SBA Microloans Support Women- and Minority-Owned Businesses
Having your own business is always challenging but it can be next to impossible if you don’t have the funds you need. Small business loans can be particularly difficult to obtain for women and minorities who may not have the assets or credit history that banks look for in determining eligibility.
The SBA, or Small Business Administration, has microloans that are particularly geared toward helping those who are just starting out or want to expand their businesses. The amount that can be borrowed is less than $50,000, and the average amount granted is around $13,000.
Although prospective lenders still need to qualify, they do not have to have the perfect credit that other types of loans may require. However, it will be necessary to show that you are a good risk in other ways, such as having collateral or being able to show good revenue. Having someone willing to co-sign your loan can also help.
While the funding comes from the SBA, you need to go through an intermediary that works with the organization to provide microloans. It is the intermediary institution that will review your application, and work with you to come up with the amount that can be approved, as well as the terms of repayment.
Because the SBA is involved, the amount of interest that can be charged on these small business loans is limited. The amount of time you have to repay it can vary, but may not exceed more than six years. The requirements that must be met for approval are up to the intermediary lender.
The organizations that are involved in microlending with the SBA are non-profit and community-based. They are involved in the program because they want to help small businesses succeed. You will still need to have a business plan so you may be directed as to the kinds of documents that will be necessary to complete your application. Some type of business training may also be required before your loan can be approved which these organizations provide.
Microloans, like all small business loans, require some risk on the part of the lender. Therefore, you will be required to show that you are worth taking a chance on. You’ll need to be patient and get all the necessary documentation together so it’s not an immediate fix. But for businesses looking for a smaller loan and borrowers that don’t have a high credit score, they may be the perfect answer for getting ahead.