Micro loans are small loans ($35,000 and under) for start-up and/or newly established small businesses.
The SBA provides funds to non-profit community lenders which then make the loans to business borrowers with the credit decision made locally.
The maximum term micro loan is 6 years with each lender having their own lending and credit requirements. However all microloans require some type of collateral and the personal guarantee of the business owner.
Micro loans normally require that small business owners applying for financing must fulfill training and business planning requirements before a loan application is accepted.
A Micro Loan can have many different uses including :
- working capital
Micro loans are relatively easy to obtain compared to traditional bank loans. There may be a problem if you are not located near one the the non-profit community lenders since they tend to only distribute funds in their own communities.