Many new founders need a small amount of money, not a large one. Maybe you need inventory, a piece of equipment, or working capital to bridge the gap before customers pay. The SBA’s microloan program was built for that. According to the SBA, it provides loans of up to $50,000 to help small businesses, and certain not-for-profit childcare centers, start up and expand. The SBA says the average microloan is about $13,000.
A microloan is a loan, not a grant, so you have to repay it. Our overview of funding options for new founders explains the difference.
How the program works
You do not borrow from the SBA directly. The SBA provides funds to designated intermediary lenders, which are nonprofit, community-based organizations with experience in lending as well as management and technical assistance. Those intermediaries run the program for eligible borrowers. Applications go to the local intermediary, and credit decisions are made at that level, according to the federal GovLoans page on the program.
Who can apply
The SBA says an eligible business must:
- Not be a type of ineligible business.
- Be an operating business.
- Operate for profit.
- Be located in the U.S.
- Be small under SBA size requirements.
Each intermediary lender has its own lending and credit requirements. Generally, they require some type of collateral as well as the personal guarantee of the business owner. That means you could be personally responsible for repaying the loan if the business cannot.
What that means for a first-time borrower
Because each intermediary sets its own rules, two lenders can respond very differently to the same request. Before you apply, ask:
- What can the loan be used for, and what can it not be used for?
- What interest rate, fees, and repayment term would apply?
- What collateral and personal guarantee would you require?
- Do you offer help with planning or training alongside the loan?
- How long does a decision usually take?
Loan terms can change, so confirm current details with the lender and on the SBA page above.
Get your paperwork ready
Lenders will want to see that you understand your business and your numbers. A short plan, a realistic budget, and clean records go a long way. These guides can help you prepare:
- How to write a one-page business plan you will actually use
- Know your numbers: financial basics for new founders
- Why you need a separate business bank account
- How to get an EIN for your new business
Watch for scams
The SBA warns that you do not need to pay a middleman to get an SBA loan, and that applying through the SBA or an approved lender is free. It also says official SBA email comes only from addresses ending in @sba.gov. You can read those warnings on the SBA’s manage your business page. Never pay an upfront fee to someone who promises to get you a loan.
Get free help before you apply
A business counselor can review your plan and your numbers before a lender does. See our guide to free business help for new founders for where to start.
Your next step
Read the SBA microloan page, write down how much you need and exactly what you would spend it on, and then contact a counselor to ask which intermediary lenders serve your area.