While many entrepreneurs turn to traditional bank loans when they work to start a corporation, Business Insider says microfinancing can help many business owners get the money they need.
The site says that lenders – called community development financial institutions – will provide loans of up to $35,000 to people unable to get credit, and some will lend up to $200,000 to small businesses. CDFIs have seen a strong boost in interest recently. The number of new loans at CDFIs at the end of 2009 was up nearly 70 percent compared with the year before.
Business Insider says most microfinancing lenders have very different lending criteria compared to traditional banks. While they will still look at a business owner’s credit score and cash flow predictions, other factors like relevant industry experience can also be part of the loan process.
The site says that entrepreneurs looking at CDFIs for credit should try to bring as many records as possible, including bank statements, balance sheets and business plans. The site says that even if the CDFI isn’t ready to grant the loan right away, they will often look for ways to help the business owner move forward.
President Barack Obama has also continued to urge Congress to pass a number of proposed laws to help small businesses, including a $30 million loan fund and a $20 billion fund for state programs encouraging private banks to distribute loans.
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