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How to Get an SBA Microloan

What it is

An SBA microloan provides very small loans for people who are trying to start a new business, have newly established businesses or have growing small business concerns through the United States Small Business Administration. Under this program, funds are made available by the SBA to nonprofit community-based lenders called intermediaries. These lenders then make loans available to borrowers. The maximum amount available is $35,000 and the average loan size is around $13,000. Applications are submitted to the intermediary and all credit decisions are made at that level.

The maximum term for this type of loan is six years, but otherwise loan terms vary according to the amount borrowed, the use of the funds, the needs of the borrower, and any terms and conditions set out by the lender or intermediary. Interest rates vary between eight percent and 13 percent based upon the policy of the intermediary lender and costs to the lender from the United States Treasury.

Who it's for

Many small businesses find themselves in need of a business loan at one time or another for a variety of reasons. An SBA microloan can provide short-term assistance in small amounts for small businesses in the early stages. Those interested in applying for a microloan should contact a microlender in their area to begin the application process.

What you need to do to apply

In order to be approved for an SBA microloan, a borrower must meet the lending and credit requirements of the intermediary. Generally, this lender will require collateral or some type of security, as well as the personal guarantee of the business owner in order to approve financing. Each intermediary is required to provide business based training and technical assistance to microborrowers. Borrowers may be required to fulfill training or planning requirements before a loan applicant will be considered.

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