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Business microloans explained

Are small expenses holding back your business? A microloan might be able to help.

Small business owners know that taking out a $50,000 loan isn’t always the best way to pay for something as minimal as a broken oven. However, you might find that you’re in need of some financing to get your business up and running again. This is where microloans come in.

We take you through what a microloan is, who they’re best suited for and where you might find one.

What is a microloan?

A microloan is what it sounds like: A small loan. Business microloans are typically around $1,000 or more and are designed to help out businesses that need access to a small amount of money. They’re a good option for startups and businesses in underdeveloped areas, which typically don’t need a lot of capital but might have trouble finding financing.

Here are some things to keep in mind:

Microloans can be a solid way to pay for…

  • Inventory and supplies.
  • Equipment or furniture.
  • Small building improvements.
  • Microloans often come with shorter terms and higher interest rates than other forms of business financing.
  • Many microloans require a personal guarantee from one of your business’s owners.
  • They’re not always available from traditional lenders like banks, which prefer to hand out larger, more profitable loans.
  • A lot of microloan options are available for business owners with poor credit or little financial history, as well as brand new business owners.

Compare microloans

While you can apply for as much as $500,000 with these lenders, you can also apply for much lower amounts (typically starting around $1,000 – $5,000).

Name Product Interest Rate Loan Amount Loan Term Minimum Revenue Minimum Time in Business Loans Offered
SharpShooter Funding Business Loan
Prime pricing from 9.00%
$500 - $250,000
6 - 120 months
$10,000 /month
100 days
Unsecured Term, Merchant Cash Advance, Invoice Factoring
To be eligible, you must have been in business for at least 100 days with a minimum of $10,000 in monthly deposits.

SharpShooter provides capital to small businesses that are underserved by banks and credit unions. It measures overall business health and potential rather than focusing strictly on traditional metrics. Fill out a simple application and get pre-approved in minutes. Receive your funds within 24 hours.
Swoop Funding Business Loan
4.00% - 25.00%
$1,000 - $5,000,000
3 - 60 months
$10,000 /month
24 months
Term, MCA, LOC & more
To be eligible, you must have been in business for at least 24 months and have a minimum of $100,000 in annual revenue.

Swoop partners with banks and alternative lenders to match your business with the right funding options. Register for free and browse your offers without affecting your credit score.
Lending Loop Business Loan
Starting at 4.96%
$10,000 - $500,000
3 - 60 months
$8,500 /month
12 months
P2P
To be eligible, you must have been in business for at least 12 months and have a minimum of $100,000 in annual revenue.

Lending Loop is Canada’s first regulated peer-to-peer lending platform. Complete an application in 5 minutes. Once you accept your loan offer, investors will begin to fund your loan on the marketplace. Your loan will be transferred to your bank account when it is fully funded.
OnDeck Business Loan
8.00% – 29.00%
$5,000 - $300,000
6 - 18 months
$10,000 /month
6 months
Secured Term, Line of Credit, Merchant Cash Advance
To be eligible, you must have been in business for at least 6 months with a minimum monthly revenue of $10,000.

OnDeck offers fast and simple financing. Apply in less than 10 minutes with your basic business information and see your loan offers without hurting your credit score. Get approved within 1 business day, and choose your term, amount and payback schedule once approved.
Loans Canada Business Loan
Prime Pricing from 9.00%
$2,000 - $350,000
3 - 60 months
$4,166 /month
100 days
Unsecured Term
To be eligible, you must have been in business for at least 100 days, have a credit score of 410+ and show a minimum of $4,166 in monthly deposits ($50,000/year).

Loans Canada connects Canadian small business owners to lenders offering financing up to $350,000. Complete one simple online application and get matched with your loan options.
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How do I know if a microloan is right for my business?

Consider a microloan if:

  • You only need to borrow a few hundred or thousand dollars.
  • Your business is a startup.
  • You’ve had trouble qualifying for larger loans.
  • You’re located in an underdeveloped area.
  • You or your business has bad credit.

Consider other options if:

  • You have an established business that could easily qualify for less costly loans.
  • You need more than $50,000.
  • You’re looking for continual access to financing — like a line of credit.
  • You’re looking to pay back a loan over a number of years.

Five tips for successfully applying for a microloan

Increase your chances of approval by following these tips for success:

  1. Make sure you’re eligible. Check the eligibility requirements before you apply for a loan to avoid wasting your time.
  2. Prepare your documents. Gather the information you’ll need to fill out your application to ensure things go smoothly.
  3. Know your finances. Know how much you need, the payments you can afford and how long it will take you to pay back.
  4. Shop around. You won’t know if there’s a microloan that’s perfect for your business unless you compare your options.
  5. Look locally. There are often business grants offered locally, through nonprofits, government programs and incubators.

Bottom line

Microloans can have higher interest rates and shorter terms than other types of financing, but if your business needs only a small amount, a microloan could be a better option overall.

If you’re not looking for a small loan for your business, you might want to look elsewhere for financing. Before signing a loan contract, compare your options to make sure you find the best loan for your business needs.

Frequently asked questions

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