Recovery Act Funding to Expand Microlending to Small Businesses Across the U.S.

With the American Recovery and Reinvestment Act funding an additional $50 million for loans, plus $24 million for technical assistance, the U.S. Small Business Administration [SBA] is expanding its Microloan program and increasing access to capital for small businesses across the country.

The program is shifting to funding provided under the Recovery Act, now that it has exhausted the regular FY 2009 appropriations for $20 million in loans and $20 million in technical assistance. With the additional resources, SBA is focused on adding new lenders and encouraging entrepreneurs to seek out SBA-backed microlenders to finance their businesses.

"SBA’s Microloan program provides a critical source of capital for entrepreneurs -- including women, low-income individuals and minorities, who often have difficulty obtaining capital to start and grow their businesses," said SBA Administrator Karen G. Mills. "With these resources, we can put more entrepreneurs and small-business owners in a position to succeed and create jobs that will, in turn, help drive our nation’s economic recovery."

Since the Recovery Act, SBA has approved eight new applications from lenders to join the Microloan program, and has 15 new loans to microlenders for $10.7 million in Recovery Act funds ready to be disbursed. Of those 15 loans, eight are for new microlenders.

The approved new microlenders are: Vermont Community Loan Fund Inc., of Montpelier, Vt; Neighborhood Development Center, of St. Paul, Minn.; Cen-Tex Certified Development Corp., of Austin, Texas; The Emperor Organization, of Tallahassee, Fla.; Staunton Creative Community Fund Inc., of Staunton, Va.; Lane MicroBusiness [d.b.a. eDev], of Eugene, Ore.; FINANTA [formerly known as American Street Financial Services], of Philadelphia, Pa; and ACCION USA Inc., of New York, N.Y.

SBA’s Microloan program supports microlenders by providing them with up to $3.5 million in low-cost loans from SBA to finance their lending to small businesses. SBA’s interest rate to microlenders is based on the five-year Treasury rate, with adjustments tied to a microlender’s average loan size.

Microlenders use the SBA funding to provide loans of up to $35,000 to entrepreneurs. Loans can be used for working capital and acquisition of materials, supplies, furniture, fixtures and equipment.

SBA also provides grant funding to microlenders, to finance technical assistance and counseling programs for their borrowers -- including staff, classroom training, and occupancy costs. SBA’s reimbursement is capped at 25 percent of the microlender’s outstanding SBA loan portfolio.

Organizations interested in becoming SBA microlenders must meet specific criteria -- in terms of organizational status, microlending experience, and matching requirements from non-federal sources. For more information, please visit: http://www.sba.gov/services/financialassistance/sbapartners/microloan; e-mail microloans@sba.gov; or, call 202-205-6485.

Entrepreneurs who wish to learn about SBA's Microloan program can visit: http://www.sba.gov/services/financialassistance/sbaloantopics/microloans/index.html.
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