Microloans – An Alternative Approach to Start-Up Financing and Where to Find Out More

Microloans are a relatively new and novel way for entrepreneurs to secure much needed financing. Raising capital for your business is difficult enough – but entrepreneurs with low-incomes, no collateral and rocky credit histories often find they do not meet the criteria for business loans from a bank.

The only other options these entrepreneurs may have are high-interest credit cards and predatory lending – two options it’s best to avoid. Microloans provide a workable financing solution for many entrepreneurs who would otherwise be unable to start their venture.

Funds from a microloan can be used to launch a business, buy inventory or capital equipment, hire employees, etc. Each lending institution establishes loan terms and what the funds are to be used for.

Loans range from as low as $500 to as high as $50,000. Repayment generally takes no longer than 5 to 6 years and rates are determined by the specific lender.

Microcredit is a form of borrowing that has exploded in the last decade across the world – and it’s becoming more popular in the United States as well. The credit crunch that began in 2008 has made it even tougher to borrow through traditional means, leaving many entrepreneurs scrambling for financing.

Where can I apply for a microloan?

Now available in the United States, a microloan is one way to incorporate your business and get it off the ground. Click on the links below for more information and where to apply for a microloan.

Small Business Administration Microloan Program

The SBA Microloan Program makes small loans to start-ups or growing small businesses. Funds from SBA are made available to community development organizations, or intermediaries, who then make loans to eligible borrowers. All decisions and processing is done at the local level. Contact an SBA intermediary in your area for more information.

Kiva.org

Kiva.org is a nonprofit, private organization who has started making microloans available in the U.S. Through their website, individuals provide relative small amounts of financial capital directly to entrepreneurs. Donors are able to track who their money goes to, what they’re using it for and their repayment progress.

Accion USA

Accion USA is another private nonprofit organization who extends microloans and provides other financial services to entrepreneurs in the United States.

These and various other microloan programs help aspiring, enterprising people across the world start a venture and earn a living on their own. As loans are re-payed, funds are lent to other low-income entrepreneurs. And while they are no silver bullet to solving the problems of poverty, microloans can be extremely helpful to those who may have no other option.

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