An answer to the small business loan crisis may be microloans. Microloans are more commonly associated with developing countries. But with more banks saying no to small company, microlenders are getting more business from entrepreneurs who want to use microloans.Congress made a halfhearted try to create a small company lending bill, but the belief that it perished amid partisan backstabbing could mean continued good business for microlenders.
Microloans bring third world flavor to American lending
In the 3rd world, microlending-small loans that lift poor individuals from poverty-has been an effective way to finance economic growth. Then the Americas economy collapsed and recovery has been weak. A New York Times report said that United States of America demand for small loans during the recession and subsequent credit crunch is increasing. The buzz on microlending is getting louder as more businesses succeed with the help of microloans. Americas business owners are taking advantage of a pilot program started by Kiva, a microlender that has made loans of more than $ 150 million in 53 countries. Grameen Bank — a microfinance group based upon in Bangladesh that was began by Muhammad Yunus, who won the Nobel Peace Prize for his groundbreaking work in microlending — has also widened its lending to Americans.
Partisan politics thwart small business lending
As microlenders take action to help smaller businesses, the Americas Senate is sitting on its hands. Bloomberg reports that because senate Democrats failed to get the votes required to advance beyond debate, a bill written to loosen small business credit died July 29. To jump start small business lending, the bill would have provided banks with less than $ 10 billion in assets $ 30 billion. The cost to pay back that money would drop for a bank as its number of small business loans rose. It was estimated that 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, quite possibly as they said it would encourage an additional round of risky lending.
Microlending at work
While the Senate dithers, microlending is scoring success stories. The New York Times article tells the story of a restaurant owner in Silicon Valley who saved her business with a $ 6,500 loan that she has three years to pay back that carries a 6 percent interest rate.As reported in the Miami Herald, Miami microlender OUR MicroLending has infused $ 4.5 million to the Miami economy with 764 loans. OUR MicroLending customers normally have less than five employees and $ 100,000 or less in annual sales. The lenders microloans average about $ 5,000 in a $ 1,500 to $ 12,000 range.
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