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Small business in the U.S. are responsible for the creation of two-thirds of the new jobs added to the economy each year. And yet, for these small businesses to continue hiring and growing, finding the business funding can be a challenge. Many big banks and lenders have no interest in making business loans under $250,000 – the cost of underwriting small loans is barely worth the profits on them. In these situations, microloans can be the best solution.

A microloan, according to the Small Business Administration, is a business loan in the amount of $50,000 or less. The SBA has made several moves in the last couple years to make these loans more profitable to lenders and more accessible to entrepreneurs. For one example, the SBA removed fees on its 7(a) loans that are $150,000 or less. The strategy is working as loan approvals for SBA microloans have experienced double digit growth in recent years.

The SBA microloan program averages loans of about $15,000 and it is able to help businesses that traditionally have a hard time getting funding from banks, like restaurants and small retailers. These types of businesses are usually seen as too risky by larger lenders based on their credit scores, assets and business history length. Microloan lenders tend to have slightly less stringent standards, although they still have requirements to be met. The most important qualification is usually whether or not a business has the cash flow to repay the loan. Businesses who are seeking money to pay off debts or to pay themselves salaries are not likely to find help from microloan lenders.

Some of the benefits of microloans that don’t always come with traditional bank loans are the mentoring and resources that are often available. Microloan lenders are usually connected with the local business community and can provide referrals for free services to small business owners, like Small Business Development Centers (SBDCs) or other local groups dedicated to helping small businesses.
When a standard small business loan won’t fit the bill, a microloan can help fill in the funding gap for your growing enterprise.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources