The SBA Micro Loan Program Explained

The SBA micro loan program is a very unique lending program designed to help small business owners. A micro loan program will allow you to borrow money for many situations and could be exactly what you are looking for. Here are a few things to consider about the SBA micro loan program and how it could potentially help your business. 

Loan Sizes

As the name of the program suggests, the micro loan program from the SBA is designed to be there for those needing smaller business loans. With the micro loan program, you can borrow up to a maximum of $35,000 for your business. While you can borrow that much with this program, the average business only borrows about $13,000 with this program. This is quite a bit smaller than other similar loan programs with the SBA, but the program still has some definite advantages. 

Potential Uses

There are many potential uses for this type of loan. The SBA allows you to do a number of productive things with the money. One of the most common uses of the money is for working capital. Sometimes, cash flow gets low when times are tough and this program can definitely help in that regard. 

You can also use the money from this loan to buy supplies, inventory, equipment, fixtures, and machinery. It can not be used to buy real estate or to pay off any other debts. This is not a debt consolidation product or a mortgage. You can use it to help cash flow or to buy items of need for your business. While the uses are somewhat restricted, there is definitely a big market for loans that can provide these needs for small businesses. 

Terms of the Loan

Since the SBA does not lend directly to small businesses, the terms of the loans are going to be very flexible. The SBA works with many lenders across the country and each one of them has a slightly different program on their terms. However, the maximum amount of time that you can borrow money for is six years. This makes the program rather short-term by nature. Interest rates can vary widely and be anywhere from 8 to 13%. The payment plans are usually flexible and you will have a few options to choose from in that regard. 

Requirements

In order to get an SBA micro loan, you will have to meet some basic requirements. They will check your credit history in order to determine your credit worthiness. They are going to want to see enough income coming in to pay back the loan in a timely manner. They may also require some kind of collateral for the loan. This criteria is lender-specific, so you may be able to find some loans that are unsecured with this program.

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