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    8 Replies Latest reply on Jul 4, 2009 6:02 PM by Iwrite

    Why can't Micro Loans work?

    Iwrite Pioneer
      I am seeing the advertising campaign for Kiva, an organization that funds micro loans in less developed countries. And I can't help but wonder, why can't this work here in the USA? Certain states like California, Wisconsin and Pennsylvania have programs, President Obama mention the need to include micro loans in the stimulus package.

      So, where are the micro lenders?

      I read post after post about how people need money and it isn't large amounts, but they can't find the money. Why not consider micro loans? Instead of asking people for one large sum, see if they would be willing to contribute smaller amounts that help you get to your goal?

      Micro Lending sounds like such a great idea, I can't figure out why it is not catching on here?

      Can someone explain to me why Micro Lending is not more widespread here in the United States?

      I don't need an explanation of what Micro Lending is, I know what it is.
        • Re: Why can't Micro Loans work?
          LUCKIEST Guide

          Why can't Micro Loans work??

           

          Iwrite, Have you ever worked with the SBA?? I have in N Y

           


          The Microloan Program provides very small loans to start-up, newly
          established, or growing small business concerns. Under this program,
          SBA makes funds available to nonprofit community based lenders
          (intermediaries) which, in turn, make loans to eligible borrowers in
          amounts up to a maximum of $35,000. The average loan size is about
          $13,000. Applications are submitted to the local intermediary and all
          credit decisions are made on the local level.

           

          At first glance, the goal of microlending is exciting and innovative: By making small loans to help impoverished people start small businesses, microlenders appear to turn those who are marginalized by mainstream banks into successful entrepreneurs.

           

          Like any other development strategy, microlending for the purpose of
          developing small businesses is a complicated endeavor that requires a
          localized understanding of the particular economic, cultural, and
          social factors affecting entrepreneurial success.

           

          Microfinance, when defined as a one-time infusion of capital to a
          start-up business which results in a profit for the microlender, is too
          good to be true.

           

          In other words. Micro Lending is out there. The amounts are small and the number of loans approved is even smaller.

           

          LUCKIEST
            • Re: Why can't Micro Loans work?
              Iwrite Pioneer
              I know it is out there but it is very seldom discussed. I'm trying to figure out why not.

              I also know it works and that the SBA offers them.

              With a little work I found a list of non-profits that provide micro loans in the states but I'm trying to figure out why it isn't mentioned here with all the people looking for funding?

              I am trying to suggest another avenue to people who do not need large amounts of money.

              Also, for those of us who are looking to invest or be an angel, why not look at starting a micro lending entity? Like you said it requires an understanding of a community and local investors have that and could pull this off.

              I'm just curious and thought I would see what the forum thought.
                • Re: Why can't Micro Loans work?
                  DomainDiva Ranger
                  As with any money lending venture...it's all about being paid back...not doing anything good by loaning money.
                    • Re: Why can't Micro Loans work?
                      LUCKIEST Guide
                      Why can't Micro Loans work?

                      Not really a micro loan , BUT a Cash Advance Loan?

                      A Cash Advance Loan is a short term payday loan designed to provide you
                      with the cash assistance you need to bridge the gap until your next payday. All
                      to often people are faced with unexpected circumstances that result in unexpected
                      expenses. Even more too often people are not financially prepared for those unexpected
                      expenses.

                      There are absolutely no credit requirements to apply for a personal payday loan. Virtually
                      anyone can get approved.
                      You can get your approval instantly with a click of a button.

                       

                      So, if you are in need of some extra cash advance a bad credit unsecured payday loan might just be the simplest solution
                      to your problems.

                       

                      LUCKIEST
                      • Re: Why can't Micro Loans work?
                        oldmoneymaker Newbie
                        I went to apply yesterday. And the first thing to come up was we don`t work with people in real-estate. So go away. On the other hand if you want to throw away money on another failed resturant were in for that. Knowing resturants have the highest failure rate of any buisness. They should stick to buying pots and pans for some little old lady cooking to feed orphan`s in an impoverished country. In this country the local and state regulations will eat you up. The poor man hasn`t got a chance anymore in this country. I think the republican`s made sure of that.
                          • Re: Why can't Micro Loans work?
                            Iwrite Pioneer
                            A pay day loan is not a micro loan - the interest is high. They also don't help you build credit.

                            Yes, making sure they pay back the loan is a huge concern but the idea is to help those who can't get funding from traditional sources.

                            Yes, the present model of lending does favor those who have businesses with material assets, which is what makes the micro lending idea so attractive. It takes into consideration factors other than credit scores and assets - they are suppose to be more flexible in their lending.

                            I am still confused why micro lending can't work in the States? I mean, how many of us would be interested in a program that provided smaller amounts of funds?
                    • Re: Why can't Micro Loans work?
                      phanio Pioneer
                      One of the largest Micro-lenders in this country is ACCION USA - who has recently teamed up with Kiva. ACCION USA provides start-up loans up to $30K and loans to established businesses up to $50K. ACCION USA does not cover every state but has partners that it works with in these other states.

                      One of the issues with Micro-Lending is that they are also required to provide the business owner with business training. I think this stops a lot of borrowers who just want the money and not willing to take the time to do the training.

                      Also, most micro-lenders are non-profits and rely on dontations for their funds (for their operations and their loans). I think this holds back many of these organziations here in the US.

                      What I would like to see is banks (traditional banks) start mimicing these micro-lenders. Provide small loans and work with the borrower. Once the borrower pays that loan back - work on another (higher amount loan). This will truely make banking and small businesses into a long-term partnership.

                      By the way - I talk about micro-loans all the time here.

                      Business Money Today
                        • Re: Why can't Micro Loans work?
                          Iwrite Pioneer
                          My bad, I missed those posts but I'll go back and seek them out.

                          I think the credit unions can do it more easily than the banks. I really don't believe that the banks care to help this economy, they seem detached from the reality of the situation despite the fact that they have just come through an economic nightmare. I worked on accounts for two major banks, and in those meetings they actually said they weren't interested in depositors with balances of less than a million dollars. I still don't think they get it. Bank of America has this forum but they really don't work with small businesses unless they are established.

                          What you are talking about is a model change for the industry and the first one to do it will reap some great benefits. I also suggested it when I first got on this forum. I think Mark Cuban recognized this with the effort he was trying to do. Too bad other big money folks didn't follow suit.