Whether you need a $1,000 or perhaps $15,000 people are looking into micro lending, the latest in fast financing. In a time when it’s hard for entrepreneurs to receive small business lending, microloans, a lending process, practiced in Bangladesh, makes its way to the United States.
What are Microloans?
In the 1970s, organizations and entrepreneurs teamed up to offer small amounts of money to people in poor countries who only needed a very small loan in order to start a business. These loans were in very small denominations, like twenty dollars to help a woman buy a thermometer needed for making cheese from her goat’s milk. Once the woman made enough money selling her cheese, she would pay back the micro lender the twenty dollars, with just a little bit in interest. This idea came from idealist and economists who were thinking of ways of combating poverty in smart ways. We cannot all give $2,000 to help someone out, but most of us can give $20. Then with that $25 that comes back to the micro lender, they can re-lend that money to another person and so on and so on. Using this example of lending, budding entrepreneurs, struggling single moms, immigrants and low income residents in the U.S. are borrowing and lending micro loans from other places besides banks.
Humanitarian organizations, investors and venture capitalists are all helping to give a little to make a lot of difference. The magic of microloans is that it helps people who wouldn’t have a chance of getting a loan from a bank due to lack of credit, experience or business history. Because it’s not a lot of money, it’s easier for the lender to take the risk. Most microloans run the gamut of 100k-50k to $500. These loans can help a person start up their own business, or pay for new equipment and upgrade their business. Humanitarian agencies that offer microloans mainly offer assistance to women, refugees, immigrants and low-income residents wanting to start their own business. According to the humanitarian agency called MercyCorps, 96 percent of their loans are paid back.
According to statistics, there are more than 500 microenterprise programs providing counseling and capital to hundreds of thousands of people each year. When you have no assets to start a business, buy a car or a house, or afford college- it’s insecurity a majority of the population faces each day. With the economy in the state it is, it makes the reality of getting assets all that more daunting. With the option of microloans, people with the fire in their belly to start their own business can see the silver lining in the dark clouds of this economy.
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