One of the examples of microloans implementation is the SBA’s Micro-loan Program with short-term loans of up to $35,000 to small businesses and not-for-profit child-care centers for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment. Proceeds cannot be used to pay existing debts or to purchase real estate. The SBA guarantees a loan to an intermediary who makes the micro loan to the applicant.

Specially designated intermediary lenders (nonprofit organizations with experience in lending and in technical assistance) lend you the money and make the microloan program work in real life.

The Microloan Program provides very small loans to start-up, newly established, or growing small business concerns. SBA makes funds available to nonprofit community based lenders and they make the loans available to eligible borrowers in amounts up to a maximum of $35,000. Applications are to be submitted to the local intermediary, as well as all credit decisions are made on the local level.

The maximum microloan terms is six years, but 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. The interest rates vary, but as a rule they are between 8% and 13%.

Business owners who send an application for a microloan should be aware that microloan intermediaries generally require some type of collateral, and the personal guarantee of the business owner. Individuals and small businesses may also be required to fulfill training and/or planning requirements before a loan application is considered.

Small businesses that are interested in applying for a microloan should contact a microlender in their area. The following link contains a state-by-state list of all SBA participating Microlending Intermediaries and their ares of operation. You can find a micro loan lender in your state by Googling your state + “microloan”.