Microloan Program

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Small Business Administration (SBA) created the Microloan Program to assist non-profit childcare centers and small business organizations by providing them with government loans on short-term basis. These business loans are only provided to the eligible borrowers. The government loans of this kind are made available to the intermediary lenders by the SBA. These intermediary lenders or Microlender intermediaries are community based non-profit organizations that have enough experience in providing borrowers with technical assistance, managing funds, and lending. The maximum amount on this government loan that can be availed of is $35,000 depending on the eligibility of the borrower. The average for government loans is $13,000.

SBA provides Microloan to small business organizations so that it can be used by them as working capital or for the purchase of supplies, inventory, fixtures, furnishings, equipment, and machinery. However these business loans cannot be utilized for the purpose of paying off debts or to invest in real estate. The SBA affiliated intermediary lenders who provide these government loans are required to provide their micro borrowers with technical assistance and business training. A small business organization applying for government loans has to fulfill certain requirements, such as planning and training completion for their loan applications to be considered.

The term of the Microloan depends on various factors like loan size or amount of the loan; the use of the loan in a planned and a systematic way; intermediary loan provider requirement; and finally, government loans depends on the small business borrower’s need. These kinds of business loans are provided for a maximum period of six years. The rate of interest varies on the basis of intermediary loan provider and U.S. treasury costs to the intermediary loan provider. Normally, the rates are within eight to thirteen percent. The lending and credit requirements of each intermediary lender differ.

The loans are given by the intermediary lender against collateral and sometimes also against the business owner’s personal guarantee. Non-profit organizations or small business companies who are willing to apply for this type of loan must contact the intermediary lenders, who are providing this loan in their respective area. All decisions regarding the credit are made on the local level by that micro lender. This loan program exists in most states and in selected areas. The non-profit organization intermediary micro lender receives this fund from the SBA. This fund is then provided to small or micro business organizations in the community. Along with this, they also provide valuable technical assistance and business training to the small companies.

The process of application varies with the micro lender. All the related information is available from SBA’s official portal. Any new venture or a growing business can avail of this small loan to meet their business financial needs.