The SBA micro loan program is an excellent source of funding if you need a small amount of capital quickly for your business. This program, designed by the Small Business Administration, has allowed a number of small business owners the capital they need to quickly and efficiently receive the financing they need for inventory purposes, business expansion, or working capital.
Additionally, it should be noted that the interest rates associated with the SBA micro loan program are significantly less than other conventional business loan. This is primarily due to the fact that the Small Business Administration provides a substantial guarantee to banks that provide this type of loan or line of credit to their customers. Typically, you can receive a SBA micro loan of up to $50,000 depending on your credit worthiness, the collateral that you have in your business, and your business' ability to generate a positive cash flow.
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As such, it may be in your best interest to investigate this program if you need a small business loan that is less than $50,000. Of course, and at all times, we strongly recommend that you work with your certified public accountant when determining whether or not this financing is appropriate for you. A CPA will also be able to determine whether or not your business can handle the debt service that is associated with this type of financing. As such, we also recommend that you develop a loan amortization table that compares your positive cash flow with the anticipated interest payments and principal payments that you will be responsible for as it relates to this form of SBA loan financing.
In most instances, you will be required to provide a profit and loss statement, cash flow analysis, balance sheet, breakeven analysis, and business ratios page that clearly shows how your start up business or existing business can handle this type of specialized SBA loan. If you are unable to produce this documentation on your own then you should work with a specialized business plan consultant, financial advisor, SBA loan broker, or other entity that can produce the necessary documentation on your behalf.
Throughout our continued series of articles relating to SBA micro loans we will continue to discuss how you can effectively receive the capital you need from a number of different financing sources. Other sources of financing frequently include angel investors, SBICs, venture capital firms, friends, family, and other sources of capital.
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