These loans are provided exclusively by approved intermediaries. Under this program, SBA makes or guarantees loans to the intermediaries, which use the money to make microloans to eligible borrowers. Through this program, the SBA helps fill the very small loan financing gap created by the absence of traditional lenders providing smaller sized conventional loans.
Intermediaries can also provide their clients with marketing, management and technical assistance.
To help finance this type of assistance, SBA provides grants to the intermediaries and other qualified nonprofit entities. These grants are available only to the intermediaries. There are no grants for the actual businesses. Microloans are available only to borrower who can demonstrates that they are unable to obtain credit elsewhere at comparable interest rates and that they have a good prospects for repayment. A microloan cannot be used for a down-payment or the purchase of real estate.