Small business startups in the U.S. are typically funded through owner savings, credit cards, family or friends. Bank loans are out of the question, and most Angel Investors are not interested in funding “concepts.” Of course, rarely does a small startup qualify for venture capital funding.
Small startups that cannot self-fund their business are out of luck—unless they can qualify for a “microloan.” The concept of microfinance has been around for some time…Kiva, Grameen, ACCION® International, “community” funding, and the Small Business Administration…are only a few of the organizations providing microfinancing for small businesses.
Microfinancing has grown in recent years, not just because it is a great help to poorer entrepreneurs, but because it is good business. For instance, in the last decade, ACCION partners have disbursed more than 28.5 million loans, totaling $23.4 Billion, to men and women entrepreneurs in 23 countries. The repayment rate of these loans stands at 97 percent—a far cry from the recent performance of Wall Street.
Now, more main-stream sources of funding are joining the microfinacing arena. I have previously posted about Super Angels, Community Development Venture Capitalists (CDVC’s), Open Source Funding, and the shift by Venture Capitalists to earlier stage funding. All of these sources are looking at startups, and many of them are offering microfinancing.
Of even greater significance is the interest being shown in microfinance by mainstream investors. Here is just one indication: ACCION® International—the private non-profit pioneer in microfinance—is sponsoring a conference in Washington D.C., September 21-23; to “…analyze next-generation microfinance investments for pension funds, family funds, and private wealth managers.” “…the conference will also assess the latest venture capital, or ‘frontier,’ investment initiatives in industries supporting microfinance.” Perhaps institutional investors are beginning to look beyond Wall Street for their investments
Could microfinance be for you?
If you are an entrepreneur wanting to start a small business—and you have no money, microfinace may be something to consider. The SBA Microloan program is a good place to start. Look at several other avenues for microfinance by searching the Internet for Microloans—there are many sources available.