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SMALL BUSINESS
Microlenders Widen Their Client Base
Amid Tight Credit Market, More Firms Look Beyond Banks for Financing
By Anjali Cordeiro
No loan is too small for small businesses these days.
With many banks continuing to pat a hold on lending, more small-business owners and would-be entrepreneurs are turning to microlenders, organizations that dole out smaller loans typically ranging from as little as $500 to $35.000.
Microlenders, most of whom are nonprofits, have traditionally focused on helping small business owners, particularly minorities and women, in lower income communities as well as entrepreneurs in developing countries who need a few dollars to buy, say, a sewing machine. They tend to charge higher interest rates than banks because their borrowers are often first-time entrepreneurs of have weaker credit profiles.
They are more lenient in screening prospective clients, however, and more willing to tailor repayment periods to the specific needs of a business. And it is that flexibility that is attracting more small-business borrowers these days.
We lent for dollars last year than we ever have in our 15-year history,” says Kathy Ricci, executive director of the Utah Microenterprise Loan Fund, a community-development organization in Salt Lake City that makes microloans. “We are seeing more people than perhaps a year ago could have gotten a bank loan, but because of the tightening of the credit market” now can’t.
Last year, the nonprofit lent out $1.2 million to small businesses, double the previous year, because of higher demand and an expansion of the lending limits in some areas to $25,000. from $10,000. So far this year, it has lent out $300,000. Its average loan size was $20,728. in 2008.
Mark Quinn, executive director of the Greater Newark Business Development Consortium, which provides financing to small business, says his New Jersey organization is now getting calls from small companies that have been in business for 10 or 20 years.
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