Small business owners, especially newer ones, often struggle to get business loans from traditional banks. Inability to provide collateral, credit history, personal guarantee, and business tax returns are just a few of the many factors that can impact your ability to secure a business loan from a bank. But, with a small business microloan program, you can easily access working capital to grow your business.
What is a Microloan?
A microloan is a small loan up to $50,000, which is aimed at helping a business start or grow. In the US, microloans are typically offered to eligible borrowers by the Small Business Administration (SBA) through its specially designated intermediary lenders.
The average loan size for an SBA microloan is about $13,000.
How Does the SBA Microloan Program Work?
As a business owner, when you want to apply for an SBA microloan, you will need to reach out to an SBA-approved intermediary lender near you. This lender follows SBA’s guidelines, such as loan terms of six years and maximum loan amount, etc.
However, lenders can also add their own small business loan requirements as long as they are not discriminatory in approving the loan. You will repay the loan to your lender itself, not the SBA.
SBA microlenders also offer free training, coaching, and technical assistance to borrowers to help them grow their businesses. You can contact an SBA-approved intermediary lender near you to get more information about how the entire process works.
Benefits of SBA Microloans
From buying new equipment to purchasing inventory, businesses can spend loan funds on multiple purposes. But you cannot use microloans to pay existing debts and purchase real estate.
Here are the key benefits of the SBA microloans:
- Small business loans are an excellent way to get working capital for business owners who don’t qualify for traditional loans
- SBA microloans often come with competitive interest rates and long repayment terms
- Traditional loans from banks can take months to get approved. But microloans are disbursed quickly to eligible borrowers
- Microlenders often offer training and technical assistance to business owners
These small loans can help business owners build or improve their credit history.
How Can Small Businesses Obtain Microloans?
To obtain a microloan, you have to first find an SBA-approved intermediary in your area. You will apply through this intermediary lender that will look after the loan approval process, set loan terms, and make all credit decisions.
To complete the application process, you may require submitting your business plan, business & personal tax returns, interim financial statement, debt schedule, etc.
Documents you need to submit to apply for an SBA microloan program vary, depending on the lender. Reading a complete guide to the small business loan documents you’ll need can help you prepare your documents for a loan.
Top Small Business Microloan Lenders
We have compiled a list of the top individual lenders that offer SBA microloans in the country.
Let’s dive in:
1. Pursuit
Pursuit is a reputed SBA-approved intermediary lender, offering loan amounts of $10,000 to $50,000. The best thing about Pursuit is its quick approval process. Once you send a complete loan application, you can know about loan approval within two business days.
If approved, the loan funding will reach your account within five days of approval.
2. BOC Capital Corporation
BOC Capital is one of the leading nonprofit community-based lenders. The organization is known to support business owners during the loan application process. If your business is in New York, BOC Capital can be an excellent choice to apply for a microloan.
If you don’t know how to get a small business loan, it also offers advisory services in loan readiness, credit evaluation and repair, financial statement preparation, and much more.
3. Grameen America
You can explore Grameen America to get an SBA microloan if yours is a woman-owned business. The organization also offers its members financial education and training to help them build their financial identity. It presently serves 22 cities in the US.
4. PeopleFund
PeopleFund offers financial assistance to low-income, underserved communities. It services the entire state of Texas. In addition to SBA microloans, PeopleFund also provides other types of loans, such as PeopleFund loans, SBA 504, and more.
5. Prestamos CDFI
Prestamos CDFI offers comprehensive loans to small businesses. In addition to microloans, Prestamos CDFI provides businesses with no-cost empowerment services, covering popular topics, such as digital marketing, basic accounting, loan application assistance, and more.
If you want to know how to get an SBA loan and be ready for the same, these no-cost empowerment services can help you a lot.
6. Colorado Enterprise Fund
Having assisted more than 2,900 Colorado small businesses, Colorado Enterprise Fund offers loans ranging from a few thousand dollars to $1,000,000.
The company claims to be more flexible than other lenders when reviewing small business loan applications. It also offers free business advice to its borrowers.
7. Main Street Launch
Main Street Launch offers micro and small loans up to $250,000. In addition to providing funding, Main Street Launch also provides opportunities to connect with a network of people and resources to grow.
Whether short-term loans or long-term loans, the company offers competitive interest rates. As a business owner, if you don’t qualify for traditional financing, you can explore this option.
8. CDC Small Business Finance
CDC Small Business Finance is a leading name for offering flexible financing options to small businesses. Available in California, Arizona, and Nevada, CDC Small Business Finance is also planning to offer its services in other locations.
Whether you want money to improve cash flow or have some kind of financial protection in tough times, the organization claims to offer highly competitive interest rates.
9. LiftFund
LiftFund is one of the leading nonprofit community-based lenders. With its multiple loan options, LiftFund helps small businesses grow. It offers small business loans, special programs, SBA 7a community advantage, and SBA 504 loans.
If a bank has denied your loan application process due to a poor credit report, you must try LiftFund. The company claims to help those with limited credit, collateral, or experience.
10. Ambac Business Capital
Ambac takes pride in being the nation’s first faith-based SBA lender. With multiple SBA loan options, AmPac Business Capital serves both newly started and seasoned businesses.
When it comes to applying for an SBA microloan program, you will have to reach out to an SBA-approved lender near you. The lenders mentioned above serve selective locations, so they may be unavailable at your location.
You can check this list of lenders to find an SBA-approved intermediary lender near you.
What Credit Score Do You Need for a Microloan?
SBA hasn’t set a specific minimum credit score requirement for a microloan. But intermediary lenders may have established their own requirements. So, it is best to check with an intermediary lender in your area about eligibility requirements.
How Long Does It Take to Get an SBA Microloan?
Depending on your intermediary lender, it can take anywhere between 15 and 120 days to get an SBA microloan.
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