Microlending - Beyond Banks: Alternative Funding for Startups

Microlenders are organizations that specialize in making small loans, typically in the range of $5,000 to $50,000, to entrepreneurs who can’t secure funding from more traditional sources. Many microlenders are non-profits that rely on donations from charities for their loan funds. And some focus on lending to specific categories or types of borrowers, such as women-owned or minority-owned businesses, or ethnic markets, such as Hispanic business owners.
Microlenders often provide education and training to their clients, in addition to money. Microloans generally carry higher interest rates than bank loans, ranging from 8% to 13%. Often, they are subsidized by federal, state, and local grants.

Game Plan

  • The U.S. Small Business Administration’s microloan program offers loans up to $50,000 to help small businesses expand. The average microloan is about $13,000. For more information, including eligibility requirements, terms, and interest rates, visit sba.gov.
  • For help in finding microlenders in your area, start by contacting your local SBA district office.
  • The Association for Enterprise Opportunity (AEO) calls itself “The Voice of Microbusiness.” You can search for microenterprise development organizations, and find a mentor for one-on-one guidance on their website.
  • Learn if a microloan is right for you.
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