As difficult as it is to accept, the reality is big banks simply aren’t interested in issuing small business loans anymore right now. However, a number of microfinance lenders have a reason to fill the void. For those unfamiliar with the term, microlenders are nonprofit organizations that supply small business owners with much-needed funding, and in some cases financial literacy training. Here’s a look at some of the microfinance companies that are helping burgeoning entrepreneurs realize their ambitions.
Since 1961, Accion has provided small business owners across the world with loans ranging from $200 to $750,000. With an eye towards empowering minority and female entrepreneurs, the organization specializes in issuing loans to those working in the daycare, food and beverage and nonprofit fields. Accion also acts as a business incubator for home-based startups and a bridge lender for established businesses.
Founded by Nobel Peace Prize winner Muhammad Yunus, Grameen America is dedicated to lifting women out of poverty with microloans. Judging by Nerd Wallet’s report that the company has issued more than $300 million in loans since 2005, its mission has been successful. The organization uses a unique lending model. Before getting any money, Grameen requires recipients to gather together a group of four women that they trust implicitly. Those women are then given one week of financial education that is designed to impart information about the importance of credit building and saving. Each member of the quartet is then issued $1,500 in seed money. After the transaction is completed, the loan recipients meet with Grameen America employees on a weekly basis to make repayments, continue their financial education and foster connections within Grameen’s peer network.
The 500 lb. gorilla of the microfinancing field, Kiva, which Forbes describes as a cross between Google and Bono, has dispersed over $764 billion since its founding in 2005. The company offers funds to entrepreneurs in two ways. Kiva.org operates like a social network — people all over the world can browse from a selection of pre-qualified applicants, select a small business owner they wish to support, and then send them money through PayPal. The process can take as little as 10 seconds and loans made through Kiva.org have a 98.44 percent repayment rate. Kiva Zip allows users to lend and receive zero percent interest loans of as little as $5 that act as both seed money and emergency bridge funding.
This article was written by Mario McKellop for Small Business Pulse