Tips For Choosing The Right Small Loan.

Tips For Choosing The Right Small Loan.

A microloan is a small-dollar business loan that’s generally available in amounts up to $50,000. These small-business loans are geared toward entrepreneurs who can’t qualify for traditional financing, such as startup founders and people with limited credit histories.

How do microloans work?

Microloans typically work like traditional term loans: You receive a lump sum of capital from a lender and repay it, with interest, over a specific period of time.

Repayment terms, interest rates and maximum loan amounts will vary based on your lender. For instance, SBA microloans funded by the U.S. Small Business Administration are available in amounts up to $50,000 with repayment terms up to seven years. Loans from the nonprofit Grameen America, on the other hand, are available only up to $2,000 with repayment terms of six months.

Best microlenders

Microloans are available from SBA intermediaries, the U.S. Department of Agriculture, nonprofit and community organizations as well as peer-to-peer lenders.

SBA microlenders

Microloan size: Up to $50,000.

Interest rates: Vary. Typically 8% to 13%.

Availability: Nationwide.

Ascendus

Microloan size: Up to $50,000.

Interest rates: 6% to 9.99% (can vary by state).

Availability: Nationwide, except Vermont and California.

Justine Petersen

Microloan size: Varies based on the program, but typically up to $50,000.

Interest rates: 6% to 20%.

Availability: Missouri, eastern Kansas and southern and central Illinois.

Kiva U.S.

Microloan size: Up to $15,000.

Interest rates: 0%.

Availability: Nationwide.

Grameen America

Microloan size: $500 to $2,000 for first-time loans.

Interest rates: 15% to 18%.

Availability: In 21 U.S. cities and Connecticut.