The Small Business Administration offers microloan programs for small business owners who are in need of a short-term loan for their company. Microloans are made through lenders but guaranteed by the Small Business Administration and usually have a maximum loan amount of $35,000.
Many small-business owners use microloans so that they can either buy supplies or equipment, as well as a variety of other reasons, all of which can help their business grow and expand to become more successful. A micro-loan can help a small business and may be easier to obtain, as many lenders have been accused of not providing small business loans for companies that may be in need.
It should be noted that loans, like these micro loans, although smaller in value than some small business loans, should not be borrowed unless a business owner needs the money to help their business grow and become more profitable, and is willing to use the loan in a responsible way. For instance, a microloan can’t be used to pay off debt as this is not only against the SBA’s policy, but also a bad financial practice in most cases.
Typically, according to the SBA website, interest rates on microloans are between 8% and 13% and usually have a maximum term of six years. Also, any small business that obtains a micro-loan may be required to take business training before they can complete their application.
Traditionally microloans have been made for companies that are smaller and may have less operating costs than other small businesses. It may be in a small business owner’s best interest to consult the SBA microloan page on the SBA’s website for more information and to see if a microloan is right for their company.