A business micro loan is especially for the start-up or to develop a newly established for-profit small company or non-profit child care center, which is made available by the Small Business Administration (SBA). Local non-profit lenders are in charge of setting their own terms and interest rates for these business micro loans. The non-profit lenders, called intermediaries, operate independently of federal oversight to a certain degree, and generally require collateral and the personal guarantee of the owner. This collateral is generally the equipment or other assets of the company. To locate an intermediary lender who provides business micro loans, look for the SBA listing in the telephone book under the U.S. Government.The amount provided by this funding is to be used for the initial money to set up a new company expenses – working capital, equipment, furniture, inventory and supplies, but is not to be used as a down payment or to purchase real estate. Business micro loans have a maximum of $35,000 with the average amount being $10,500. The fees are at the lenders’ discretion but are also based upon their cost to receive the Treasury funds which is tied to the current rates of Treasury Bills. Current rates vary from 5-7% in the United States, but foreign countries are subject to rates that exceed 20% due to the subjective lending by their intermediaries. The SBA does require that a business micro loan has a maximum term of six years, however, this will be set by the lender and can be for a shorter period depending on the financed amount and other terms established at signing.
Training to use this funding source is available through the SBA and other organizations whose goal is to see small businesses succeed in their communities. This training includes management of finances, capital, inventory, advertising, customer service, forecasting and cash flow, marketing among other topics. This training is meant to provide for leadership and communication skills that will help the small company to be successful, which in turn, makes the community more successful. The length of a business micro loan training program varies with each session offered, but a typical session will last ten weeks.
Business micro loans are an excellent means for entrepreneurs to start-up a company from scratch. But they must prove that they are ready to project themselves in a solid, business manner and are willing to meet the guidelines of the SBA to prove that stability. Biblical advice from Paul to Timothy would be well heeded when accepting a business micro loan: “Study to shew thyself approved unto God, a workman that needeth not to be ashamed, rightly dividing the word of truth.” (2 Timothy 2:15)