Small business credit being upheld by microlenders

An answer to the small business loan crisis may be microloans. Microloans are more commonly associated with developing countries. But microlending is on the rise within the United States of America as more small businesses are taking out microloans when the financial institution says no.Microlending could increase even more as a small business lending bill that would cut taxes and ease credit for smaller businesses stalled amid partisan feuding within the Senate.

Microlending – welcome to the third world, America

Microlending — making small loans, typically to the poor — has been one of the most effective means of financing growth in 3rd world countries. But then the U.S. economy fell and cannot seem to get up. The New York Times reports that demand for small loans has increased in the U.S. during the recession and credit crunch. The buzz on microlending is getting louder as more companies succeed with the help of microloans. Kiva, which has lent more than $ 150 million in 53 nations, has started pilot program lending to business owners within the United States of America. Also picking up the pace in the U.S. is Grameen Financial institution, a Bangladesh microlender founded by Muhammad Yunus, a pioneering microlender who has been acknowledged for his work with a Nobel Peace Prize.

Small business credit bill a partisan failure

Microlenders are taking up the slack in small company credit as Congress plays partisan games. A bill crafted to facilitate a thaw in small business credit died July 29, Bloomberg reports, because senate Democrats failed to get enough votes to move the measure beyond debate. To motivate small company lenders, the bill proposed funneling $ 30 billion to banks with less than $ 10 billion in assets. The cost of paying back those billions would decline for small business lenders as their level of lending rose. It was estimated how the small company lender package could prime $ 300 billion in lending. But Republicans attempted to tack an indefinite extension of the Bush tax cuts to the bill, perhaps as they said it would encourage an additional round of risky lending.

Microloans are getting results

Smaller businesses are succeeding with microloans while the Senate quarrels. The New York Times piece focused on a $ 6,500 microloan at three years and 6 percent interest that a Silicon Valley restaurant owner used to stay afloat and prosper.The Miami Herald reports that a Miami microlender called OUR MicroLending has underwritten 764 loans adding up to $ 4.5 million. Its customers typically have fewer than five employees, with sales of $ 100,000 or less. OUR MicroLoans makes loans ranging from $ 1,500 to $ 12,000 and average about $ 5,000. The average term is a year.

Additional reading

nytimes.com

bloomberg.com

miamiherald.com