Microloans becoming growing source of capital for minorities and women in the US

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From Madame Noire Business: For years, microloans have provided a gateway to self-sufficiency for the poor around the world. Now increasing numbers of entrepreneurs here in the U.S. are taking advantage of these small loans to finance their businesses.

“Microloans tend to range from $500 to $10,000, but can be as much as $50,000, with interest rates varying from three percent to 18 percent,” explains the Associated Press. With shrinking access to credit and banks denying many small business loans, microloans are an alternative. For some groups, like minorities and women, it’s one of the few alternatives.

According to Jason Riggs, communications director for Kiva, microloans play a “pivotal role” for some small businesses, providing not just funding, but also financial literacy training and other services. Kiva is a nonprofit organization founded in 2005 that has issued $341 million in loans over the past seven years. It’s also worth noting that Kiva has a nearly 99 percent repayment rate.

“You don’t see larger banking institutions providing these sorts of loan services with the loans,” Riggs adds. “This is ultimately why microloaning is so important. It provides the means, skills and education to be successful.”

Riggs pointed us to some research published in 2011 by the Association for Enterprise Opportunity, an organization that specializes in “microbusiness initiatives” to help what they call “underserved entrepreneurs.” According to that organization, there are 25.5 million “microbusinesses” (defined as companies with zero to four employees) in the U.S. Those businesses provide millions of jobs and give entrepreneurs the opportunity to vastly improve their financial fortunes. Still, many small business owners struggle. Seventy percent of U.S. businesses have revenues of $100,000 or less. For women-owned and black-owned businesses, that figure goes up to 87 percent.

Read the rest of this story on Madame Noire Business.