The SBA Microloan Program provides funding through approved nonprofit intermediary lenders. Those intermediaries make the credit decision, set loan terms within program requirements, and often pair financing with management or technical assistance.
Start with the use of proceeds
SBA identifies permitted uses that can include working capital, inventory, supplies, furniture, fixtures, machinery, and equipment. The program does not allow microloan proceeds for every purpose; for example, official guidance states they cannot be used to pay existing debts or purchase real estate.
Expect local underwriting
Intermediaries evaluate the business, owners, repayment ability, use of funds, and supporting documents. Collateral and a personal guarantee may be required. Because intermediaries differ, compare more than one available source when practical.
Prepare a focused application
- Exact dollar request and itemized use
- Business plan or operating summary
- Cash-flow history and realistic projections
- Owner and business financial information
- Licenses, formation records, and tax documents
- Collateral and personal-guarantee information
Compare the full obligation
Record the interest rate, APR if disclosed, origination and closing fees, payment frequency, maturity, collateral, guarantee, late fees, and prepayment terms. Training or technical-assistance requirements may add time but can also strengthen the business plan.
Borrow only for a use with a credible repayment source. A microloan is smaller than many bank loans, but it is still enforceable business debt and can connect to the owner’s personal finances through a guarantee.