Microlenders, not banks, are making more small business loans

The small business loan crisis has been getting some relief with microloans. Until, now most individuals associated microloans with poor developing countries. But microlending is on the rise in the United States of America as more smaller businesses are taking out microloans when the financial institution says no.Congress made a halfhearted try to create a small business lending bill, but the fact that it passed away amid partisan backstabbing could mean continued good business for microlenders. Article source – Microlending blooms as banks refuse for making small business loans by Personal Money Store.

America gets a taste of the third world with microlending

One of the most effective ways to finance growth in the third world has been making small loans to the poor-otherwise known as microlending. But then the Americas economy fell and cannot seem to get up. A New York Times report said that Americas demand for small loans during the recession and subsequent credit crunch is increasing. Microlending is getting noticed and microloans are increasing in popularity. United States of America business owners are taking advantage of a pilot program began by Kiva, a microlender that has made loans of more than $ 150 million in 53 countries. Grameen Financial institution — a microfinance group based in Bangladesh that was started by Muhammad Yunus, who won the Nobel Peace Prize for his groundbreaking work in microlending — has also widened its lending to Americans.

Small company credit bill a partisan failure

The United States Senate sits and argues when microlenders step up to finance small business. Bloomberg reports that because senate Democrats failed to get the votes required to advance beyond debate, a bill written to loosen small business credit died July 29. To jump start small company lending, the bill would have provided banks with less than $ 10 billion in assets $ 30 billion. The cost to pay back that money would drop for a financial institution as its number of small business loans rose. The small company loan package had been estimated to stimulate up to $ 300 billion in lending. But Republicans said it would result in more risky lending, quite possibly as they tried to attach making the Bush tax cuts permanent to the bill.

Microloans carve out a niche

Microlending is growing because smaller businesses aren’t waiting for Congress to get its act together. The New York Times article tells the story of a restaurant owner in Silicon Valley who saved her business with a $ 6,500 loan that she has three years to pay back that carries a 6 percent interest rate.The Miami Herald reports that a Miami microlender called OUR MicroLending has underwritten 764 loans adding up to $ 4.5 million. OUR MicroLending customers normally have less than five employees and $ 100,000 or less in annual sales. The loans made by OUR MicroLoans average about $ 5,000 and fall within a $ 1,500 to $ 12,000 range.

Additional reading

nytimes.com

bloomberg.com

miamiherald.com