All Articles Tagged "microfinancing"
Microloans Providing an Alternative Resource for Small Businesses
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For years, microloans have provided a gateway to self-sufficiency for the poor around the world. Now increasing numbers of entrepreneurs here in the U.S. are taking advantage of these small loans to finance their businesses.
“Microloans tend to range from $500 to $10,000, but can be as much as $50,000, with interest rates varying from three percent to 18 percent,” explains the Associated Press. With shrinking access to credit and banks denying many small business loans, microloans are an alternative. For some groups, like minorities and women, it’s one of the few alternatives.
According to Jason Riggs, communications director for Kiva, microloans play a “pivotal role” for some small businesses, providing not just funding, but also financial literacy training and other services. Kiva is a nonprofit organization founded in 2005 that has issued $341 million in loans over the past seven years. It’s also worth noting that Kiva has a nearly 99 percent repayment rate.
“You don’t see larger banking institutions providing these sorts of loan services with the loans,” Riggs adds. “This is ultimately why microloaning is so important. It provides the means, skills and education to be successful.”
Riggs pointed us to some research published in 2011 by the Association for Enterprise Opportunity, an organization that specializes in “microbusiness initiatives” to help what they call “underserved entrepreneurs.” According to that organization, there are 25.5 million “microbusinesses” (defined as companies with zero to four employees) in the U.S. Those businesses provide millions of jobs and give entrepreneurs the opportunity to vastly improve their financial fortunes. Still, many small business owners struggle. Seventy percent of U.S. businesses have revenues of $100,000 or less. For women-owned and black-owned businesses, that figure goes up to 87 percent.
Other research conducted in 2011 by the Aspen Institute, a D.C.-based policy and educational studies group, found that 159 microenterprise programs administered 12,547 microloans. (A total of 762 programs had been identified as those providing a financing product, training, or some other service; 48 percent, or 366, participated in the study.) The value of those loans was $104.2 million. More than half of those served were women (59 percent) or people of color (53 percent).
Why Micro-lenders Will Replace Sallie Mae
(Black Enterprise) — There seems to be a new trend taking root when it comes to college financing. Last week, I wrote about companies adopting a micro-loans model for student lending. Days later, micro-loan giant,Kiva, announced it was expanding its small business social lending to students seeking to get through school as well. Even though Kiva’s program is only for students abroad at the moment, this expansion demonstrates how college financing or student loan debt assistance is taking a social approach.
Why Microfinancing Works
(Inc) — Hester and Jason Rodriguez learned quickly that banks weren’t going to be much help to them in their dream of opening a restaurant in Corpus Christi, Texas. The couple had what they thought was a solid plan, plus about $20,000 in savings and a stash of used restaurant equipment. But even though the couple owned their home, bankers felt they lacked sufficient capital and denied their loan applications. Fortunately, the city’s Small Business Development Center pointed them toward Accion Texas-Louisiana, a nonprofit microlender that was willing to make a low-interest loan of $25,000. (The interest was made even lower by a Corpus Christi program that buys down debt for new and existing small businesses that can create jobs.) It was just enough to get Hester’s Café up and running.
