Not every business needs a $500,000 loan. Sometimes the right amount is $15,000 for inventory or a piece of equipment, and the bank isn't interested in a loan that small. That is the gap SBA microloans were built for.
How microloans work
The SBA lends money to intermediaries: mostly local nonprofit and community lenders. They make the loans to small businesses, make every credit decision and set the terms. So although the program is federal, the lender you deal with is local.
Amount: up to $50,000. SBA says the average microloan is about $13,000.
Term: up to seven years.
Rate: set by each lender. SBA says rates generally fall between 8% and 13%. Federal rules also cap the rate at a set margin over the lender's own cost of SBA funds.
Uses: working capital, inventory, supplies, furniture, fixtures, machinery and equipment.
Not allowed: paying off existing debt or buying real estate.
For loans over $20,000, federal rules require the borrower to show it can't get similar credit elsewhere and has good prospects for success. Many lenders keep most loans smaller than that.
Why owners like them
Microlenders often work with businesses that are young, have thin credit or have little collateral. Many also offer free coaching or training alongside the loan. A well-repaid microloan can also build the track record you need for a larger bank or SBA loan later.
A worked example
Example only, not a quote. A $20,000 microloan at 10% repaid monthly over five years costs about $425 a month, or about $25,500 in total. The same loan at 13% costs about $455 a month, or about $27,300 in total. Ask each lender for its exact rate and any fees before you compare.
How to find a lender
Open SBA's list of microlenders and find the intermediaries that serve your state or area.
Call two or three. Ask about typical loan size, rate, fees, how long a decision takes and what documents they need.
Bring a short plan for the money: what you'll buy, how it pays back, and a simple cash forecast.
Sources
U.S. Small Business Administration: Microloans (checked November 14, 2026)
Electronic Code of Federal Regulations: 13 CFR Part 120, Subpart G (Microloan Program) (checked November 14, 2026)
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