Microloan Legislation Helping Small Businesses

Congress has finally gotten serious about helping small business. While business owners scrambled to find funding during the recession through merchant cash advances and alternative lending, big banks failed to help the little guy. That’s because big banks don’t really lend to small business, they lend to other big banks. In an attempt to spur job growth, it has become obvious that the availability of microloans to small business may hold the key to getting small businesses the needed credit to grow again. Legislation has been put in place in the last 18 months, that has effectively tripled the amount of funding of microloans, up to $75 million. Their hope is that for every microloan that goes out 1 to 1 ½ jobs are created.
What Businesses Can Expect
To get some of this cash, businesses need to look at the Small Business Administration’s microloan programs to see if they qualify for the loans. If they do, they can borrow up to $50,000, which is up from the previous $35,000 limit, through an intermediary lender. They will be able to use the funds for working capital, inventory, supplies, and equipment. They are restricted from using the monies to pay back debt.
Terms and Conditions
The loans are made through approved intermediary lenders. They can establish their own terms and conditions, but there are some restrictions. The loan can not be for more than six years. The interest rate can be anywhere between 8 and 13 percent. Depending on the intermediary lender, you may have to provide collateral or a personal guarantee of the business loan. The business owner will receive training and technical assistance so that they understand the terms of the microloan and how it works before they get the monies. Despite all these extra conditions, this is welcome news to small business owners who have had difficulty obtaining small business loans during this financial crisis.

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