What is an SBA Microloan?
Learn what SBA Microloans are, understand the terms and requirements, and see how this program helps startups and small businesses access smaller amounts of capital.
The SBA Microloan program provides small loans up to $50,000 to help small businesses and certain nonprofit childcare centers start and expand. The average microloan is about $13,000. Unlike other SBA loans, microloans are provided through nonprofit community-based intermediary lenders rather than banks.
How SBA Microloans Work
The SBA provides funds to nonprofit intermediary lenders (community organizations with experience in lending and technical assistance), who then make loans to eligible borrowers. These intermediaries also provide business training and support to help borrowers succeed.
Technical Assistance
Many microloan intermediaries require borrowers to complete training or technical assistance programs before receiving their loan. This support can be valuable for newer business owners.
SBA Microloan Terms
Key terms for SBA Microloans:
| Feature | Details |
|---|---|
| Maximum loan amount | $50,000 |
| Average loan amount | Approximately $13,000 |
| Maximum term | 6 years |
| Interest rates | Typically 8% to 13% |
| Collateral | Required (personal guarantee and/or business assets) |
Eligible Uses
SBA Microloans can be used for most business purposes:
- Working capital
- Inventory and supplies
- Furniture and fixtures
- Machinery and equipment
What Microloans Cannot Fund
There are some restrictions on microloan use:
- Paying off existing debt
- Purchasing real estate
Who Should Consider Microloans
SBA Microloans are often a good fit for:
- Startups that may not qualify for larger SBA loans
- Home-based businesses
- Businesses owned by women, minorities, or veterans
- Very small businesses (often called micro-enterprises)
- Businesses that need smaller amounts of capital
- Entrepreneurs who would benefit from training and technical assistance
Microloan vs. SBA 7(a)
The main differences: Microloans have lower maximums ($50,000 vs. $5 million), are processed by community lenders rather than banks, often include training requirements, and may have more flexible credit requirements.
If you need more than $50,000, you will need to apply for an SBA 7(a) or other loan program.
Find SBA Microloan intermediaries in your area through the SBA's Lender Match tool or by searching for Community Development Financial Institutions (CDFIs) in your state.
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Read more →Important Disclosure
Not Financial Advice: The information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. You should consult with qualified professionals before making any financial decisions.
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