
Microloan
A microloan is a small, short-term loan designed to assist entrepreneurs and small businesses, particularly those lacking access to traditional banking services. In the United States, the Small Business Administration (SBA) offers microloans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand.
The concept of microloans originated to support impoverished individuals and groups, especially in developing regions, by providing them with the financial means to start or grow small businesses.
Microloans can be used for various purposes, including working capital, inventory, supplies, furniture, fixtures, machinery, and equipment. However, they cannot be used to pay existing debts or to purchase real estate.
The average microloan amount is about $13,000, and the maximum repayment term allowed for an SBA microloan is six years. Interest rates vary depending on the intermediary lender and the cost to the intermediary from the U.S. Treasury.