Micro Business Loans: An Alternative for Bad Credit Business Owners

The micro business loan program fits the needs of entrepreneurs who only need a small amount of financing and cannot qualify for traditional bank loans. This program provides small loans to start-up, home-based or micro-businesses. Loan amounts are available from $1,000 up to $35,000 and must be repaid within six years.

Who Can Apply

Start-up businesses, home-based businesses, existing and growing businesses.

Maximum Loan Amount

The average loan amount is $13,000; however, small business owners can borrow from $1,000 to $35,000.

How You Can Use The Loan Proceeds

Loan proceeds can be used for working capital, acquisition of materials, inventory, supplies, furniture, fixtures, machinery and equipment. Micro loans may not be used to acquire land or property.

Microlenders

Nonprofit agencies, private foundations and the U.S. Small Business Administration (SBA) operate microloan programs. While the SBA does not provide loan funds directly to borrowers it provides low-cost loans and grants to nonprofit intermediaries such as community economic development and nationwide microloan centers. Loan funds are redistributed to small businesses and loan guidelines are established by the intermediary agency.

Terms, Interest Rates and Fees

The maximum term allowed for a microloan is six years. Loan terms vary according to the size of the loan, the planned use of the funds, the requirements of the intermediary lender, and the needs of the small business borrower. The rates are typically between 8% and 13%.

Collateral

The community based intermediary establishes its own lending criteria. Some intermediaries may require collateral but not likely. A credit report is pulled on the small business owner but it is not the only requirement when considering approval. Bad credit business owners are often approved with a solid business plan and business training.

Training and Assistance

The intermediary is required to provide small business training and technical assistance to the borrower. Small business owners may be required to complete a series of training or a business planning courses as a precondition before the loan is approved and funded.

Where To Apply

Small business owners should apply for a microloan in their community. The difficulty with microloans is that intermediaries distribute the loans in their own communities and if you do not live in an area of an intermediary this type of loan may not be available to you. If this is the case you can research your State and local government agencies as an alternative as some offer loans similar to the microloan program. A nationwide microlender with an online application is www.accionusa.org

For more information on finding a microlender visit: Microloans