Microlending continues torrid growth

Jessica SarterSmall Business Lending

In recent years, certain types of loans have been far more popular than others, likely because of the economic conditions that have affected small business lending. Microloans have been among the most commonly desired and acquired forms of financing for small businesses, according to several recent reports.

During the most recent recession, a greater number of businesses were started than had been seen in more than 10 years. According to 2010 Kaufman Index of Entrepreneurial Activity, 558,000 businesses were in 2009, up 0.34 percent from 2008. This number was surpassed in 2010, as the Kaufman Index showed 565,000 new businesses started monthly that year, while dropping to 543,000 in 2011.

The Huffington Post cited this information in an article from June of this year, while it purported that people who lost jobs as a result of layoffs started a massive number of companies. According to the Post, 15 percent of entrepreneurs started a small business following unemployment, while the bulk of those were in the last 12 months.

It should come as no surprise, then, that microloans have been among the most popular choices of financing for small business owners. These loans are excellent choices for entrepreneurs who are looking to launch an operation, as they tend to have preferable rates and terms while not being viewed as high risk by lender or borrower.

The Associated Press reported this week that microlending has exploded over the last several years. Citing data from The Aspen Institute’s FIELD program, the source explained that microloan disbursement volumes increased 25 percent between 2008 and 2010. The AP noted that women entrepreneurs were the most common borrowers of microloans.

Further, the source purported that one reason for this rise in microlending – mostly fueled by new entrepreneurs – is because of the culture of micro finance. According to the AP, most lenders who offer microloans offer support far exceeding simple financing, such as guidance, training, classes for financial matters and mentoring.

This is true for microloans that are backed by the U.S. Small Business Administration, as well. The SBA notes on its website that all certified lenders of microloans have to offer the small business owner financial guidance, business planning support and more, giving new entrepreneurs a boost into the ins and outs of corporate ownership and operations.

Still, the source explains that finding any type of financing at the startup level is difficult for any entrepreneur. Though there are several support structures in place, especially on local levels, startup companies are most often viewed as more risky than those that have established a foothold in their respective industries.

This was evidenced by recent Federal Reserve data that showed mid-market companies accounted for a higher percentage of loan acquisitions in the last quarter of this year. Companies of this size seemed to be using the funds to expand operations, and were widely viewed by financial institutions as safer than their younger, smaller counterparts.

Still, reports from the Fed and other government agencies have made it clear that loan requirements of many financial institutions have eased, making it the right time to get the loan application process started.

One option small business owners and new entrepreneurs always have, no matter their location, is a service like BoeFly. This firm, sometimes explained as the “Match.com of small business lending,” uses complex algorithms to pair lenders with the borrowers that best suit their specific business’ needs.

Additionally, with more than 2,200 participating lenders and only one loan application required, small business borrowers can be sure they are getting the best results through the most efficient process.