Since I work in the finance industry, I like to stay abreast of as many things in the financial world as possible. Recently, I have had an interest in learning more about microfinance or microloans. According to the US Small Business Administration, “microloans provide small businesses with small short-term loans for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment.” The US Small Business Administration Microloan Program was established in 1992.
While the SBA is not actually the one that does the lending, they do connect businesspeople with specially designed intermediary lenders. These intermediary lenders are nonprofit organizations that have experience in lending.
The average microloan is around $13,000 with the maximum reaching up to $50,000. Larger banks sometimes may be unwilling to loan amounts of money less than $50,000, which makes microloans fill an essential niche in business development. When starting a small business, the owners may not have the past experience or credit rating to be approved for loans.
If you are looking into becoming a microloaner yourself, there are resources for that as well. Websites like Kiva will help parties come together for lending. The lending can even be as low as $25. Kiva has a transparent business model that enables the microloaners to get in touch with the small business owners with whom they are loaning money. And according to their website, there is a 97 percent loan repayment rate. There are many services like Kiva out there, so do your research on what you think fits you or your business’s interests best and get out there and engage in some small scale business development!
It can be quite simple to become involved in microloaning, no matter what side of the equation you are on. If you are a small business owner in need of some capital, the application process seems to be straightforward and if you have the right mindset and a professional business plan you’ll be on your way. If you wish to loan small amounts of money like on websites like Kiva, it is only a few clicks away. Like qualifying for any sort of loan, it depends on your financial situation, credit rating and more.
If you are interested in finding a microloaners in your area, check out the list on the SBA’s website. In my opinion, entrepreneurship in its best form is when both parties benefit and after doing my research on microloans, this seems to be a solid avenue for that kind of business.
Let me know what you think of microloans, if you have ever been involved in microfinance or if you have any services that you recommend to those who have an interest in getting involved in the world of microfinance.