Microloans: How They Work and Best Microlenders of 2023

Microloans can be a good fit for those who struggle to qualify for traditional financing, such as startups and borrowers with limited credit.
Randa Kriss
Rosalie Murphy
By Rosalie Murphy and  Randa Kriss 
Edited by Sally Lauckner

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Microloans are business loans available in small amounts, generally up to $50,000. These small-business loans are typically geared toward entrepreneurs who can’t qualify for traditional financing, such as startup founders and people with limited credit histories.

Microlending is also a good option for businesses owned by women, minorities and veterans, as well as those in low-income and underserved communities.

Here’s what to know about microloans and how to find the best microlenders for your business.

How do microloans work?

Microloans can be used for purposes related to starting or growing a business, such as covering day-to-day expenses, purchasing inventory or making payroll.

Generally, these business loans 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.

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Repayment terms, interest rates and maximum loan amounts will vary based on the 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. Microloans 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.

Microlenders typically have flexible eligibility requirements and are often willing to work with startups and businesses with bad credit. Many of these lenders also provide free or low-cost training and business coaching to help entrepreneurs develop knowledge and skills.

The best option for you will typically be wherever you can qualify with the most competitive rates and terms.

SBA microlenders

Microloan size: Up to $50,000.

Interest rates: Vary. Typically 6% to 9%.

Availability: Nationwide.

The SBA microloan program is funded by the SBA and administered through a network of community lenders, also called intermediaries. These microlenders offer loans to small businesses that may not qualify for other types of SBA loans.

Interest rates, repayment terms and eligibility requirements on SBA microloans vary based on the intermediary lender. Each lender can set its own standards, subject to SBA guidelines — repayment terms, for example, cannot exceed seven years.

According to the Congressional Research Service, the average microloan issued in the 2021 fiscal year was $16,557, much lower than the maximum available loan amount

Congressional Research Service. Small Business Administration Microloan Program. Accessed Oct 11, 2022.

As of March 2022, 140 SBA microloan intermediaries serve 49 states, Washington, D.C., and Puerto Rico. You can find a lender that serves your area by searching the directory on the SBA’s website.

Farm Service Agency

Microloan size: Up to $50,000.

Interest rates: Based on the Farm Service Agency direct operating/direct ownership loan interest rate at the time of loan approval or loan closing. As of October 2022, the rate is 3.875% for operating loans and 4.125% for ownership loans

Farm Service Agency. Farm Loan Programs. Accessed Oct 11, 2022.

Availability: Nationwide.

Part of the U.S. Department of Agriculture, the Farm Service Agency, or FSA, offers two types of loans through its microloan program. These loans are designed to help smaller farms, including nontraditional operators — such as farm trucks, farms participating in direct sales and community supported agriculture, or CSA — access capital.

Farmers can apply for:

  • Direct farm ownership microloan. Used for a down payment on a farm and to repair or restore farm buildings. Maximum repayment term is 25 years.

  • Direct farm operating microloan. Used to buy tools, equipment and livestock or cover other expenses related to essential operations. Maximum repayment term varies based on the loan’s use case but cannot exceed seven years.

To qualify for either of these microloans, you must meet the guidelines outlined by the FSA. You can contact your local FSA office for more information and assistance with the application process.

Accion Opportunity Fund

Microloan size: $5,000 to $100,000.

Interest rates: 5.99% to 16.99%.

Availability: 45 U.S. states.

Accion Opportunity Fund, part of the global nonprofit Accion, can be a good microlender for startups and businesses with bad credit.

To qualify for an Accion business loan, you’ll need at least three months in business. Accion doesn’t set a minimum credit score requirement, and the annual revenue requirement varies based on the loan program.

When you apply for a microloan, Accion will present several offers, all with different terms and interest rates, and you can choose the one that fits best. Accion loans are available from $5,000 to $100,000 with repayment terms that range from 12 to 60 months.

Accion also offers free business coaching and mentoring as well as a library of financial resources for small-business owners.


Microloan size: Varies based on program, starting at $500.

Interest rates: Typically around 9%; can vary based on your qualifications.

Availability: Alabama, Arkansas, California, Florida, Georgia, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, New York, Oklahoma, South Carolina, Tennessee and Texas.

San Antonio-based LiftFund offers small-business loans to entrepreneurs in 15 states. This nonprofit, community development financial institution, or CDFI, issues SBA microloans, SBA community advantage loans and specialized types of financing. LiftFund also offers SBA 504 loans, which provide long-term funding for real estate or large-equipment purchases.

LiftFund can work with businesses with limited credit, collateral or experience and, after you apply, help you understand your funding options. Borrowers can also attend group training sessions and receive one-on-one consultations from business coaches.

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.

Justine Petersen, based in St. Louis, offers several types of microloan programs for small businesses. This not-for-profit corporation offers SBA microloans and microloans through a partnership with a local CDFI as well as through its Able Biz microloan program.

These loans are available up to $50,000 with repayment terms and interest rates that vary based on the program and your business’s qualifications. Justine Petersen also provides smaller microloans through the Able Life program, offering up to $2,500 with no collateral required.

This microlender focuses much of its efforts on expanding access to capital, making it a good option for business owners with a limited credit history or those in traditionally underserved communities.

Justine Petersen also offers counseling, training and mentorship for small-business owners. Plus, borrowers who fund with this organization can access post-loan assistance to help them reach their goals for expanding their businesses.

Kiva U.S.

Microloan size: Up to $15,000.

Interest rates: 0%.

Availability: Nationwide.

Kiva U.S. is a part of Kiva, a nonprofit that offers peer-to-peer microlending in nearly 80 countries.

To receive an interest-free microloan of up to $15,000 through Kiva U.S., you must apply for pre-qualification and then invite friends and family members to lend to the venture. Because Kiva doesn’t require a minimum credit score, years of cash flow statements or collateral, this process helps you establish creditworthiness through “social underwriting.”

Once that happens, Kiva opens the loan to people who help crowdfund the desired amount. Fundraising can take about eight weeks, and you have up to 36 months to repay your loan.

Kiva might be a worthwhile option if you need a smaller amount of capital ($15,000 or less) and have a strong social or community following.

Grameen America

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

Interest rates: 15% to 18%.

Availability: In 21 U.S. cities.

Grameen America ​has a nontraditional microlending system: You must form a group with four other women you trust, and then your group participates in financial training.

After the training, each member receives a microloan to build their small business. The women in your group meet weekly to make repayments and receive ongoing education.

First-time loans are available from $500 to $2,000 and must be repaid on a six-month term. Every six months, depending on your repayment history and support from your Grameen America location, you may have the opportunity to receive larger loans.

Grameen America does not require a minimum credit score, business income or collateral to qualify for funding. The microloan program is designed to help women entrepreneurs grow their businesses, build their credit and create jobs in their communities.

Other borrowing options

Many microlenders also offer alternative forms of funding, including SBA 7(a) loans, business term loans and business lines of credit. LiftFund, for example, offers a loan program that provides financing up to $500,000 to historically underserved businesses that are looking to buy commercial real estate.

If a microloan won’t offer you enough funding, see whether you can qualify for other types of business loans. Some online lenders are willing to work with newer businesses or those with less-than-perfect credit histories. You should compare factors like interest rates and funding times to find the right fit for your needs.

If you’re seeking capital but aren’t sure where to start, you might consider connecting with a lender in your community, like a CDFI, then exploring your financing options.

Frequently asked questions

Many small businesses can be eligible for microloans. Eligibility requirements vary based on the lender and type of microloan you’re applying for.

Unlike with more traditional business loans, many microlenders don’t have minimum eligibility criteria for credit scores or annual revenue, making it easier for startups and businesses with bad credit to qualify.

Yes. Microloans are not grants; they must be repaid to the lender. Like standard term loans, microloans are typically repaid, with interest, on a set schedule over a predetermined period of time.

The average microloan is typically available in amounts up to $50,000. The specific amount you receive will vary based on the lender, type of microloan and your business’s qualifications, among other factors.

For example, although SBA microloans are available up to $50,000, the average loan amount issued in the 2021 fiscal year was $16,557.