What is a microcredit for small businesses?

Small business owners, especially newer ones, often struggle to get business loans from traditional banks. Failure to provide collateral, credit history, personal guarantee and tax returns are just some of the many factors that can affect your ability to obtain a business loan from a bank. But with a small business microcredit program, you have easy access to working capital to grow your business.

What is a micro loan?

A microloan is a small loan of up to $50,000 that is intended to help start or grow a business. In the US, microloans are typically offered to eligible borrowers by the Small Business Administration (SBA) through specially designated intermediary lenders.

The average loan size for an SBA microloan is approximately $13,000.

How does the SBA microcredit program work?

To apply for an SBA microloan as a business owner, you must contact an SBA-approved intermediary lender in your area. This lender follows the guidelines of SBA, such as loan terms of six years and maximum loan amount, etc.

However, lenders can also add their own small business loan requirements as long as they are not discriminatory in approving the loan. You repay the loan to your lender itself, not to the SBA.

SBA microlenders also provide free training, coaching, and technical assistance to borrowers to help them grow their businesses. You can contact an SBA approved intermediary lender in your area to learn more about how the entire process works.

Benefits of SBA Micro Loans

From buying new equipment to buying inventory, companies can use loan money for multiple purposes. But you can’t use microloans to pay off existing debt and buy real estate.

Here are the main benefits of the SBA microloans:

Small business loans are a great way to get working capital for entrepreneurs who don’t qualify for traditional loans. SBA microloans often have competitive interest rates and long repayment terms. It can take months for traditional bank loans to be approved. But microloans are quickly disbursed to eligible borrowers Microlenders often provide training and technical assistance to business owners

These small loans can help business owners build or improve their credit history.

How can small businesses get microloans?

To get a micro loan, you must first find an SBA accredited broker in your area. You apply through this intermediary lender who handles the loan approval process, sets loan terms and makes all credit decisions.

To complete the application process, you may need to submit your business plan, business and personal tax returns, interim financial statement, debt statement, etc.

Documents you must submit to apply for an SBA microloan program vary depending on the lender. Reading a complete guide to the small business loan documents you need can help you prepare your documents for a loan.

Best microcredit lenders for small businesses

We have compiled a list of the best individual lenders offering SBA micro loans in the country.

Let’s dive in:

1. Chase

Pursuit is a reputed SBA approved intermediary lender, offering loan amounts from $10,000 to $50,000. The best thing about Pursuit is the fast approval process. After you submit a complete loan application, you can be notified of the loan approval within two business days.

If approved, the loan will be in your account within five days of approval.

2. BOC Capital Corporation

BOC Capital is one of the leading non-profit community-based lenders. The organization is known to support entrepreneurs during the loan application process. If your company is based in New York, BOC Capital can be an excellent choice to apply for a micro loan.

If you don’t know how to get a small business loan, it also offers loan readiness consulting services, credit evaluation and repair, financial statement preparation and much more.

3. Grameen America

You can explore Grameen America to get an SBA micro loan if yours is a woman-owned business. The organization also provides financial education and training to its members to help them build their financial identity. It currently serves 22 cities in the US.

4. People Fund

PeopleFund provides financial assistance to low-income and disadvantaged communities. It serves the entire state of Texas. In addition to SBA microloans, PeopleFund also provides other types of loans such as PeopleFund Loans, SBA 504, and more.

5. Prestamos CDFI

Prestamos CDFI offers comprehensive loans to small businesses. In addition to microloans, Prestamos CDFI offers businesses free empowerment services, covering popular topics such as digital marketing, basic accounting, loan application assistance, and more.

If you want to know how to get an SBA loan and be ready for it, these free empowerment services can help you a lot.

6. Colorado Enterprise Fund

Colorado Enterprise Fund has helped more than 2,900 small businesses in Colorado and offers loans ranging from a few thousand dollars to $1,000,000.

The company claims to be more flexible than other lenders in assessing credit applications for small businesses. It also offers free business advice to its borrowers.

7. Launch Main Street

Main Street Launch offers micro and small loans up to $250,000. In addition to providing funding, Main Street Launch also provides opportunities to connect with a network of people and resources to grow.

Whether short-term or long-term loans, the company offers competitive interest rates. If you, as an entrepreneur, do not qualify for traditional financing, you can explore this option.

8. CDC Small Business Finance

CDC Small Business Finance is a leading name for providing flexible financing options to small businesses. CDC Small Business Finance is available in California, Arizona and Nevada and plans to offer its services in other locations as well.

Whether you want money to improve cash flow or some sort of financial protection during tough times, the organization claims to offer very competitive interest rates.

9. Lift Fund

LiftFund is one of the leading non-profit community-based lenders. With its multiple loan options, LiftFund helps small businesses grow. It offers small business loans, special programs, SBA 7a community benefit, and SBA 504 loans.

If a bank has declined your loan application process because of a bad credit report, you should try LiftFund. The company claims to help people with limited credit, collateral or experience.

10. Ambac Corporate Capital

Ambac is proud to be the nation’s first faith-based SBA lender. With multiple SBA loan options, AmPac Business Capital serves both newly started and experienced businesses.

When it comes to applying for an SBA microloan program, you should contact an SBA-approved lender in your area. The lenders listed above serve selective locations, so they may not be available in your location.

You can refer to this list of lenders to find an SBA accredited intermediate lender near you.

What credit score do you need for a microcredit?

SBA has not established a specific minimum credit score requirement for a microloan. But intermediate lenders may have established their own requirements. So it is best to check with an intermediary lender in your area about the eligibility requirements.

How long does it take to get an SBA micro loan?

Depending on your intermediary lender, it can take anywhere from 15 to 120 days to get an SBA microloan.

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This post What is a microcredit for small businesses? was original published at “https://smallbiztrends.com/2022/07/microloan.html”

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