The SBA’s Microloan program may give small business owners exactly what they need

Jessica SarterSmall Business Lending

As the owner of a small business, you might need a small business loan for a relatively low amount that is still majorly important to your success. You might want to take a look at one of the U.S. Small Business Administration's (SBA's) three major loan types – the Microloan program.

Like the other loan programs the SBA manages, such as the 7(a) and 504, the Microloan initiative is intended for a wide range of small business needs. It also stands out due to its availability to certain nonprofit organizations – specifically, those engaged in child care and related services.

Before you seek out lenders that provide funds as part of this program, keep in mind that you won't receive Microloan program small business loans through the average bank. The SBA gives these funds to nonprofit lending organizations in communities all over the U.S.

As you might guess from their name, microloans have a certain limit and aren't intended to finance major expenses – you can't receive more than $50,000. You're also not permitted to use microloan funds to buy real estate or pay back current debts. Aside from those restrictions, they can fill several essential business needs – purchasing inventory, supplies or equipment and boosting your working capital.

While these loans can't have a term longer than six years, the actual length will depend on your small business loan needs, your lender's requirements, the loan amount and how you plan to use the money. Interest rates depend on the lender's guidelines, and you may see rates ranging between 8 and 13 percent.

Some Microloan providers require borrowers to undergo classes or training focused on financial management as part of the application process. As is the case with many aspects of the Microloan program, the specifics will vary based on your lending organization. 

If you feel like funds from a Microloan small business loan are exactly what you need, get the ball rolling by finding out which groups supply Microloan funding in your state. You can do so by checking the list provided on the SBA's website. Since so many parts of this process are decided by your lender, you'll do best by personally investigating the terms, interest rates and other requirements of several organizations to find the best deal.