Get Your Business Funded: Creative Methods for Getting the Money You Need

Microlending in the United States

There are few good things to be said about the Great Recession, but one is this: a whole slew of new and creative methods for funding a business have come out of it (necessity being the mother of invention and all). One of these new funding mechanisms is the adaptation of traditional microfinance and microlending to richer economies. The needs are there; they are just different, both qualitatively and quantitatively. It turns out that Western entrepreneurs need microloans too—just tack on a zero or two.

In 2006, the Grameen Bank and its founder Muhammad Yunus received the Nobel Peace Prize. Interesting Grameen facts:

• Fully 97 percent of its borrowers are women.
• The bank requires no collateral.
• The repayment rate is 97.25 percent.
• Because it wants no litigation in the rare case of default, the bank does not require borrowers to sign any legal documents.
• The interest rate on all loans is 11 percent.
• The average loan size is $309.

Source: www.grameen-info.org.

So microlending in the United States is a fairly new phenomenon and as a result the actual number of loans has been fairly low to date. But that is also changing. Recent changes in law have made more money available both for microloans, as well as for technical assistance to microlenders. As a result, in 2010, the number of microloans doubled over the previous year.

One reason you should be excited about this option, aside from the policy decision to increase microlending, is that the actual ...