All About the SBA Microloan Program - By: Travis Giggy

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http://www.smallbusinessvictory.com/blog/post/About-the-SBA-MicroLoan-Program.aspx
Whether youâ€™ve been recently unemployed and are thinking about starting your own home-based business or youâ€™re an entrepreneur who is already running a small business, being unable to access capital is a problem that can keep you from achieving your dreams.
The Small Business Associationâ€™s Microloan program might be able to help. The Microloan program helps entrepreneurs who need small amounts of capital. So if you own or would like to start a business but are having trouble qualifying for a traditional bank loan, the Microloan Program might be right for you.
Hereâ€™s how it works: the SBA doesnâ€™t lend you the money directly. Instead, it makes funds available to local non-profit intermediary organizations that, in turn, provide loans of $35,000 or less to existing small businesses. These intermediary organizations have their own lending criteria, set their own rates, and ensure that all credit decisions are made locally.
These loans are not grants. They must be paid back in six years or less. And the loans canâ€™t be used for everything. You canâ€™t use the money to pay off existing debts or to purchase real estate. But an SBA Microloan can help you obtain working capital or finance the purchase of equipment or inventory. More specific details will be determined by your intermediary lender. The lender sets the interest rate and determines how much money you can receiveâ€”most applicants will not receive the $35,000 maximum. The SBA reports that the average loan amount is around $13,000. But the paperwork is relatively simple, the loans can be approved quicklyâ€”which is helpful if you need capital in a hurryâ€”and entrepreneurs who wouldnâ€™t qualify for many traditional business loans do qualify under the Microloan program. An extra benefit of the program is that borrowers can receive business-based training and technical assistance. This guidance can be a helpful to you, as a new business owner.
If you want to receive a Microloan, the first thing you need to do is find a intermediary organization. You can do this by contacting your local SBA office. If you donâ€™t know where your local office is, you can always look it up on the Small Business Associationâ€™s website. Go to www.sba.gov, and then look under the local resources section. Youâ€™ll see your local office listed there. And while youâ€™re on the website, take a look at the free online courses that the SBA offers. You can get information on business topics such as e-commerce, marketing and preparing a business plan without ever leaving your desk.
After finding an intermediary organization, take a look at the loan application. You will have to provide some information on your company. If your company is new and you donâ€™t know how to answer the questions, go back to the Small Business Association website and take another look at the free coursesâ€”theyâ€™ll provide you with more information on the practicalities of starting your business.
Youâ€™ll also need collateralâ€”an asset that you pledge toward repayment of the loan, should you not be able to repay the loan in cash. If you arenâ€™t sure what you can use as collateral, make a list of the resources you already have for your business. Do you have office equipment? A company vehicle? These are items that can be used for collateral. If you are still not sure what to use as collateral, ask your intermediary lender. They might be able to help you find some creative solutions. You should also be ready to sign a personal guarantee promising to repay the money.
Because the Microloan program is funded with federal dollars, it is vulnerable to changes in the political landscape, and the last few have been tumultuousâ€”with funding being cut further each year. In his 2008 budget, Bush proposed to cut funding to the program entirely, suggesting that other SBA loan programs, especially the 7(a) business loan program could pick up the slack. While investigating the 7(a) program is also worthwhile for small businesses, it does tend to give larger loans. The Microloan Program is still the easiest way for a small businesses that doesnâ€™t qualify for a bank loan to obtain credit, so as the credit market tightens, more entrepreneurs will find themselves in this pool. What is going to happen to the program in the future? Only time will tell. But if you are an entrepreneur or small business that needs capital now, the SBA Microloan program currently remains a very viable option.

About the Author

If you're ready for real, authentic strategies designed to help you start your business and increase your income, then the Small Business Victory Blog is for you. Travis Giggy publishes once or more per week...and it's jam packed with videos and expert audio interviews about small business loans, marketing, promotion, and business strategy without all the hype and unrealistic expectations seen so often online.The Small Business Victory Blog is online at this web address: http://www.smallbusine

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