SBA microloans are loans that the U.S. Small Business Administration (SBA) provides for up to $50,000 through intermediary lenders to help entrepreneurs grow their small businesses.

Microloans can be used for many different purposes, such as for working capital or inventory. But they have some limitations—for example, they cannot be used to pay debt. The loan terms and rates on SBA microloans will vary depending on the intermediary lender. The typical microloan applicants are startups and existing 澳洲幸运5官方开奖结果体彩网:small businesses.

How SBA Microloans Work

The SBA supplies funds to intermediary lenders, which administer the loan program. These lenders are nonprofit community-based organizations. SBA borrowers submit their SBA microloan applications to a local SBA-approved intermediary. The SBA provides a list of designated intermediary SBA microlenders.

The SBA provides up to $5 million to an intermediary lender to issue SBA microloans. Then, the loans require a 15% nonfederal cash match.

SBA microloans are generally issued to startups and 澳洲幸运5官方开奖结果体彩网:small businesses, but not-for-profit childcare centers may also qualify. SBA microloans are closed within 120 days of being approved.

Main Features of an SBA Microloan

Like other types of loans, SBA microloans have specific terms, interest rates, fees, and other features. Let’s look in more detail at what they provid🃏e 🐻and what they require.

Maximum Amount

The SBA microloan program provides loans up to $50,000. The average loan amount is $13,000.

Terms

SBA-backed intermediaries set repayment terms, so they may vary from loan to loan. The terms will be determined in part by the loan amount and the borrower’s needs. The maximum repayment term for an SBA microloan is six years.

Interest Rates

Intermediaries determine the 澳洲幸运5官方开奖结果体彩网:interest rates for microloans. You can expect interest to be about 8% to 13%.

Fees

You are responsible for paying a number of fees associated with an SBA microloan. For example, intermediaries may charge a packaging fee. The packaging fee is limited to 3% of the total loan amount for loans with terms of a year or more. For loans with terms of less than a year, the packaging fee is limited to 2% of the total amount of the loan.

Collateral

The SBA does not give intermediaries specific criteria regarding collateral for specific loans. However, intermediaries typically require microloan borrowers to provide collateral because intermediaries must maintain cash reserves and loan balances that equal 115% of what the SBA provided the intermediary.

Personal Guarantee

In addition to collateral, intermediaries may also require you to provide a personal guarantee. Essentially, if the business is unable to repay the loan, then you, as the business owner, would be responsible.

SBA Microloan Uses

You can use ꧂microloans for𓂃 a number of purposes, including:

• Machinery and equipment
• Supplies
• Inventory
• Furniture and fixtures
• 澳洲幸运5官方开奖结果体彩网:Working capital

You cannot use the funds from an SBA microloan to pay off debts or buy real estate.

Eligibility Requirement꧑s to Get an SBA Microloan

How can you qualify for an SBA loan? SBA microloan requirements will vary depending on the inter💜mediary lender. Common eligibility requirements in♕clude:

• Operating as a for-profit business (some nonprofit child care centers may be eligible)
• Operating in the intermediary’s approved area
• Meeting SBA small business size standards
• No disbarment from receiving federal funds

Requirements for Startups

The SBA considers businesses that have been operating for two years or less to be startups. Intermediaries may have specific 澳洲幸运5官方开奖结果体彩网:credit scores and collateral requirements for startups.

Requirements for Existi🏅ng Businesses Over 2 Years Old

Intermediaries may also have specific requirements relating to an applicant’s credit score and business cash flow if their business has been operating for more than two years. Borrowers with existing businesses will likely still need to provide collateral.

Pros and Cons of an SBA Microloan

SBA microloans can be a good option for small bu෴sinesses that need a relatively small amount of money to help them grow or open, but it is important to consider the potential benefits and downsides.

SBA Microloan vs. SBA 7(a) Loan

The SBA microloan program and the SBA 7(a) loan program have some similarities and differences.

How to Apply for an SBA Microloan

To apply for an SB✱A microloan, submit your microloan application to an intermediary lender. The SBA🥃 provides a .

Each intermediary lender may have specific application requirements. They may ask you to provide financial documentation about your business and personal finances. An SBA microloan is funded within 120 days.

The Bottom Line

SBA microloans can help startups and other small businesses seeking a𝔉 relatively small amount of financing. Microloans can be used for many different purposes. While interest rates, 🧸fees, and terms will vary depending on the intermediary lender, you will have a maximum of six years to repay the loan.

If you need more f🌜unding or more flexible repayment terms, you can explore the SBA’s other loan programs or conventional financing options.