Large Banks Decrease Microlending Opportunities

A recent opinion poll by Small Business Majority, Main Street Alliance and the American Sustainable Business Council found that “90 percent of small business owners believe the availability of credit is a problem, and three in five say it is harder to get a loan now than it was four years ago.”

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The larger banks have pulled back on loans under $250,000. The problem is the small loans cost about the same in transaction costs as a $1 million loan. So if traditional banks aren’t lending where can small businesses find funding to run their businesses and help with cash flow?

The answer is to look for alternative lending sources, such as microlenders and community development financial institutions (CDFIs), including community development credit unions.

“90 percent of small business owners believe the availability of credit is a problem, and three in five say it is harder to get a loan now than it was four years ago.”

Microlenders/CDFIs often make loans under $50,000. These loans include those financed by the Small Business Administration Micro Loan Fund, USDA Rural Development loans and community development loans by local governments, banks and donors. Microlenders place more emphasis on cash flow than collateral, and give more weight to the character of the borrower.

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