Opportunity Fund is a non-profit microlender based in the San Francisco Bay Area. It is currently ranked as the third-largest microlender in the U.S. and is doing its part to help microfinance grow in this country. However, it and other microlenders are facing increasing competition from pawnbrokers and establishments offering payday loans and check-cashing services.
According to Opportunity Fund spokesperson Caitlin McShane, business owners are pawning their belongings and becoming indebted to loan sharks just to keep their enterprises afloat. The situation is bad and this is the competition her organization faces. Though the microlending industry is growing rapidly, it is not as well-known as these alternatives.
University of California-Berkeley professor Sean Foote reported that microfinance is growing faster worldwide than Internet usage. It is one of the newer trends in the U.S. but the market is huge. There are currently approximately 25 million unbanked U.S. citizens who do not have access to credit. Small businesses are increasingly turning to microlenders for alternative financing.
The self-employed and people with limited access to services offered by traditional banks are supported by microlending. Business owners without credit can receive microfinancing if they are able to illustrate the demand for their products or services. In the Bay Area alone, microlenders have assisted a cupcake vendor, empanada business, robot company, and a dry cleaner trying to become more eco-friendly. Funding from banks, individual donors, and foundations makes this possible.
Banks view small loans as difficult to manage and payday loans feature high interest rates. Alternative financing like microlending helps people who have bad credit, no credit, or little financial education. To keep financing costs low, small business owners should explore this alternative funding source rather than paying a visit to their local pawnbroker. They will be helping an industry that is designed to help them.
