Over time, businesses often run into situations where they need extra as well as external financial inputs. For this reason, institutions such as the Small Business Administration in the US have formulated loans specifically for this purpose. They offer a number of SBA microloan programs to businesses in need. Low-income individuals, women, minority business owners, veterans, and other small businesses are among the categories eligible for SBA microloans.

SBA Microloan Program

Financial providers or institutions, like Booster Financial, are allocated loans to provide businesses with these microloan programs. Businesses can consult with them to negotiate the best program for their individual needs. It is important to consult with them to find the right program for your needs.

Small businesses should be aware of the fact that the SBA microloan program offers loans between $13,000 and $50,000. The microloan program helps a few businesses and some nonprofit child care centers. These programs are basically for startups and the expansion of existing small businesses.

The U.S. Small Business Administration provides funds to specially designated intermediary lenders, like Booster Financial, with a record of lending. This is why it is specifically called the SBA microloan program, as the funds are provided to the financial provider to disburse to small businesses as a microloan.
As an intermediary, the financial institution will also provide services such as the management of the funds as well as any technical support. Thus, the intermediary manages the microloan program on behalf of qualified borrowers.

How Do Businesses Qualify for the SBA Microloan Program?

As with any other loan, businesses should know what amount they would like to borrow. This will assist the financial provider in giving the right advice and guiding the borrower to the right funding. This will also speed up the approval of the program.

Businesses should be aware of the fact that each financial provider, like Booster Financial, has its own criteria for the borrower in terms of their credit requirements as well as their lending requirements. It is therefore important to discuss these matters with the provider in the initial application.

Whether the financial provider will require any collateral will depend on how much the borrower needs or based on its eligibility standards. In most instances, lenders, like Booster Financial, will require some form of collateral as protection against nonpayment.
One way of doing this is by using assets acquired through the loan program, such as equipment, as collateral for the microloan program.

The financial provider could also secure the microloan by requesting the business to sign a personal guarantee that it would repay the loan. That is why the businesses applying for the microloan program should be operational or have their prospective business in the US or in one of its territories.

In contrast to most other SBA loans, the SBA microloan program has a little less stringent credit requirements, typically requiring a minimum credit score of between 620 and 640. While the credit requirements for microloans may be less stringent, collateral might still be necessary and, as said, can be in the amount of up to $50,000.

It is a popular loan choice for most startup businesses, but some non-profit child care centers and for-profit small businesses can also apply. However, the requirement, as stated, is that all small businesses should have a good financial record as well as a good credit score. A good financial record will give an indication of how the business uses its funds.

How Can a Business Use the SBA Microloan Program?

The SBA microloan can be used for most of the business’s activities. There are no restrictions, except for two, on how the business can use the funds received from the financial provider. However, as already stated, it is important for the business to know that the provider manages the funds. The business is therefore accountable for how they use the funds.

If the business has a need for working capital, it can utilize the funds for that purpose. Working capital is an important element in every business and is therefore always needed. Working capital is a necessity as it is the foundation of the day-to-day running of the business.

Some of the other ways in which a business can utilize the SBA microloan are in the purchasing of supplies or boosting its inventory. If there is growth and new furniture or machinery is required, it would benefit the business to apply for a microloan program.
Two major dis-qualifiers are that businesses cannot use an SBA microloan to pay off previous debts or to buy property.

How Do Businesses Repay an SBA Microloan Program?

The payments of an SBA microloan program depend entirely on how much the borrower applies for. The amount the borrower requests will have the added interest rate as well as the fees the financial provider, like Booster Financial, charges. All this adds up to what the installments will work out to.

The SBA funds the microloans, while the intermediary lender, like Booster Financial, manages the loan, processes applications, and distributes the loan funds. The financial provider works off of SBA guidelines but is free to set its own rates and eligibility standards. This results in a range of minimum loan amounts to lend, rates, and fees.

It is therefore important that businesses keep the following in mind:

  • Businesses should make sure that they have calculated the right loan amount from the start. This is important because it would not be conducive to take out any additional financial debt after the fact.
  • In light of the above point, it is important for businesses to ensure that they know what their specific needs are. This is why the following point is vitally important.
  • It is important for the business to have a clear plan for the funds that are required, especially in terms of how they will spend them.
  • It is therefore ideal to set up a budget plan on how to use the funds.
  • The financial provider, like Booster Financial, will provide the business with the necessary requirements. Not all lenders have the same requirements, and businesses should keep that in mind.
  • The cost to the intermediary from the US Treasury as well as the intermediary lender’s fees, like Booster Financial, influence interest rates. These rates can be between eight and thirteen percent.
  • A major consideration is that businesses should keep in mind that the maximum term permitted for an SBA microloan is a six-year repayment period.

The Process of Applying for an SBA Microloan Program

First and foremost, businesses should follow the points made in the previous section. Secondly, approval of an SBA microloan program will depend on the following:

  • As mentioned elsewhere, a business must have a sound financial plan for how they are going to use the funds. Even though there are no restrictions on how the funds can be used, the financial provider needs to know what the business will use the funds for and not abuse the funds.
  • Before applying for the microloan program, there has to be evidence that the business made attempts to find alternative ways of financing its business.
  • By establishing what the business needs beforehand, the business will be able to demonstrate its need for a loan, especially if it is for specific purposes.

Furthermore, businesses should know that financial providers like Booster Financial have expertise in the lending process. They also have the expertise in business management and the technical support to offer a microloan program.

Before any SBA microloan application is taken into account, there might be a need for the business owner to complete planning or training requirements. This is especially true if they apply for an SBA microloan. It is also important to note that this business education is intended to support startup businesses as well as those intending to grow their company.

Small businesses should get in touch with a local financial institution if they are interested in the microloan program. However, most intermediary micro-lenders, like Booster Financial, are available online. This is especially true when they are in the final stages of their decision-making process of applying for a microloan program.

The SBA lends money to a micro-lender, who then uses the money to make small loans to small businesses. Therefore, they have complete control over the credit decisions. It is crucial to understand the interest rates, costs, and loan amounts that the creditor or financial institution is willing to offer the business. Additionally, the application procedure will differ from lender to lender.

Finding the Right Provider for an SBA Microloan Program

The best way to go about finding the right provider for an SBA microloan program is to check with the Small Business Administration (SBA). They should have a list of all the financial providers or micro-lenders. This is important as the Small Business Administration (SBA) provides the funds to the financial provider.

One of the requirements if you want to apply for a microloan program is to work through a local, SBA-approved intermediary, like Booster Financial. This is important as well, as financial providers or intermediaries have set rules to abide by. Businesses can access most micro-lenders on their websites.

Although some financial providers will work with startups, the majority will look at the time the business has been operational. For most, they require a time period of two or more years in business. Here again, it is important to know that it depends on individual businesses, especially if that business has a solid financial plan. The financial provider will look at all aspects of the application in order to make the final decision.

Frequently Asked Questions

What is a microloan program?

The microloan program offers loans of up to $50,000. These loans are specifically to support startup businesses and the growth of small businesses, as well as some not-for-profit childcare facilities.

For what purposes can businesses use an SBA microloan program?

Businesses can use a microloan program for working capital, supplies, inventory, furniture, machinery, or equipment.

What is working capital?

Without working capital, no business can function. The money required on a daily basis to keep the business running is known as working capital. The company can use the cash for a variety of daily needs, such as the requirement to pay bills or buy daily supplies.

How do repayments work for microloans?

The loan repayments are calculated from the loan amount, the interest rate, and the financial provider’s fees. It will depend entirely on what the requirements are of a specific micro-lender as well.

How do businesses apply for an SBA microloan program?

It is important for a business to know what its needs are before applying for a microloan program. The next step is to find the right financial provider, like Booster Financial, and start the application process with them.

What restrictions are placed on an SBA microloan program?

Businesses cannot use an SBA microloan program to pay off prior debts or to purchase real estate. There is also the fact that the repayment terms are set at a maximum term of six years.

Who can apply for an SBA microloan program?

The following groups qualify for an SBA microloan program: those in the low income bracket; women; minority entrepreneurs; veterans; and other small businesses.

How does the lending process work?

Financial providers like Booster Financial have expertise in the lending process, in business management, and in providing technical support to businesses. The SBA provides funding to a micro-lender, who uses it to make small loans to start-up companies. As a result, they have total authority over credit decisions.

How does a business find the right financial provider for an SBA microloan program?

Finding the right financial provider for an SBA microloan program is imperative. The business should check with the Small Business Administration (SBA) for legitimate local and online micro-lenders.

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