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The SBA’s Micro-loan Program provides short-term loans of up to $35,000 to small businesses and not-for-profit child-care centers 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 buy real estate. An extremely useful factor that you need to be aware of and considered to be one of the most essential for you while dealing with this question is that the SBA makes or guarantees a loan to an intermediary, who in turn, makes the micro loan to the applicant. These organizations in addition provide management and technical assistance. The SBA does not guarantee the loans. The micro loan program is accessible in selected locations in most states.
Small businesses and not-for-profit child-care centers needing small-scale financing and technical support for start-up or expansion
Particularly designated intermediary lenders (nonprofit organizations with experience in lending and in technical assistance) really lend you the money.
To provide you with more details and therefore better understanding of the subject it should be mentioned that the Microloan Program provides very small loans to start-up, newly established, or growing small business concerns. Under this program, SBA makes finances available to nonprofit community based lenders (intermediaries), which, sequentially, make loans to suitable borrowers in amounts up to a maximum of $35,000. The average loan size is nearly $13,000. Applications are submitted to the local intermediary and all credit decisions are made on the local level.
The maximum term allowed for a microloan is six years. Still, loan terms fluctuate according to the size of the loan, the planned management of funds, the requirements of the intermediary lender, and the needs of the small business borrower. The maximum loan amount is $35,000, however, the regular loan amount is around $13,000. Interest rates vary, depending upon the intermediary lender and costs to the intermediary from the U.S. Treasury. In general these rates will be between 8 eight percent and thirteen percent.
Every intermediary lender has its own lending and credit requirements. However, business owners contemplating application for a microloan should understand that intermediaries will generally require some kind of collateral, and the individual guarantee of the business owner.
Each intermediary is required to provide business based training and technical support to its microborrowers. Actually, individuals and small businesses applying for microloan financing may be required to fulfill training and/or planning requirements before a loan application is considered.
Finally, it should be mentioned that small businesses that are interested in applying for a microloan should speak to a microlender in their area. In order to find out a micro loan lender in your state you just need to use internet and in few seconds you will be provided with all necessary info.
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