3 common Small Business Administration loans—and which type might be right for your business

Microloans represent some of the easiest SBA loans available for small businesses, but they are small loans offered with an investment of $50,000. The amount of microloan is $13,000and the purpose of these small financing packages is help a small business keep its doors open through “marketing, management, and technical assistance to small lenders and potential borrowers,” according to the SBA. Interest rates range from 8% to 13%.

A small loan may be suitable for the owner of a new or existing business that needs a boost to achieve short-term goals such as promotion or expansion of operations. Unlike other SBA offers, these microloans are very friendly to startups, because the applicant does not have to provide the financial history of the business – there are two years of experience in the industry, proof, and a solid business plan is in the instructions.

Another requirement for SBA microloans is “good character,” which measures whether the applicant has a history of theft and fraud, among other crimes. (However, a criminal record does not automatically disqualify someone—it may take a lot of work to win over lenders). Interestingly, research indicates that, contrary to popular belief about the characteristics of successful entrepreneurs, the presence of secretive or neurotic personality makes them unable to get an SBA microloan. The 2021 quantitative study the 177 small businesses found that there is no strong relationship between successful microloan approvals and characteristics such as communication, speaking, and motivation, which are often associated with successful leaders and business owners.

Although the loans are more popular compared to 7(a) or 504 loans, small loans make more money to women and small business owners. Data from 2022 was not available as published, but Congressional Research Service data shows that in 2021, the SBA approved 4,510 loans amounting to $74.6 million; 61% of loans and 41% of loans were given to minority-owned small businesses, and 48% of loans and 41% of loans were given to women’s businesses.

This article originally appeared on Ruby and was produced and distributed in association with Stacker Studio.

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