SBA Microloan Requirements: What Intermediaries Check

An SBA microloan is a loan of up to $50,000 made by a nonprofit intermediary with money it borrowed from the SBA, and the intermediary, not the SBA, decides whether you qualify. The SBA fixes a short floor: an operating for-profit business (or a nonprofit childcare center), a U.S. location, SBA size standards, and an eligible industry. Since April 1, 2026, it also requires 100% U.S. citizen or national ownership. Credit score, collateral, equity, and which personal financial statement form you fill out are all the intermediary’s call.

The SBA’s floor: rules the intermediary cannot waive

These come from the SBA’s microloan program page and the regulation behind it, 13 CFR 120.707. An intermediary can be stricter than any of them. It cannot be looser.

Who can borrow

• An operating, for-profit small business located in the United States that meets SBA size standards and is not an ineligible type under 13 CFR 120.110. A nonprofit childcare center is the single nonprofit exception.
• Owners who are all U.S. citizens or U.S. nationals. Policy Notice 5000-877232 revised the Microloan SOP 52 00 B effective April 1, 2026, to require that 100% of direct and indirect owners be U.S. citizens or nationals. That mirrors the rule the SBA applied to 7(a) and 504 loans on March 1, 2026, and it leaves no room for a green-card holder on the cap table.
• No Associate of the business who is currently incarcerated. 13 CFR 120.707(a) bars the loan outright in that case, and the SBA’s definition of Associate reaches owners, officers, directors, and key employees.

How much, how long, at what rate

In practice the SBA says rates “generally” land between 8% and 13%, and the loan is a term loan with monthly payments. A revolving line of credit is not an allowed structure, according to the American Bar Association’s 2026 summary of the program, which cites the Microloan SOP. Pursuit, for one, also notes there is no prepayment penalty on its microloans.

The $20,000 line matters more than most borrowers realize. Below it, the intermediary can approve on its own credit judgment. Above it, the file has to contain evidence that a bank or credit union would not do the deal on comparable terms. A written decline from a bank is the cleanest evidence, so get one before you apply for $35,000.

What the money can and cannot do

Proceeds may fund working capital and the purchase of materials, supplies, furniture, fixtures, machinery, and equipment. The SBA’s program page is blunt about the other side: proceeds “cannot be used to pay existing debts or to purchase real estate.” Real estate is a firm no.

Debt is where borrowers get confused. The SBA’s restriction stands, yet Pursuit’s microloan page lists refinancing high-cost debt as a use, so ask your intermediary whether a refinance would run through its SBA microloan or a separate non-SBA product. If property or a large refinance is the real need, you are looking at a 7(a) loan, which allows both.

One more SBA-level fact shapes everything that follows. 13 CFR 120.707(a) states that “SBA does not review Microloans for creditworthiness.” The SBA never reads your file. The intermediary’s loan officer and loan committee do.

The intermediary’s bar: what four published credit policies ask for

Because the SBA stays out of the credit decision, the real requirements are whatever the intermediary in your area has written into its own policy. The four intermediaries below publish theirs, and the spread between them is the point.

Three things fall out of that table.

Expect to pledge collateral and sign a personal guarantee. The SBA does not require either. Three of the four policies above require collateral, two name a personal guarantee, and Pursuit’s product page is silent on both, so assume both and ask. Read our guide to what a personal guarantee commits you to before closing day, because on a microloan the guarantee usually outlasts the business.

The personal financial statement is the intermediary’s choice, and you should ask which form. The SBA’s own Form 413 page lists the programs that use it: 7(a), 504, disaster, surety bonds, WOSB certification, and 8(a). Microloans are absent. Columbia EDC requires Form 413 anyway, and LiftFund asks for a household budget instead.

Either way the loan officer is reading the same thing: what you own, what you owe, and what is left over each month to cover a $300 payment.

On a $16,000 loan, the household balance sheet carries more weight than the business plan. The projections for a two-person landscaping company are easy to write and hard to verify. Your bank statements are not. The fastest way to stall a microloan file is a personal financial statement whose cash line does not match the three months of statements the same intermediary asked for.

Build the PFS from the statements, not from memory, and the two documents will agree when the loan officer lays them side by side. The section-by-section walkthrough of Form 413 covers the lines that most often disagree with the bank’s numbers.

The SBA’s program page still quotes an average of “about $13,000.” Its own year-end approvals data for FY2025 puts the average closer to $16,000, essentially flat from FY2024, while the count of loans fell about 15% from the year before.

The intermediaries themselves describe the job the same way. Bankable, the Indiana nonprofit that became the largest SBA microlender in the country at the end of 2025, put it this way when the ranking was announced:

“Told no somewhere else” is the program’s design, written into the credit-elsewhere test. The intermediary expects a thin file. What it will not accept is a messy one.

What ends a microloan application before underwriting

These end the conversation at the SBA level, before the intermediary’s own policy comes into play.

• An ineligible business type. 13 CFR 120.110 excludes, among others, businesses primarily engaged in lending, passive landlords and developers, speculative businesses, pyramid sales plans, businesses earning more than a third of revenue from legal gambling, and any business engaged in illegal activity.
• Any owner who is not a U.S. citizen or U.S. national. Since April 1, 2026, that includes lawful permanent residents, at any ownership percentage.
• Proceeds for real estate. The use is checked at closing, and the intermediary has to document where the money went.
• Already owing that intermediary $50,000. The cap is on total outstanding balance, not on each loan.
• An Associate who is currently incarcerated, or under indictment for a felony or financial-misconduct charge. Both 120.110(n) and 120.707(a) bar the loan.
• A prior loss to the federal government on an earlier federal loan or guarantee, under 120.110(q). A defaulted and charged-off SBA or disaster loan falls here, and a compromise settlement counts as a loss. The ABA’s summary of the Microloan SOP adds delinquent federal debt, other than an existing microloan, to the list.
• No intermediary serving your county. The program is place-based. If the directory shows nothing within your state’s coverage, the SBA microloan is not available to you, whatever your credit looks like.

Intermediary-level disqualifiers vary. Pursuit, for one, lists a bankruptcy within seven years, open liens or judgments, and a felony history as bars to automatic approval. Those are that lender’s rules, and another intermediary may read the same facts differently.

Six borderline situations, and what to do in each

“My personal credit score is 590.” You are not out. The SBA sets no minimum, and Columbia EDC’s 2023 policy manual states it had none either, though individual loan programs at the same lender can set a floor. Expect three things instead:

• A smaller loan, closer to the $10,000 the regulation steers intermediaries toward.
• Collateral on everything the loan buys.
• A written explanation of every delinquency, which Business Impact NW says it reads. Six months of clean payment history before you apply helps more than any letter.

“We have no revenue yet.” It depends on the intermediary. LiftFund welcomes startups, Pursuit wants an established business with break-even cash flow, and Columbia EDC takes startups with a business plan and three years of projections. Where you are welcome, the file shifts to projections, your own cash in the deal, and your personal financial statement.

Our guide to startup loans with no revenue covers how a lender reads a pre-revenue file. It also explains the 10% equity injection the SBA requires on a 7(a) loan to a startup, which intermediaries do not copy.

“I need $35,000.” You are above the $20,000 credit-elsewhere line, so the intermediary needs evidence you could not get the money from a bank or credit union on comparable terms. Apply at your bank first and keep the decline letter. Without it, the loan officer either caps you at $20,000 or has to paper the test some other way, and both take time.

“I want to pay off $18,000 of credit-card debt the business ran up.” Expect a no on the SBA microloan itself. The SBA’s program page says microloan proceeds cannot pay existing debts. Pursuit advertises high-cost debt refinance, so ask whether that runs through a separate non-SBA product. A 7(a) loan can refinance current business debt, and many intermediaries also lend their own non-SBA money with fewer use restrictions.

“My co-founder has a green card.” Ineligible for an SBA microloan since April 1, 2026, and for 7(a) and 504 loans since March 1, 2026, at any ownership share. The realistic paths are a non-SBA loan from the same nonprofit lender, or a restructure of ownership that a lawyer, not a loan officer, should advise on.

“I already have a $30,000 microloan outstanding.” You can borrow up to $20,000 more from the same intermediary. The $50,000 cap applies to your total balance with that lender at any one time, not to each loan.

If the intermediary says no

Most microloan declines trace back to the file, and a file can be rebuilt in a few weeks. Work the list in order.

1. Rebuild the package so the documents agree. Pull three months of personal and business bank statements, then build the personal financial statement from them. Cash on the PFS should match the statements to the dollar. Add a one-paragraph explanation for any late payment on your credit report. The full checklist is in documents needed for a business loan.

2. Ask the same nonprofit about its non-SBA loans. Most intermediaries are Community Development Financial Institutions that also lend their own capital. Business Impact NW, for example, lists SBA microloans alongside SBA 7(a), USDA, and in-house loans that start at $5,000. The underwriting is similar, the use-of-proceeds rules are often looser, and the citizenship restriction is an SBA rule, not a CDFI rule.

3. Price a 7(a) Small Loan if the need is above $50,000 or includes refinancing. A 7(a) loan can be underwritten on projected cash flow at a 1.1 debt service coverage ratio, as our startup loan guide explains, and it allows refinancing and real estate. The paperwork is heavier: SBA Form 413 from every 20% owner, dated within 90 days of submission for applications SBA receives from October 1, 2026.

4. Use equipment financing when the asset is the collateral. A $22,000 commercial oven or a used box truck secures itself. Equipment lenders underwrite the asset first and the borrower second, which is the reverse of a microloan.

5. Do not wait on the program’s funding. The administration’s FY2027 budget request, published April 3, 2026 on the SBA’s budget justification page, proposed no new microloan lending authority and no microloan technical-assistance funding, against $41 million for technical assistance in FY2026. Congress decides the final numbers, and intermediaries lend from revolving funds that keep working either way. If you qualify now, apply now.

Before you apply, run your own numbers through the free net worth calculator so the figure you put on the intermediary’s PFS is the same one your bank statements support. The broader workflow on assembling a loan file is in the business loan applications use case. The rest of the program coverage lives in our SBA lending archive, including the full map of SBA loan types.