 TITLE: What Is Microlending? CONTENT: How Does Microlending Work?\n---------------------------\nThe concept of microloans emerged in the 1970s when Muhammad Yunus, an economics professor in Bangladesh, started looking for a way to help people escape poverty. He lent $27 to a group of women who owed money for materials they used to make and sell stools. The small loan was enough to help them get out of debt and transform their stool manufacturing operation into a profitable business.\nBoth overseas and in the U.S., microloans are typically made by nonprofit organizations. Because microlending is designed for small business owners who can't get credit elsewhere, loan terms and lending criteria are usually more flexible than those for typical business loans. To increase borrowers' odds of success, microlenders may also offer them business services such as mentoring, technical assistance, networking opportunities and assistance with sales and marketing.\nThe best-known U.S. microlending program, the SBA Microloan Program, provides loans of up to $50,000 for small business startup and expansion. Loans average about $13,000 each and can be used for working capital, inventory, supplies, furniture and fixtures, machinery and equipment. They can't be used to pay existing debts or buy real estate.\nSBA microloans are administered by community-based nonprofit organizations that serve as intermediaries for the agency. Each of these lenders has its own criteria for loan applicants; however, most require you to put up some collateral and personally guarantee the loan. You can find SBA microlenders in your area through your local SBA District Office.\nAlso consider these popular microlenders:\n*   **Kiva** lends U.S. small businesses up to $15,000 at 0% interest. Fill out an application online and, if you prequalify, you'll have 15 days to invite friends and family to finance you on the Kiva platform. If you're successful, your request is promoted to Kiva's 1.6 million lenders worldwide for 30 days.\n*   **Accion Opportunity Fund** offers loans ranging in size from $5,000 to $100,000 for entrepreneurs who have been in business at least 12 months, own at least 20% of the business, and generate $50,000 or more in annual sales. Loans are customized to your needs; you can also receive business education, coaching and access to support networks.\n*   **Grameen America** is an offshoot of Yunus' Grameen Bank that provides microloans of $2,000 to $15,000 to women who live below the federal poverty line. Women form groups of five, open commercial bank accounts, and receive financial training before getting their loans. They have six months to repay the loans, during which time they receive ongoing support. Once the loan is repaid, borrowers become eligible for larger loans. END