Section 120.707 - What conditions apply to loans by Intermediaries to Microloan borrowers?(a)General. Except as otherwise provided in this paragraph (a), an Intermediary may only make Microloans to small businesses eligible to receive financial assistance under this part. A borrower may also use Microloan proceeds to establish a nonprofit childcare business. An Intermediary may not make Microloans to businesses with an Associate who is currently incarcerated, serving a sentence of imprisonment imposed upon adjudication of guilty, or to childcare businesses with an Associate who is currently on probation or parole for an offense against children. Proceeds from Microloans may be used only for working capital and acquisition of materials, supplies, furniture, fixtures, and equipment. SBA does not review Microloans for creditworthiness.(b)Amount and maturity. Generally, Intermediaries should not make a Microloan of more than $10,000 to any borrower. An Intermediary may not make a Microloan of more than $20,000 unless the borrower demonstrates that it is unable to obtain credit elsewhere at comparable interest rates and that it has good prospects for success. An Intermediary may not make a Microloan of more than $50,000, and no borrower may owe an Intermediary more than $50,000 at any one time. Each Microloan must be repaid within seven years.(c)Interest rate. The maximum interest rate that can be charged a Microloan borrower is: (1) On loans of more than $10,000, the interest rate charged on the SBA loan to the Intermediary, plus 7.75 percentage points; and(2) On loans of $10,000 or less, the interest rate charged on the SBA loan to the Intermediary, plus 8.5 percentage points.61 FR 3235, Jan. 31, 1996, as amended at 66 FR 47073 , Sept. 11, 2001; 66 FR 47878 , Sept. 14, 2001; 76 FR 63547 , Oct. 12, 2011; 80 FR 34046 , June 15, 2015; 85 FR 7651 , Feb. 10, 2020; 85 FR 80588 , Dec. 14, 2020; 87 FR 38909 , June 30, 2022 85 FR 7651 , 3/11/2020; 85 FR 80588 , 3/27/2020; 87 FR 38909 , 8/1/2022; 89 FR 34101 , 5/30/2024