SBA MicroLoans
What is a SBA microloan?
SBA Microloans are a type of financing provided by the Small Business Administration (SBA) to help small businesses and certain not-for-profit childcare centers start up and expand. The program offers loans up to $50,000, with the average microloan being about $13,000. These loans are administered through designated intermediary lenders, which are typically nonprofit community-based organizations with experience in lending, as well as management and technical assistance.
What are the criteria required to qualify for SBA microloans?
To qualify for an SBA microloan, businesses must meet the following criteria:
For-Profit Status : The business must operate for profit, with the exception of certain not-for-profit childcare centers
Location : The business must be located and operating within the United States.
Size Standards : The business must meet the SBA’s size standards for a small business .
Credit and Collateral : Intermediary lenders have their own lending and credit requirements, but generally, some type of collateral and the personal guarantee of the business owner are required .
Use of Funds : Microloans can be used for working capital, inventory, supplies, furniture, fixtures, machinery, and equipment.
They cannot be used to pay existing debts or to purchase real estate.
Which businesses are ineligible for SBA microloans?
According to the SBA, the following are ineligible for microloan assistance -
Non-Profit Businesses: Except for certain not-for-profit childcare centers, non-profit businesses are not eligible.
Financial Businesses: Those primarily engaged in the business of lending, such as banks and finance companies.
Passive Businesses: Owned by developers and landlords that do not actively use or occupy the assets acquired with the loan proceeds .
Life Insurance Companies : These are not eligible for SBA microloans.
Businesses Engaged in Illegal Activities : Any business that is illegal under federal, state, or local law .
Businesses in Certain Industries : Such as gambling, where more than one-third of gross annual revenue comes from legal gambling activities
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