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What Is an SBA Microloan, and How Does It Work?

An SBA microloan is a small business loan backed by the U.S. Small Business Administration (SBA) that provides up to $50,000 to help startups and small businesses with working capital or the purchase of inventory, supplies, furniture, fixtures, machinery, or equipment. These loans are administered through nonprofit, community-based lenders known as intermediaries, which receive funds from the SBA to distribute as microloans. Unlike other SBA loans, microloans cannot be used for real estate or debt repayment. They typically come with higher interest rates compared to other SBA loans, but they are still generally lower than those from traditional commercial lenders. The application process for an SBA microloan is less stringent, making it more accessible for small business owners who might not qualify for conventional bank loans. Additionally, these loans often include technical assistance and business training to help borrowers succeed.

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