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What is a small business microloan?

Small business owners, especially newer ones, often find it difficult to obtain 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 affect 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 Microcredit?

A microloan is a small loan of up to $50,000 to help a business start or grow. In the United States, microloans are generally 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 around $13,000.

How does the SBA microcredit program work?

As a business owner, when you want to apply for an SBA microloan, you’ll need to go to an SBA-approved intermediary lender near you. This lender follows SBA guidelines, such as six-year loan terms and maximum loan amount, etc.

However, lenders can also add their own small business loan requirements as long as they don’t discriminate in loan approval. You will repay the loan to your lender itself, not to the SBA.

SBA microlenders also provide free training, coaching, and technical assistance to borrowers to help them grow their business. You can contact an SBA-licensed intermediary lender near you for more information on how the whole process works.

Advantages of SBA microloans

From purchasing new equipment to purchasing inventory, businesses can spend loan funds for multiple purposes. But you cannot use microloans to pay off existing debts and buy real estate.

Here are the main advantages of SBA microloans:

  • Small business loans are a great 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 be approved. But microloans are disbursed quickly to eligible borrowers
  • Microlenders often provide training and technical assistance to business owners

These small loans can help business owners establish or improve their credit history.

How can small businesses obtain microloans?

To obtain a microloan, you must first find an SBA-approved intermediary in your area. You will apply through this intermediary lender who will handle the loan approval process, set loan terms and make all credit decisions.

To complete the application process, you may need to submit your business plan, business and personal tax returns, interim financial statements, debt statement, etc.

The documents you need to submit to apply for an SBA microloan program vary by lender. Reading a comprehensive guide to the small business loan documents you’ll need can help you prepare your documents for a loan.

Top Small Business Microcredit Lenders

We’ve compiled a list of the best individual lenders that offer SBA microloans in the country.

Let’s dive in:

1. Pursuit

Pursuit is a reputable SBA-approved intermediary lender, offering loan amounts from $10,000 to $50,000. The best thing about Pursuit is its fast approval process. Once you submit a complete loan application, you can be notified of loan approval within two business days.

If approved, loan funding will reach your account within five days of approval.

2.BOC Capital Corporation

BOC Capital is a leading not-for-profit community lender. The organization is known for supporting 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, he also offers counseling services for loan preparation, credit reporting and repair, financial statement preparation, and more.

3. Gramein America

You can explore Grameen America for an SBA microloan if yours is a woman-owned business. The organization also provides its members with financial education and training to help them build their financial identity. It currently serves 22 cities in the United States.

4. People Fund

PeopleFund provides financial assistance to low-income and underserved communities. It serves the entire state of Texas. In addition to SBA microloans, PeopleFund also offers other types of loans, such as PeopleFund loans, SBA 504, etc.

5. Prestamos CDFI

Prestamos CDFI offers comprehensive small business loans. In addition to microloans, Prestamos CDFI provides businesses with free empowerment services, covering popular topics, such as digital marketing, basic bookkeeping, loan application assistance, and more.

If you want to know how to get an SBA loan and be ready for the same, these free empowerment services can help you a lot.

6. Colorado Enterprise Fund

Having helped over 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 offers 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 Funding

CDC Small Business Finance is a leading name in providing flexible financing options for small businesses. Available in California, Arizona and Nevada, CDC Small Business Finance also plans to offer its services in other locations.

Whether you want the money to improve your cash flow or have some sort of financial protection in tough times, the organization claims to offer very competitive interest rates.

9. LiftFund

LiftFund is a leading nonprofit community lender. With multiple loan options, LiftFund helps small businesses grow. It offers small business loans, special programs, SBA 7a community benefit, and SBA 504 loans.

If a bank denied your loan application process due to a bad credit history, you need to try LiftFund. The company claims to help those with limited credit, warranty, or experience.

10.Ambac Business Capital

Ambac is proud to be the nation’s first faith-based SBA lender. With multiple SBA loan options, AmPac Business Capital serves both newly established and seasoned businesses.

To apply for an SBA microloan program, you will need to apply to an SBA approved lender near you. The lenders mentioned above serve selective locations, so they may not be available at your location.

You can consult this list of lenders to find an SBA-approved intermediary lender near you.

What credit score do you need for a microloan?

The SBA has not set a specific minimum credit score requirement for a microloan. But intermediary lenders may have established their own requirements. It is therefore best to check with an intermediary lender in your area for eligibility requirements.

How long does it take to get an SBA microloan?

Depending on your intermediary lender, obtaining an SBA microloan can take between 15 and 120 days.

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