The Microloan Program gives small, short-term loans to small business concerns and certain types of not-for-profit child-care centers. The SBA makes funds available to specially designated intermediary lenders. These are nonprofit community-based organizations with experience in lending as well as in management and technical assistance. These intermediaries make the loans to eligible borrowers. The maximum loan amount is $50,000, but the average microloan is about $13,000.

Microloans may be used for working capital, the purchase of inventory or supplies, and the purchase of furniture or fixtures, or the purchase of machinery or equipment. Microloan proceeds cannot be used to pay existing debts or to purchase real estate.

If you are a potential borrower, the SBA recommends four steps to take to get the ball rolling in its loan programs. First, estimate your business startup costs or the funds that you need to grow the business. Second, contact a local bank or lender to review the available loan programs for small businesses. Third, prepare a draft loan proposal. Finally, discuss all of the above with someone having solid knowledge of SBA loans, such as a representative of the SBA itself.