Microloan, a 7(m) loan program
The U.S. Small Business Administration's 7(m) Microloan program provides short-term loans of up to $35,000 to small businesses and not-for-profit child-care centers for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment. Proceeds cannot be used to pay existing debts or to purchase real estate. The SBA makes or guarantees a loan to an intermediary, who in turn, makes the microloan to the applicant. These organizations also provide management and technical assistance. The loans are not guaranteed by the SBA. The microloan program is available in selected locations in most states.
SBA Microloans are generally designed to target low- and moderate-income microentrepreneurs, particularly the so-called "unbankable" population that has had little to no contact with the mainstream financial services industry. Typical Microloan clients have either no credit history or a poor credit history, lack of collateral and a lack of business longevity, making them unqualified for more traditional commercial debt financing. Successful Microloan clients, given appropriate financing and technical assistance, have built successful firms that improved their own standards of living while also creating needed jobs in low-income communities.
The future of the 7(m) Microloan program is uncertain. In his budgets for FY2005, FY 2006 andFY2007, President George W. Bush has proposed elimination of the Microloan Direct Loan program and its companion program, the Microloan Technical Assistance program. Thus far, Congress has chosen to reinstate the programs (which are usually funded at approximately $17-20 million per fiscal year) in defiance of the Administration's requests.
• SBA 7(m) Microloan Web site
• Find a microloan lender in your area
• Association for Enterprise Opportunity - microenterprise development industry trade organization; member organizations include microlenders that do not use SBA funds for their lending pool