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What Is an SBA Microloan?
SBA microloans, which are some of the easiest SBA loans to get approved for, range in size between $500 and $50,000.
The SBA Microloan Program Explained
SBA microloans, which are some of the easiest SBA loans to get approved for, range in size between $500 and $50,000. Microloans are a great option for entrepreneurs who may find it difficult to get other kinds of SBA loans due to not having great credit. Many microloan borrowers are women, members of minority groups, have lower incomes, or experience other barriers to getting the funding they need to start a business.
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What is an SBA Microloan?
An SBA Microloan is a loan offered by the Small Business Administration (SBA) that ranges in size between $500 and $50,000. It is a great option for entrepreneurs who may find it difficult to get other kinds of SBA loans due to not having great credit. Many microloan borrowers are women, members of minority groups, have lower incomes, or experience other barriers to getting the funding they need to start a business.
SBA Microloan terms include:
Loan Size Loan Term Interest Rate Usually $10,000 to $50,000 (average of around $14,000). Some lenders may offer microloans as small as $500. Varies, but cannot exceed 6 years Can vary between 6.5% and 13% but average is 7.5% What are the benefits of an SBA Microloan?
The SBA Microloan Program offers a range of benefits for entrepreneurs, especially those who may find it difficult to get other kinds of SBA loans due to not having great credit. These benefits include:
- Loans ranging from $500 to $50,000
- A great option for entrepreneurs with lower credit scores
- A great option for women, members of minority groups, and veterans
Despite these benefits, SBA microloans still require borrowers to have good credit, and usually require collateral, which may not make them the best choice for many entrepreneurs in disadvantaged communities.
What are the eligibility requirements for an SBA Microloan?
SBA Microloans have eligibility requirements that include:
- For existing businesses over 2 years old:
- Business must have positive cash flow
- Decent credit score (minimum of 575 for many lenders, though a score of 620-640 is preferred)
- At least two years of experience in the industry
- Sufficient collateral, or a co-signer with collateral and good credit
- For start-ups:
- Owners must have at have put at least 25% of their own funds in the business
- Good/decent credit
- At least two years of industry experience
- Sufficient collateral, or a co-signer with collateral and good credit and the ability to potentially repay the loan
- Strong business plan, including financial projections and market analysis
In addition to the qualifications above, a business must also meet the general eligibility requirements for SBA loans, such as being in an approved industry (i.e. no gambling, lending, real estate investment, or speculation-based businesses allowed) and being a for-profit company based in the U.S.
- For existing businesses over 2 years old:
How much money can I borrow with an SBA Microloan?
You can borrow between $500 and $50,000 with an SBA Microloan. The average loan size is around $14,000. The loan term cannot exceed 6 years and the interest rate can vary between 6.5% and 13%, but the average is 7.5%.
Source: SBA Express Glossary and SBA 7a Loans Small Business Blog
What types of businesses are eligible for an SBA Microloan?
SBA Microloans are available to for-profit businesses based in the U.S. that are in an approved industry, such as retail, manufacturing, or professional services. Gambling, lending, real estate investment, and speculation-based businesses are not eligible for SBA Microloans.
Source: www.sba7a.loans/sba-7a-loans-small-business-blog/sba-microloans