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There are microloan business lenders available for existing and start-up businesses. And to a greater extent they are designed to assist entrepreneurs who may not be able to qualify for financing from conventional lenders. In the United States the SBA defines a microloan as a small business loan under $35,000. Worldwide, microlending may be as small as ten dollars.
The SBA Micro-Loan
The SBA does have a microloan business program available. They work with community based organizations in providing the loans. The value is that these lenders also provide technical assistance, helping to assure that these businesses succeed. The terms are loan maturity within six years and an interest rate between eight and thirteen percent. Although the maximum loan amount for a microloan business is $35,000, the value of most loans under this program are much lower. These loans are meant to serve very small businesses and could also help an established business in a pinch.
Community Development Organizations
Many communities have local economic development and business development organizations to assist small businesses. Some of these provide loans and those loan as microloans. Microloan business recipients often have lessened paperwork requirements while receiving additional technical assistance for their business. Also, credit requirements are redesigned to meet the needs of the community they serve. The following are a couple of examples of communities that do microloan business.
The first example is in Shawnee, Oklahoma. The Citizen Potawatomi Nation is a prosperous Native American tribe based in Shawnee. They have established the Citizen Potawatomi Community Development Corporation that offers business microloans to Native American entrepreneurs. They span the micro-lending category of under $35,000 with a minimum loan amount of $5,000 but can extend to a maximum amount of $300,000. Also, they have favorable small business loan rates and terms for Native American entrepreneurs.
The second example is in Albuquerque. A community group called ACCION who's stated purpose is to serve those in New Mexico, Arizona, and Colorado. They have credit terms that are designed to assist a microloan business prospect. Mainly the business must have the ability to collateralize a loan and show a good business formula to repay the loan. They will lend out between $200 to $150,000. They can help with amounts more than $150,000 but that will require the assistance of a third-party lender.
While these organizations serve a specific demographic, most communities have a similar organization that could help with a small business with a microloan.
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