Microloans Pick up in U.S.

Posted by The Yodler

They say it takes money to make money. That may be true, but what if there’s no money to begin with? Local business owners all over the country are struggling to secure loans to expand or sustain their businesses. In a flagging economy, some people have gotten creative and used microloans. Microloans are just what they sound like – loans for small amounts of money. Known for its success helping entrepreneurs in third world countries, microlending is gaining traction in the United States, according to a recent article in The New York Times.

Kiva, one of the best known international microlenders, has teamed up with domestic microlender Opportunity Fund to give a leg up to entrepreneurs who don’t qualify for traditional business loans. Traditional banks will not normally provide a loan for less than $50,000, while microlenders will give as little as tens of dollars in third world countries or a few thousand dollars in the U.S. Both Kiva and Grameen Bank, a microfinance group that is based in Bangladesh and was started by Muhammad Yunus, winner of the Nobel Peace Prize for his groundbreaking work in microlending, have expanded their lending to also include Americans.

The business owner spotlighted in the Times article, Amanda Keppert, obtained a $6,500 loan (from Kiva via Opportunity Fund as the intermediary) that she has three years to pay back and that carries a six percent interest rate. She used the money to buy an ice maker, a generator to save on propane costs and large signs to advertise her hot dog stand business.

Foreign microlenders aren’t the only players getting involved. Urged by Federal Reserve Chairman Ben Bernanke, who earlier this month expressed concern that large financial firms aren't doing enough to help small businesses, Bank of America this week committed $10 million in grants to nonprofit organizations that lend to small businesses. These organizations, called Community Development Financial Institutions, or CDFIs, normally tap funds from federal agencies but have been hamstrung by the recession. Other companies, like Wells Fargo, are also promising action.

If you’re interested in applying for a microloan or finding more information about microloans, visit these websites:

• www.cdfifund.gov
• www.kiva.org
• www.opportunityfund.org