What is a microloan? A Great Option for Small Business Funding

What is a microloan? Generally speaking, it’s a small business loan that can cover up to $50,000 in financing. Microloans are a great funding option if your business has lower operational expenses or when you need a funding boost to help your business grow.

SBA Microloans are only offered through SBA-approved lenders, like Pursuit. With fast turnaround times, flexible business uses, reasonable repayment terms, and affordable interest rates, they’re an ideal funding solution for any business.

Read on to learn more about this option and hear from small business owners who have used SBA Microloans to grow their businesses.

SBA Microloan: Here’s why it may be ideal for your business

Loan options like the popular SBA 7(a) and SBA 504 programs are excellent for small businesses with larger projects. However, you may find that a smaller loan is a better fit for your needs, especially if your business:

  • Is still in its early phase. For example, if you’re looking to sign a lease, purchase equipment, hire an employee, buy inventory, or need working capital, you might need a smaller loan amount.
  • Has lower costs in general. This would include specialty retail boutiques, take-out food businesses, or service-based businesses like graphic designers and financial advisors.
  • Needs working capital to overcome the challenges of running seasonal or cyclical business.
  • Doesn’t have enough collateral, to qualify for a traditional business loan.

In these situations, you want a simplified application process, quick decisions, and money in the bank faster. But make sure you do your research before you apply for a business loan that seems too good to be true. Many of these options are considered predatory lending and can result in loans with excessively high interest rates or unreasonable repayment terms, like daily payments.

Here’s why SBA Microloans are a much better option.

To begin with, they’re only available through lenders that are approved by the SBA. Microloan lenders want to get you the funds you need to build your business while offering affordable repayments that are easier for you to make each month.

In addition to borrowing from a trustworthy source, the SBA Microloan:

  • Offers loan amounts from $10,000 to $50,000
  • An easy application process
  • Reasonable repayment terms that make it easier to meet the terms of your loan and successfully build your business credit
  • Flexible uses that include (but aren’t limited to):
    • Working capital
    • Inventory or supplies
    • Furniture or fixtures
    • Machinery or equipment

Is my business eligible for an SBA Microloan?

When it comes to loans for small businesses, lenders are looking at how many years you’ve been in business and your profit among other criteria. If your business doesn’t quite meet the requirements, then you may need another funding option.

That’s where an SBA Microloan comes in. It’s a great first loan to help you build or repair your credit history as you grow your business.

SBA Microloans have more flexible eligibility and funding criteria than most conventional business loans. If your business has a break-even or positive cash flow and a history of paying its debts, then you’re a good candidate for the SBA Microloan. As an SBA-approved Microloan lender, Pursuit can offer your business automatic approval if you meet these requirements:

  • Two or more years in business
  • Two or more employees
  • Cash flow that’s positive or break-even
  • Your personal credit score (and any owners with 20% or more owner interest) is 640 or higher
  • Your business isn’t home-based
  • Your business generates at least $120,000 in annual revenue
  • There haven’t been any liens or judgments filed for you or your business within the last three years
  • You and your business have no prior bankruptcies

If you’re looking for an SBA Microloan lender, try using the SBA Lender Match tool to find approved lenders in your area.

Need some inspiration? Learn how an SBA Microloan helped these businesses achieve their goals:

Pursuit can help: Explore the SBA Microloan and more

Pursuit’s loan advisors work with business owners in Connecticut, New York, New Jersey, and Pennsylvania. We’ll get to know your business and your vision and work with you to find potential funding options that will benefit your business. Take a look at the 15+ loan options available through Pursuit, then contact us. Every day, we help small business owners like you get the funding they need to succeed and we look forward to helping you, too.

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