Microloans becoming a viable alternative

12/1/2011

Microlending has become an increasing popular form of providing alternative small business loans, helping thousands of company owners who would otherwise be shut out from capital or forced to take out high-interest loans, the Mercury News reports.

The issue for small business owners is that bigger banks typically don't have the time or resources to spend managing many small loans, and prefer to deploy a large chunk of money to two or three companies.

As the hunt for alternative lending grew, companies like San Jose, California-based Opportunity Fund benefited - the company has become the country's third largest microlender since its inception 16 years ago.

"The growth rate of microfinance around the world is astounding, growing faster than worldwide internet usage,'' venture capitalist Sean Foote told the media outlet.

And according to the Washington Business Journal, the microloan process may soon become simpler.

Chairman of the House Small Business Subcommittee on Contracting and Workforce Mick Mulvaney explained that in some cases microloans are "nearly as difficult to get approved as a million-dollar loan," which has led the Small Business Administration to enact changes that would simplify the process.