The Small Business Administration’s Microloan Program was created in 1992 to target small-business entrepreneurs who only need a small amount of money—whether it be for machinery, supplies, inventory, or working capital.
Various nonprofit organizations around the country act as intermediaries that lend out their money. There are approximately 200 microlenders in the U.S. Before you apply for a microloan, make sure to write up a clear and detailed business plan, and ensure that you will be able to meet the monthly repayments in a timely fashion.
What is great about the Microloan Program is that it especially caters to those small-business entrepreneurs who may have never borrowed money before from a bank. Banks are often hesitant to lend money to first-time borrowers, so the Microloan Program is an excellent alternative. New businesses that who do not have a long operating history can also benefit from the Microloan Program.
However, one major downside of the Microloan Program is that its interest rates tend to be a little higher than those for standard bank loans. Moreover, if you do not live in an area that has an intermediary microlender, it can be difficult to partake in this program. That’s when a company such as Biz2Credit can be helpful in connecting with lenders, such as Accion East and Online, which make microloans to companies all over the country.
It is also important to keep in mind that some intermediaries do require some form of collateral from a small business owner before a loan will be made. Biz2Credit can help you shop around to find the intermediary microlender that best fits your small business’s needs.