We've written before about the Small Business Administration's brand-new emergency microlending program. Designed specifically for those small businesses and entrepreneurs struggling to pay off pre-existing bank loans, it allows them to apply for loans up to $35,000 that are then backed 100% (so at zero risk to the lender) by the SBA. Good deal--for the banks. But what about small business owners and entrepreneurs who need just a little bit of financing, but need it for something other than to pay off bank loans--who may not even have, or be able to obtain, bank loans in the first place???
Enter microlenders. The New York Times reports on the increased business--usually, requests for loans in the range of $5,000 to $35,000--that has been thrown the way of these largely non-profit, community-focused financial institutions. The average 2008 loan was $11,500, due back in full in ten years, with an interest rate of 11%. These lenders are specifically designed for entrepreneurs who, because they lack sufficient collateral or sheer experience to obtain a more traditional bank loan, have few other places to turn.??
The catch being that (say it with us) in this economy more established businesses--and even some banks!--have had to turn to the microlenders for more help. Currently, SBA regulations prohibit most microlenders from lending more than $750,000 per year. How long until we hear people clamoring for that to rise????
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