While so many in Congress and the White House seem entirely concerned about providing large loans to large, existing businesses for their development and expansion needs, we too often forget about businesses that historically produce the greatest number of jobs in the shortest amount of time:  small businesses.

The following article discusses the Micro Loan program of the SBA.  Keep in mind also, that, after a recent partnership with Accion, The National Puerto Rican Chamber of Commerce is now one of these lenders and can help small (to VERY small) businesses to obtain one of these loans.  Just give us a call . . .

posted at ChamberofCommerce.com:

What You Need to Know About Micro Loans

The most tangible example of the micro loan exists in the United States, but did not originate in America. Originally conceived as a way to combat poverty, economist Muhammad Yunus received the 2006 Nobel Peace Prize for originally devising the program to benefit the Bangladesh poor.

Now the concept is used widely by the Small Business Administration to benefit small businesses and entrepreneurs in the purchase of improvements, inventory and equipment. These loans also provide working capital to launch small businesses.

The SBA makes these funds available to intermediary lenders experienced in lending, management and technical assistance. These intermediaries then make the small business loans available to eligible borrowers.

Eligibility for SBA Loans

The micro loan program ensures the success of companies facing failure without it. One of the conditions in obtaining this micro-financing is usually mandatory attendance in workshops or classes. These classes are designed to help owners understand loan and small business practices in ways that will help them flourish and grow. Entrepreneurs usually embrace this education requirement and use it to increase their competitive edge.

Business training and technical assistance is provided by each intermediary to its micro-borrowers. Sufficient guarantees of repayment will need to be assured through cash flow, collateral or a reasonable amount of personal credit.

Maximum and Minimum Amounts

All of these business financing loans are between $1,000.00 and $35,000.00, with the average loan being $13,000.00. Loans will vary according to the small business borrower’s needs, the planned use of funds, the loan size and the requirements of the intermediary lender. Six years is the maximum term allowed for repayment, with three to five years being the average micro-payment schedule.

Interest rates will vary according to the intermediary lender, costs from the U.S. Treasury to the intermediary, and generally these rates vary from eight to thirteen percent.

How Micro Loans Help American Business

The micro loan program has been crafted with the struggling new American business owner in mind. The traditional bank loan can take advantage of the entrepreneur through higher interest rates and demands of greater capital. For many, this loan program, made available through the Small Business Administration through non-profit community lenders – is just what they need to jump-start a new business and avoid poor re-payment terms that can leave the business owner in severe debt.

Thankfully these loans will enable American business to re-invigorate the United States’ economy and strengthen our country’s autonomy.