The SBA Microloan program funds nonprofit, community-based intermediary lenders, who in turn make small loans (up to $50,000) to small businesses and certain not-for-profit childcare centers. It exists because conventional banks and many non-bank lenders won't underwrite loans below a certain size — the per-deal cost of underwriting doesn't justify the interest income on a $10,000 ticket.
How the funds reach the borrower
The SBA lends to qualified nonprofit intermediaries (often Community Development Financial Institutions — CDFIs). Those intermediaries then make microloans to local small businesses using their own underwriting, typically with a stronger emphasis on business plans, mentorship, and technical assistance than a conventional lender would apply.
Loan size, term, and use
Microloans run up to $50,000, with the average loan size historically closer to $13,000–$15,000. Maximum term is 6 years. Eligible uses include working capital, inventory, supplies, furniture and fixtures, and equipment — but not real estate purchase or refinancing of existing debt.
Who tends to qualify
Because intermediaries focus on community impact, microloans are often more accessible to startups, owners with thinner credit files, and businesses in underserved markets than conventional bank lending. Personal guarantees and collateral are typically still required, but the bar is set by the intermediary, not by a national bank credit policy.
Where to look
The SBA publishes a list of microloan intermediaries by state. Many are well-known regional CDFIs. Treasury's CDFI Fund site is also a useful starting point for verifying that a lender is in fact a certified CDFI rather than a marketing-only "community lender" claim.
Sources
Editorial note: This article is general information about how small-business lending products work. It is not financial, legal, or tax advice for any specific borrower. Loan terms, eligibility, and rates vary by lender, borrower profile, and current market conditions, and the specific facts of your business will determine which products and structures actually fit. Consult a CPA, attorney, or SBA-approved lender before making decisions that affect your business.