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If you are like many people with an idea for a profitable business, you hit a  brick wall when you try to get a small business loan from a bank. Perhaps you  don’t have a great credit score, or you haven’t been able to establish any  credit record at all. Maybe you don’t have a lot of education or a business  track record. You may not even have a bank account, much less a personal  relationship with a banker.
It is a painful experience to be ignored or rejected, especially when you  know you have a good idea and the motivation to make it work. Fortunately there  is an alternative to bank lending that has emerged over the past decade in the  United States: Microfinancing. Microfinance Institutions (also known as MFI’s)  provide small loans and other helpful services to businesses and individuals who  find it difficult or impossible to get financing through traditional means.  Originally limited to developing countries, there are now a number of these  lenders in the United States and Mexico–and the trend is growing.

MFI’s differ from banks in that they exist to help people who can’t get  funding through the usual financial institutions. They know that not being able  to meet a bank’s requirements doesn’t mean you can’t be successful. In addition  to loans they often provide business counseling, advice, and ongoing support to  help establish and grow your business. Each MFI operates a little differently  and has its own policies regarding eligibility and the timing and method of  repaying your loans. While they typically don’t insist that you have a bank  account, credit record, collateral or someone to guarantee your loan, they may  require that you join a small group to receive training and counseling. Loans  must be repaid according to agreed terms and schedules. Once your initial loan  has been repaid, you may be able to get additional loans to grow your business.  Loan amounts differ among MFI’s but may range anywhere from $500 to as much as  $100,000.

Some of the better known Microfinance Institutions in the United States  include Grameen America and ACCION U.S.A., both of which operate nationally.  There are also regional organizations such as The Opportunity Fund for those in  California, and CASH (the Community Alliance for Self Help) in Seattle.

Another exciting development is the creation of non-profit groups formed to  allow individuals to make donations which are pooled together to increase the  funding available for micro-lending. One such organization is KIVA in San  Francisco. Donors can search through descriptions of actual borrowers and  businesses all over the world (including the U.S.) and make loans of as little  as $25 to a specific individual. As the loan is repaid, the donor receives  credits which can then be reinvested, donated, or cashed out.

Whether you are seeking a small business loan or you would like to support  borrowers, there are organizations ready to make your transaction a painless —  and even uplifting — experience.

About Author: N.S. Jenks has an MBA with extensive business and marketing experience, and has also played a major role in many professional and volunteer fundraising successes. Jenks is passionate about creative financing and has done extensive research in the areas of grants (government and private), scholarships and alternative funding sources.

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