Micro Loans. Do You Know How They Work?
A micro loan is a small, short-term loan offering low-interest rates. It is usually great for startups or self-employed people. Micro loans are guaranteed either by government organizations or other companies.
Get the Best for Your Business
In the US, micro loans are mostly issued through the Small Business Administration’s (SBA) micro loan program. Intermediary community lenders get financing from SBA and grant loans to small business owners. SBA micro loans do not exceed $50.000, and the average loan is worth up to $13.000.
Micro loan rules vary from a lender to lender. However, they are called to help businesses with startup costs and expansion. As a rule, such financing is used for working capital, equipment, furniture, machinery, inventory or supplies.
If you are interested in high risk business funding, consider turning to firstamericanmerchant.com. First American Merchant (FAM) is a reputable high risk payment processor that offers micro loans and other small business funding to merchants of any type and size.
Are You Eligible for a Micro Loan?
Here is the list of people who are eligible for micro loans. Find out whether you can apply for such funding and which micro loan program is the best fit for your business.
- Farmers – The US Department of Agriculture (USDA) Farm Service Agency (FSA) offers government-backed micro loans to small and mid-sized farming operations. The average farm micro loan is approximately $22.000.
The program is specifically designed for farmers who sell their wares through farmers markets, farm trucks or CSA (community supported agriculture) co-ops. This program also aims to support farmers who are involved in alternative growing methods like organic farming, aquaponics, hydroponics, and vertical growing.
- Historically Disenfranchised Groups: Women, Minorities, etc. – The average loan is about $14.038. The program offers a mentorship training program to provide these groups with not only financing but also business support and training.
- Parolees and Felons – The SBA microloan program offers funding to individuals who are on probation or parole.
- Low-Income Female Entrepreneurs – Grameen America, a 501 nonprofit microfinance organization, has its own microloan program. This nonprofit organization has distributed $480 million in loans to 75.000 women in 11 different cities.
- Restaurant Managers or Owners – Western Michigan’s Micro Lending Initiative, funded by the Opportunity Resource Fund and administered through Huntington National Bank, offers financing to restaurateurs to expand their business and make it more efficient.
- Veterans and Farms – FSA has recently expanded its micro loan program to make funding available to veterans who have difficulty buying land to start a farm.
Micro loans help business owners hire new employees, start new marketing campaigns, expand their operations, purchase inventory, and more. Moreover, such funding improves economies, builds communities, and helps individuals who have difficulty getting approved for traditional financing. In Iowa, for example, micro loan programs are focused on attracting more immigrants to the state.