Are you a small business and are you looking for resources to help you implement your business plan? In 2013 PCDC will publish articles and resources for small businesses in our monthly newsletter. This month please find information on the Micro Loan program provided by the Small Business Administration.
SBA Microloan Program
The SBA microloan program provides short-term small loans ranging from $500 to $50,000 to women, low-income, minority, veteran, certain types of not-for-profit child-care centers and other small business owners through a network of approximately 160 intermediaries nationwide. SBA makes low cost funds available to specially designated intermediary lenders, which are nonprofit community-based organizations with experience in lending as well as management and technical assistance. These intermediaries take in the applications, assess, underwrite and make loans to eligible borrowers. The maximum loan amount is $50,000, while the minimum is $500, but the average funded microloan is about $13,000. In eastern PA, there are 9 SBA micro lenders that approved 121 SBA micro loans in the amount of over $1.18 million during the first 10 month of FY 2012.
Each intermediary lender has its own lending and credit requirements. Generally, intermediaries require some type of collateral as well as the personal guarantee of the business owner. Microloan proceeds may be used for the typical business purposes, such as working capital, purchase of inventory, supplies, furniture or fixtures, machinery and equipment. Proceeds from a microloan cannot be used to pay existing debts or to purchase real estate. Asian Americans may borrow micro loans to start new businesses in Chinatown such as nail and hair solon, grocery store, bakery store, gift shop, flower shop, travel agency, tea house, coffee, and takeouts, etc. Interest rates vary and are negotiated between the borrower and the intermediary, depending on the intermediary lender and costs to the intermediary from the U.S. Treasury. Generally, these rates will be between 8 and 13 percent. The maximum term for a micro loan is 7 years.
Each intermediary (lender) is required to provide business training and technical assistance to its micro-borrowers. If you apply for microloan financing, you may be required to fulfill training and/or planning requirements before your loan application is considered. Such training and technical assistance may include general business education, assistance with business planning, industry specific training and other types of training support. This business training can be helpful to you as you launch or expand your small business.
If you have any questions, please feel free to contact John Xu, Lender Relations Specialist of Philadelphia SBA District Office at 610-382-3082. His e-mail is: firstname.lastname@example.org.