SBA Microloans and Stabilization Loan Program

 

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Small businesses needing small-scale financing and technical assistance for startup or expansion may be able to obtain up to $35,000 through short-term loans of public money called "microloans." The average loan size is about $13,000. These loans are administered through responsible nonprofit groups, such as local economic development organizations or state finance authorities, that are selected and approved by the SBA. The SBA loans the money to the nonprofit organization which then pools the funds with local money and administers direct loans to small businesses.

These loans are administered much like a line of credit and are intended for the purchase of machinery and equipment, furniture and fixtures, inventory, supplies and working capital. The funds are intended to be dispersed with close monitoring of the recipient and a self-employment training program may accompany the loan. The maximum maturity for a microloan is six years. The loan cannot be used to pay existing debts.

The microloan program has received a fair amount of political attention as a model for government-sponsored assistance to local businesses, but the overall money allocated to this program is relatively limited. However, the 2009 Stimulus legislation added $50 million in funding through September 2010 and added $24 million in technical assistance grants as well.

The 2009 Stimulus legislation also created a new Business Stabilization Loan Program. This law provides deferred-payment loans of up to $35,000 to viable small businesses that need the money to make payments on an existing, qualifying loan for up to six months. These loans will be 100 percent guaranteed by SBA. Repayment would not have to begin until 12 months after the loan is fully disbursed. The law provides $255 million for this new program, which is intended to help small businesses have time to re-focus their businesses in order to succeed in the long run through these difficult economic times.

More detailed Microloan information can be found on the SBA site at this page.

Work Smart A representative from one SBA-approved intermediary stated that their total annual allocation was $40,000 and those funds were gone within two months. Because your timing in applying for these loans may be important in some areas, checking with local sources prior to your actual need for the money may be the best plan for staking a claim to these limited funds.