20 Sites to Help You Get a Microloan for Your Small Business or Startup

This post was updated January, 2012

Hitting the wall trying to get financing for your business? If your monetary needs are small, these 20 resources can help you access the money you need to start or run your small business. There are options even where poor credit and few assets are an issue.

 

Since the recession peaked in 2009, a growing number of entrepreneurs and small business owners have been stepping away from the traditional business banking model. The trend, spurred by necessity as banks all but closed off the flow of business-related financing, has helped to generate the interest and buzz surrounding “alternative” financing models namely: microfinancing, peer-to-peer lending, and most recently, crowdfunding.

What follows is a list of twenty possible avenues of microfinancing for entrepreneurs and business owners. Many of these resources will provide access to financing even to borrowers who own few assets, have poor or no credit history, or those who are involved in a “high risk” concept.

Please note that I created this list with US businesses in mind, but many of these resources point to organizations that operate in several other countries as well.

Microlending for Small Businesses in the US

There are several microlending programs available to small business owners and entrepreneurs in the US. With microlending, funding is typically provided via community-based, nonprofit microfinance institutions. Though anyone can apply for funding, these programs tend to favor business owners working in rural or disadvantaged communities as well as those struggling with limited money or poor credit.

SBA Microloan Program. Through its microloan program, the Small Business Association (SBA) provides direct funding to designated non-profit intermediary lenders (typically community-based organizations) who then provide microloans to small business owners and entrepreneurs. With the passage of the 2010 Small Business Jobs Act, SBA microloan program was expanded; now the loan limit is $50,000 (up from $35,000).

The maximum term allowed for these loans is six years, with interest rates ranging between 8 and 13 percent. They do have some restrictions on use, however. While they can be used for a variety of purposes including the purchase of inventory, equipment, supplies, and furniture, the money cannot be used to cover debt or make a real estate purchase. For a list of participating microlenders by state, see this document.

Accion USA. Accion USA is one of the largest microlenders in the US. It’s a microfinance community organization that offers small business loans up to $50,000 as well as business consulting to small business owners who are unable to secure traditional financing. Interest rates are competitive, there’s no fee to apply, and you can even apply online.

Kiva. Kiva is an international organization dedicated to fighting poverty. It operates a peer-to-peer lending Web portal where small business owners and entrepreneurs apply for loans by posting their stories online. Borrowers are not required to offer collateral. Those interested in investing make donations of $25 or more. The funds are then pooled till the total amount is reached and are subsequently distributed to the borrower via local microfinancing institutions. Kiva just recently entered the US, with its headquarters based in San Francisco.

Communities at Work Fund. In May 2010, global financial services company, Citi provided $199 million of capital in conjunction with Calvert Foundation and Opportunity Finance Network to establish the Communities at Work Fund. The program offers loans to Community Development Financial Institution (CDFI) loan funds that finance small businesses in addition to community service organizations in under-served communities.

In addition to the above platforms, business owners can also try locate a local microlender through search portals such as the Microfinance Gateway or through the Association for Enterprise Opportunity.

Commercial Peer-to-Peer Lending Resources for US Small Businesses

Unlike the microlending programs mentioned above, when it comes to commercial peer-to-peer lending, only borrowers with good credit need apply. Those who can access this form of microlending will enjoy good interest rates on unsecured financing and avoid all the processing, requirements, and fees associated with traditional business loans.

Lending Club. Business owners with a credit score of 660 or higher should definitely give the Lending Club a try. After a loan request is made, individual investors make small investments of $25 or more till the full amount is reached. With Lending Club borrowers can get a personal loan up to $25,000 payable in three years with fixed interest rates that are often better than those charged by traditional lenders. Borrowers can apply online for free, and get a quick approval. Upon approval financing is typically received within two weeks.

Prosper.com. Like Lending Club, to borrow at Prosper, business owners must have a good credit score- 640 or higher. Prosper.com just modified the way it connects lenders and borrowers. In the past, lenders would make bids and compete, auction style, for borrowers by offering the best interest rates. Today, Prosper operates much like Lending Club, offering personal loans up to $25,000.

Crowdfunding Sites for Small Business Owners and Entrepreneurs

In the crowdfunding model, the online collective pools together money in support of a project or organization. In this case, the borrower’s credit rating is not the main factor determining whether funding will be achieved. Instead, significant emphasis is placed on the borrower’s online reputation in addition to the idea behind the funding request. Unlike more traditional forms of business financing, the money raised through crowdfunding is not directly repaid. Recipients instead may offer their investors a specified item or service in exchange for their pledge of money.

Kickstarter is perhaps the most well-known crowdfunding site, but several other services exist. Not all of them are free, however. Many will charge a fee on the funds collected (usually around 5%) as well as third party processing fees, so make sure you do your research before submitting a request for funding.

Here is a list of the current top crowdfunding sites for small business owners:

-Venture Socially- Offers several tools and features to help pitch your project to the masses.

-33needs.  Provides crowdfunding for social entrepreneurs, social enterprises and businesses with a social mission.

-MicroVentures. Targets businesses that are creating technologies, products and services in areas, such as business products, consumer products, electronics, and online technology.

-Quirky. Offers product designers and inventors the chance to bring their products to market.

-FansNextdoor. FansNextdoor is a platform for all creative professionals to promote and fund their projects together with their fans.

-Cofundos. Crowdfunds open-source software projects.

-Indiegogo  Submit any kind of project: creative, social, or entrepreneurial, and get the tools and platform you need to raise funds.

-Growvc A global marketplace for startup funding.

-Rocket Hub. RocketHub is a community for “creatives and fuelers.”

-Peerbackers. Peerbackers is for business owners to raise capital from their peers

Bottom line: with a little persistance, small business owners and entrepreneurs of all walks of life can use various microfinancing platforms to get the capital they need to start and run their businesses.

 

Comments

  1. says

    Wow, this article is so great. Adam, please do you have any sites fund for Ghanaian start-ups ? Its so difficult to find much detailed fund in Ghana, can you direct me ?? Thank You and hope to hear from you soon.

  2. says

    Hi Adam! That’s a great collection of sites you mention.

    I’d just like to add our own crowdfunding site – Go Get Funding (http://gogetfunding.com). We launched in late 2011 and have helped individuals and businesses raise several thousands of dollars so far. We continue to grow thanks in part to our innovative social features.

    Also, just a note that Profounder (mentioned in your article) is now shutting down.

    All the best!
    Sam

  3. says

    Well, I live in Greece and, if you’re following just a little bit the international news, you should know that it’s not Nigeria — but it is not a “Western Europe” country in the strict sense of the term.

    We’re having this huge financing problem, a great recession going on, and things are getting uglier every day. I really could use a loan to help me write a book and set up a language-learning website (you can read some of it in my blog post below).

    Am I eligible for microfinancing? Which site should I address to get funding?

  4. says

    Thanks for your prompt reply, Adam.

    Unfortunately, as I understand it, this is an institutional channel involving banks, etc — I was thinking strictly crowdfunding, you know, people for people, not banks for interests.

    Anyway, thanks again…

  5. says

    Hello Adam! Great collection of sites you’ve shown.
    I want to start an on-site (mobile) oil change business here in Kansas City, But I have not found anyone to invest in my idea. My reasoning: One, I have no credit history and Two, I have a felony conviction from more than ten years ago. Given the opportunity this WILL be a very successful business because I have a LOVE for this kind of work, determination and will to make it succeed. I also love helping others, My business model will be to serve those in the community that are in need. I just need the funding to go for it! without the collateral punishment. Can you guide me in finding individuals who would be interested in this type of venture?.
    Sincerely
    Sean Bonakies

  6. Adam Gottlieb says

    Hi Sean,

    If you can scrape together the money to start up- even if you have to start up operations on a smaller scale, then you could try asset-based financing later on (ie when you actually have some revenue). I would suggest getting a business cash advance based on either credit card sales alone or your entire revenue stream.

    See this post for more info:
    http://frugalentrepreneur.com/2012/10/confused-by-alternative-finance-10-types-of-alternative-lending-explained/

  7. says

    Dear Adam,
    I am a tanzanian and with my three partners have managed to open a microfinance unit which act as a bridge to helping those people with no access to normal banking as they require collaterals which they dont possess. We started with our small capital and we have already issued some loans to especially small womens groups whoc could not access the banking system.
    But we are limited with fund to provide more loans and on behalf am seeking your opinion and idea which will help getting a cheaper finances which help reach these people in rural areas.

  8. Steve says

    I really enjoy reading your article. Could you please suggest to us links of micro lending institutions for start ups in Ghana?

  9. Sally says

    Not sure if any of these sites, besides the peer to peers, allow the lenders to charge interest; do you know?

  10. says

    It’s really helped all the new owners to grow. All the sites have very good information. After studying the statement the owners can easily get the finance so that they can invest in their business .
    Small Business loans

  11. says

    Hey there this is kinda of off topic but I was wondering if blogs use WYSIWYG editors or if you have to manually code with HTML.
    I’m starting a blog soon but have no coding skills so I wanted to get advice from someone with experience. Any help would be enormously appreciated!

  12. says

    It is actually a great and helpful piece of information.
    I am glad that you simply shared this helpful information with
    us. Please keep us up to date like this. Thank you for sharing.

  13. says

    Hi, I do think this is an excellent blog. I stumbledupon it ;) I will revisit
    once again since I book-marked it. Money and freedom is the best way to
    change, may you be rich and continue to guide others.

Trackbacks

  1. [...] Tools for small business microfinancing. It’s perhaps interesting that at the same time small business financing has become tight from traditional sources there has been an explosion of microloaning sources for small business, many of the Internet. Check out this comprehensive list of sources to see if one might be right for you. The Frugal Entrepreneur [...]

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