Are you starting or expanding a business, and in need of a loan to help make it happen? While there are some larger loan options available, many entrepreneurs – particularly freelance, online and home-based businesses – require only a few thousand dollars to get started. If this is the case for you, consider a microloan.

Why? Many start-ups and new small businesses often find they may not qualify for a traditional small business bank loan.  Without a proven track-record of 3-5 years under your belt and/or established business credit, many banks simply won’t take the risk.


SBA Microloans

SBA Microloans are typically offered to businesses with smaller start-up capital needs (usually less than $50,000). Unlike traditional bank business loans, funding is typically provided via community-based, nonprofit microfinance institutions.  Furthermore, SBA’s popular Microloan Program provides short-term loans up to $50,000 to help small businesses startup and expand, although the average microloan is about $13,000.

Anyone can apply for a microloan, although these loans often favor people with low cash reserves or poor credit as well as those in rural or disadvantaged communities. However, many micro-financing institutions also offer specific micro-financing programs for women-owned businesses, environmentally responsible businesses, veterans and specific business-types. Microloans must be repaid in six years and can be used for:

  • Working capital
  • Buying inventory or supplies
  • Purchasing furniture or fixture
  • Investing in machinery or equipment


Where Can I Get a Microloan?

The SBA provides funds to specially designated intermediary lenders, which are nonprofit community-based organizations with experience in lending as well as management and technical assistance. These intermediaries administer the Microloan program for eligible borrowers. Microlenders in the Midwest include:


How to Be Prepared

Don’t overlook the importance of a business plan when it comes to applying for any type of loan because your lender will expect to see that you’ve done your research, understand your market, have a clear plan for success, and that you can demonstrate how and when you will repay the loan. SBA’s Writing a Business Plan guide can help.

You should also make sure you are aware of your credit score, and once you are up and running, take steps to establish your business credit score as soon as possible. For tips read: 6 Ways to Establish and Maintain a Healthy Credit Score for Your Startup or Small Biz.


If you determine that your start-up venture is going to cost you somewhere between $500 and $50,000, and your savings just aren’t enough, it would be wise to consider a microloan.