What are Micro Loans?
Micro loans are small business loans for up to $35,000. Micro loans are generally used for start-up cash but are sometimes given to newly launched small businesses for working capital.
Micro loans can be used for many purposes including the purchase of equipment, inventory, machinery, fixtures, furniture, supplies, and even to purchase another business.
Does the Small Business Administration Give Out Micro Loans?
No. The Small Business Administration (SBA) does not lend money to businesses or individuals. However, the SBA does have many programs that small businesses can apply to for loans and other business support.
The SBA does provide funding to certain nonprofit community lenders. These lenders then make micro loans to small businesses, usually within their own communities.
Micro loans obtained through SBA-backed or other related programs typically require the applicant to fulfill certain business training and planning requirements (which vary) before a business owner can submit an application for a micro loan.
Suggested Reading:
What Are General Terms of Micro Loans?
Each lender will have their own requirements for repayment of a micro loan. In general, the maximum term for micro loans is six (6) years. Interest rates and collateral requirements vary considerably between lenders but almost all require a personal guarantee by at least one of the business' owners.
At one time, micro loans were relatively easy to obtain compared to traditional bank loans. However, with the downturn in the United States economy in 2008, micro loans can be more difficult to get now.
