Naperville Business Lawyer Addresses Microloans for Small Businesses

microloans, small business loan, Naperville Business Law AttorneyMany would-be entrepreneurs and even some existing small business owners often struggle to find the capital they need to take the next step in growing their enterprises. In today’s business landscape, a growing number of financial institutions are hesitant to lend smaller amounts of money or to work with relatively low annual revenue companies. Despite employing roughly half of the current work force, and creating as many as two of every three new jobs in the United States, it is becoming increasingly harder for such businesses to find the financing they need to run, grow, and become successful. If you are having trouble finding the necessary capital you need, a Naperville business attorney can help you through the process of securing a microloan.

What are Microloans?

The U.S. Small Business Administration has established a microloan program designed to address lack of funding accessible to a certain sector of business owners. Microloans, by definition, are loans of up to $50,000 which the SBA makes available to small businesses and not-for-profit childcare centers for startup and expansion purposes. The SBA distributes the money through intermediaries, typically, nonprofit community organizations which serve not only as lenders, but as sources of support and assistance. The average SBA microloan is approximately $13,000.


The SBA permits its intermediary lenders to develop their own eligibility criteria, but most require collateral and a personal guarantee by the owner. Some organizations may require borrowers to meet certain training or planning requirements to provide the best chance of success for the business. Microloans, however, are limited regarding the purposes for which they can be used. Permitted uses include:

  • Working capital;
  • Supplies or inventory;
  • Furniture or permanent fixtures; and
  • Machinery, equipment, or tools.

An SBA microloan cannot be used to purchase real estate or pay down existing debt. Providing a clear, concise business plan, backed up by real numbers, to local lenders and being ready to invest your own money in your business will increase your likelihood of being approved.

Potential Drawbacks

As with most aspects of business, there are a number of possible concerns regarding microloans to discuss with your business attorney. It is important to realize that the terms of your loan repayment may vary based upon a number of factors including the amount and use of the loan, the needs of the borrower, and requirements set by the lender. The maximum repayment period, however, is six years.

The interest rate for microloans is generally between 8 and 13 percent, but depend, again, upon the terms set by the lender. Microloan rates are typically a bit higher than those for a standard SBA, due to their increased accessibility.

We Can Help

Whether you need assistance locating an intermediary lender or developing a business plan to submit with your application, our team is ready to assist you. Contact an experienced Naperville business planning attorney at the Gierach Law Firm. We will help you get the capital you need to start your company moving in the right direction. Call 630-756-1160 for a consultation today.




Small Business Administration