Microloans are surprisingly effective. In fact, the winner of the 2006 Nobel Peace Prize, Dr. Muhammad Yunus made his mark by making miniscule loans of as little as $20 to his fellow citizens of Bangladesh to help them start successful …
Introduction
Microloans are surprisingly effective. In fact, the winner of the 2006 Nobel Peace Prize, Dr. Muhammad Yunus made his mark by making miniscule loans of as little as $20 to his fellow citizens of Bangladesh to help them start successful businesses.
I’ve extensively outlined the steps you need to take to write a business plan. Once it is ready you have several options to consider with the SBA, the federal government agency that cultivates small business.
This posting will look at the SBA Microloans. This program is administered by 101 non profit organizations in all fifty states except Wyoming.
Instructions
Difficulty: Easy
Steps
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Step One
Determine if the size of the Microloan Program is right for you.
The term “small business” covers a range of activities. In the United States a small business can have up to 100 employees. If you’re a one person shop just getting started the microloan program could be just what you need. If you have to make payroll for 99 employees to float a new technical innovation, look elsewhere. The SBA Microloan program provides small loans to start ups, or growing small businesses through local non-profit intermediaries. Loans top out at $35,000. The average loan runs $13,000.
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Step Two
See if you can handle the costs.
The maximum term for the loan is six years. Rates vary depending on the prevailing prime rate, but they are generally between 8 and 13%. In contrast, if you have equity built up in your home, you can probably pick up a home equity line of credit for less than 8%
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Step Three
Be Prepared to Put up Collateral
Each local lender has its own requirements; however you should be prepared to put up some collateral as well as the owner’s personal guarantee.
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Step Four
Take Advantage of the Training and Technical Assistance provided
Every local intermediary must provide technical and business training to its borrowers as a precondition of participating in the program. Your lender might require you to take additional business training or flesh out your business plan in greater detail before approving your loan.
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Step Five
Contact a Microloan Intermediary.
To apply for an SBA Microloan contact a lender in your state. Cut and paste this link to your browser for a state by state list of lenders in PDF that you can download: http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_fa_microloan.pdf
