Tight Credit, Microloans and Small Business

With lending from banks getting tougher for many small businesses, some entrepreneurs are turning to less traditional sources for financing.

The March 31 Wall Street Journal has an interesting article focused on microlenders, who are traditionally nonprofits that focus on boosting small businesses, particularly women and minority entrepreneurs in poorer communities and developing nations. But they are attracting more small business borrowers these days.

The Journal’s report highlights four developments. First, microlenders are lending more. Second, some are lending to businesses that have been around for a decade or two. Third, some businesses that have been around for some time “are using microloans to supplement financing from banks that are lending.” Fourth, those who lost their jobs are turning to microlenders to start up new businesses.

The piece illustrates both the creativity of entrepreneurs in getting the job done, and the ability of the market to adapt and find ways to meet demand, even in tough economic times.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council