Micro lending programs gain traction with small businesses

Micro lending programs are emerging as a response to the credit crisis for small businesses. Micro lending is most commonly associated with developing countries. But micro lending is on the rise in the U.S. as more small businesses are turning to micro lending when the bank says no. Micro lending programs could increase even more as a bill of borrowing for small businesses that would cut taxes and credit facility for small businesses stopped amid partisan feuding in the Senate.

Micro lending: welcome to the Third World, America
Micro lending - making small loans, usually for the poor - has been one of the most effective means of financing growth in third world countries. But then the U.S. economy has fallen and can not seem to arise. The New York Times reports that tight credit and recession have increased the demand for loans under the United States. Micro lending and microfinance are receiving attention are increasing in popularity. Kiva, which lent more than $150 million in 53 countries, began lending pilot program to business owners in the U.S. Grameen Bank -a micro lending program in Bangladesh which was started by Muhammad Yunus, who won the Nobel Peace Prize for his innovative work in micro lending - has also increased its lending to Americans.

Small business lending bill fails
Micro lending as measures to help small businesses, the U.S. Senate is sitting on their hands. Mr. Bloomberg reports that a bill addressing the lack of credit for small businesses died July 29 when the Senate Democrats do not get enough votes to consider the legislation. The bill would have provided $30 billion for banks with less than $10 billion in assets encourage lenders to small businesses. The cost of paying back the billions would be reduced to small business lenders such as their level of borrowing rose. It is estimated that the lender package could prime $300 billion in small business loans. But Republicans want to extend the grip of Bush's tax cuts for the project and said it would encourage more risky loans.

Micro Lending Success Stories
While the Senate hesitates, micro lending is scoring success stories. The New York Times tells the story of a restaurant owner in Silicon Valley who saved her business with a loan of $6,500 that she has three years to pay off and carries an interest rate of 6 percent. The Miami Herald reports that OUR MicroLending, a lender based in Miami, made 764 micro loans totaling $4.5 million. Their clients generally have fewer than five employees, with sales of $100,000 or less. OUR microloans range from $1,500 to $12,000 and average about $5,000. The average loan term is one year.