Business With a Microloan

By kmurray, Contributor and Moderator
Published: January 15, 2014

Are you starting or expanding a business, and in need of a loan to help make it happen? While there are some larger loan options available, many entrepreneurs – particularly freelance, online and home-based businesses – require only a few thousand dollars to get started. If this is the case for you, consider a microloan.

What’s a microloan?

Microloans are loans in what would be considered “smaller” amounts than conventional business loans. SBA’s Microloan program, for instance, provides loans of up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. The average microloan is about $13,000.

What can I use a microloan for?

Microloans can be used for a number of things, including:

  • Working capital
  • Inventory or supplies
  • Furniture or fixtures
  • Machinery or equipment

You can’t use funds from an SBA microloan to pay any existing debts or to purchase real estate.

What are the terms and interest rates?

Microloan repayment terms vary according to several factors, including:

  • Loan amount
  • Planned use of funds
  • Requirements determined by the intermediary lender
  • Your needs as a small business borrower

The maximum repayment term allowed for an SBA microloan is six years. 

Interest rates vary, depending on the intermediary lender and their costs from the U.S. Treasury. In general, these rates are between 8 and 13 percent.

How can I get a microloan?

SBA provides funds to certain intermediary lenders, which are nonprofit community-based organizations with experience in lending, management and technical assistance. These intermediaries manage the Microloan program for eligible borrowers. So you don’t go directly to SBA for a microloan – you work with your local lender.

Each intermediary lender has its own lending and credit requirements. Typically, they require some type of collateral as well as the personal guarantee of the business owner. You may also have to fulfill training or planning requirements before a lender considers your loan application.

Learn more

For more information about microloan and if one might be right for you, contact your local SBA District Office or check out this list of participating microloan intermediary lenders.

Related Resources

About the Author:

Katie Murray

Contributor and Moderator

I am an author and moderator for the the Community. I'll share useful information for your entrepreneurial endeavors and help point you in the right direction to find other resources for your small business needs. Thanks for joining our online community here at!


Having problems applying for loan. Ever link keeps taking me to another link to another link, but never giving actual information or application to apply for loan??? Thanks, Paul Frazier
Very informative and useful article on getting a microloan. A large number of small entrepreneur will be benefited with it. And the best part is that the maximum repayment term allowed for an SBA microloan is six years. That means it allow the person to have a easy time in repaying the capital he will ask for. Thanks for sharing the information.
i think the average loan capacity need to be 20k instead of a 13 k limit
With a recent Intuit study predicting that 40% of the workforce will be self-employed by 2020, micro-loans can be a useful tool. At the same time, it is important to know what you need the money for. The fact is that over 80% of small business launch and grow without taking out a business loan. Be sure to work on the numbers to determine if you need a bank loan. Consider working with a business advisor through SCORE, SBDC, WBC or Veteran Business Centers. Depending on the scope of your business, do a keyword search for "the CFO trusted advisor network" to evaluate working with a part-time CFO. An experienced business advisor can help you evaluate micro-loans as well as reward-based and equity-based crowd funding options.
Microloan seems to be amazing device to get loan for small things. But its terms & condition are also flexible enough, & the same can be repayed in a tenure of six years or so, what else a small business holder can ask for.

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