by Ryan Kernan
The SBA's microloan program is aimed at very small businesses and is available in amounts up to $50,000 from local microlenders, although the average loan is less.
The microloan program from the Small Business Administration, as the name implies, is targeted towards very small businesses. A new start-up or growing small business may apply for a Microloan. The average Microloan is $13,000 though borrowers may seek up to $50,000 in funding.
Loans are not made by the SBA, but by Microlenders at the local level. Microlenders are nonprofit community based lenders who accept applications, make credit decisions, and disperse the loans with funds made available by the SBA. Small businesses wishing to apply for a Microloan should contact a local Microlender in their area. Currently Microlenders operate in 46 states, the District of Columbia, and Puerto Rico. To locate a Microlender near you, visit www.sba.gov.
Microloans have a maximum term of six years, though terms vary according to several factors, including the planned use of funds and the requirements of the Microlender. Because each Microlender is different, interest rates on Microloans vary greatly. Borrows can expect interest rates between 8 and thirteen percent. Each Microlender has its own lending and credit requirements, but borrowers should be aware that some type of collateral is generally required, and the personal guarantee of the business owner is also usually requested.