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How much is available
The maximum loan amount is usually $35,000 with the average loan being $13,000. You can
borrow as little as $1,000 or less. The borrower may use the proceeds for working capital and
acquisition of materials, inventory, supplies, furniture, fixtures, machinery and equipment. Loans
cannot be made to acquire land or property. Microloans are not a one-time deal. Most microloan
programs allow you to come back and borrow larger amounts once the first loan amount is paid
on time.
Who provides the loans
Hundreds of microloan programs exist throughout the United States. Nonprofit agencies, private
foundations and the Small Business Administration (SBA) operate microloan programs. The SBA
does not grant microloans directly, they provide low-cost loans and grants to non-profit
intermediaries such as community economic development and microloan centers nationwide
which redistribute the funds to qualified small businesses.
Microlenders are typically small community-based nonprofits. The SBA uses about 160
microlenders around the country as intermediaries to provide SBA loans to small businesses.
The Obama Administration's Recovery Act of 2009 gave an additional $50 million to
microlenders, increasing their annual operating budget from approximately $25 million. Some
microlenders receive their funds from state or local government and even philanthropic
organizations
General lending guidelines are established by the intermediary agency and all credit decisions
are made on the local level. Business owners will likely be required to submit a business plan. If
you do not have a business plan most intermediaries offer business planning courses and other
training. There are also templates that can assist you in preparing a business plan at
SBA template.
Terms, interest rates, and fees
The maximum term allowed for a microloan is six years. However, loan terms vary according to
the size of the loan, the planned use of funds, the requirements of the intermediary lender, and
the needs of the small business borrower. Interest rate on microloans can be lower than
traditional small business financing and often much lower than bank credit card rates.
Credit and Collateral
The community based intermediary establishes its own lending and credit requirements. Some
intermediaries may require collateral but not likely. The business owner will be required to
personally guarantee repayment of the loan. A credit report is pulled on the small business
owner but it is not the only criteria considered.
Bad credit business owners are often approved with a solid business plan and business training.
Although it is completely up to the Microloan organization to establish underwriting criteria, they
are accustomed to dealing with start-up businesses who have little collateral and less than
perfect credit.
Training and assistance
The intermediary is required to provide small business training and technical assistance to the
borrower if needed. Small business owners may be required to complete a series of training or a
business planning course as a precondition before the loan application is approved.
Where to apply
Small business owners should apply for a microloan in their community, city or county. Visit the
SBA's microlending page to find a list of microlender intermediaries around the country.
While microloans are a good source of funds for small businesses unable to borrow from
traditional banks, it can be cumbersome to obtain a microloan if training and business planning
courses are required.
Another problem with microloans is that intermediaries distribute the loans in their own
communities and if you do not live in an area of an intermediary then a microloan may not be
available to you. If this is the case you can research your State and local government agencies
for alternative sources as some offer loans similar to the microloan program.
Accion USA
A great alternative to the SBA Microloan Intermediaries is a nationwide microlender called
Accion USA. Accion USA specializes in working with small business owners who may not meet
traditional bank loan qualifications. You may qualify with a credit score as low as 575. Accion USA
can actually help you build a positive credit history as they report loan payments to the major
credit bureaus. They offer business loans at interest rates as low as 8%! The loan turnaround
time can be much faster than SBA Microlenders.
Microloan organizations may be the only alternative for small business owners and entrepreneurs
who have bad credit. Microlenders are comfortable with the needs, experience, collateral or lack
thereof, small borrowers have and they provide a much needed service.
The maximum loan amount is usually $35,000 with the average loan being $13,000. You can
borrow as little as $1,000 or less. The borrower may use the proceeds for working capital and
acquisition of materials, inventory, supplies, furniture, fixtures, machinery and equipment. Loans
cannot be made to acquire land or property. Microloans are not a one-time deal. Most microloan
programs allow you to come back and borrow larger amounts once the first loan amount is paid
on time.
Who provides the loans
Hundreds of microloan programs exist throughout the United States. Nonprofit agencies, private
foundations and the Small Business Administration (SBA) operate microloan programs. The SBA
does not grant microloans directly, they provide low-cost loans and grants to non-profit
intermediaries such as community economic development and microloan centers nationwide
which redistribute the funds to qualified small businesses.
Microlenders are typically small community-based nonprofits. The SBA uses about 160
microlenders around the country as intermediaries to provide SBA loans to small businesses.
The Obama Administration's Recovery Act of 2009 gave an additional $50 million to
microlenders, increasing their annual operating budget from approximately $25 million. Some
microlenders receive their funds from state or local government and even philanthropic
organizations
General lending guidelines are established by the intermediary agency and all credit decisions
are made on the local level. Business owners will likely be required to submit a business plan. If
you do not have a business plan most intermediaries offer business planning courses and other
training. There are also templates that can assist you in preparing a business plan at
SBA template.
Terms, interest rates, and fees
The maximum term allowed for a microloan is six years. However, loan terms vary according to
the size of the loan, the planned use of funds, the requirements of the intermediary lender, and
the needs of the small business borrower. Interest rate on microloans can be lower than
traditional small business financing and often much lower than bank credit card rates.
Credit and Collateral
The community based intermediary establishes its own lending and credit requirements. Some
intermediaries may require collateral but not likely. The business owner will be required to
personally guarantee repayment of the loan. A credit report is pulled on the small business
owner but it is not the only criteria considered.
Bad credit business owners are often approved with a solid business plan and business training.
Although it is completely up to the Microloan organization to establish underwriting criteria, they
are accustomed to dealing with start-up businesses who have little collateral and less than
perfect credit.
Training and assistance
The intermediary is required to provide small business training and technical assistance to the
borrower if needed. Small business owners may be required to complete a series of training or a
business planning course as a precondition before the loan application is approved.
Where to apply
Small business owners should apply for a microloan in their community, city or county. Visit the
SBA's microlending page to find a list of microlender intermediaries around the country.
While microloans are a good source of funds for small businesses unable to borrow from
traditional banks, it can be cumbersome to obtain a microloan if training and business planning
courses are required.
Another problem with microloans is that intermediaries distribute the loans in their own
communities and if you do not live in an area of an intermediary then a microloan may not be
available to you. If this is the case you can research your State and local government agencies
for alternative sources as some offer loans similar to the microloan program.
Accion USA
A great alternative to the SBA Microloan Intermediaries is a nationwide microlender called
Accion USA. Accion USA specializes in working with small business owners who may not meet
traditional bank loan qualifications. You may qualify with a credit score as low as 575. Accion USA
can actually help you build a positive credit history as they report loan payments to the major
credit bureaus. They offer business loans at interest rates as low as 8%! The loan turnaround
time can be much faster than SBA Microlenders.
Microloan organizations may be the only alternative for small business owners and entrepreneurs
who have bad credit. Microlenders are comfortable with the needs, experience, collateral or lack
thereof, small borrowers have and they provide a much needed service.
More Resources
Business Opportunities
Home-based business
opportunities. Earn extra income
from your computer.
Bad Credit Business Loans
Find alternative funding sources if
you have bad credit.
Business Loan Sources
A little creativity and al lot of
determination can get you the
money you need.
Home-based business
opportunities. Earn extra income
from your computer.
Bad Credit Business Loans
Find alternative funding sources if
you have bad credit.
Business Loan Sources
A little creativity and al lot of
determination can get you the
money you need.
Business Credit
How to Build Business Credit
Separate from Your Personal Credit
in 10 Steps
How to Build Business Credit
Separate from Your Personal Credit
in 10 Steps
Microloans: A way to get a
bad credit business loan
January 2, 2010 by Lisa Phillips
bad credit business loan
January 2, 2010 by Lisa Phillips
Microloans service entrepreneurs who need financing assistance to start or expand their
business but cannot qualify for traditional bank loans. Microloan organizations provide funding to
start-up entrepreneurs, home-based businesses, existing and growing small business owners.
business but cannot qualify for traditional bank loans. Microloan organizations provide funding to
start-up entrepreneurs, home-based businesses, existing and growing small business owners.
Small business owners seeking bad credit
business loans may find a microloan meets
their needs because you may qualify with less
than perfect credit, little to no assets and even
limited business experience.
Who can apply
Start-up businesses, newly established
businesses, home-based businesses and
growing businesses. During this credit crunch
it has become increasingly difficult to get
approved for even the smallest business loan.
A mircroloan may be the answer to your short
term financing needs.
business loans may find a microloan meets
their needs because you may qualify with less
than perfect credit, little to no assets and even
limited business experience.
Who can apply
Start-up businesses, newly established
businesses, home-based businesses and
growing businesses. During this credit crunch
it has become increasingly difficult to get
approved for even the smallest business loan.
A mircroloan may be the answer to your short
term financing needs.
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