|
Rates, costs and terms to expect
when looking for micro-loans
By Jay
MacDonald • Bankrate.com
 It
is tempting to liken microloans to snowflakes: No two are alike.
The industry prides itself on helping struggling
micro-entrepreneurs survive and prosper on a case-by-case basis.
However, some general lending parameters exist.
Here are some of them:
ACCION
International offers more than 300 different loan programs ranging
from $500 to $25,000. Those in dire straits -- no or poor credit
history, limited business experience, little collateral -- my qualify
for subsidized loans at 3 percent to 5 percent interest. The more
typical borrower can expect to pay near-market rates of between
12 percent to 16 percent. Terms generally range from 3 months to
24 months, and often include business training classes and other
forms of assistance.
"We want to be below loan sharks and credit cards, but we also want
to provide incentive for the borrowers to work themselves into the
formal financial sector," says ACCION's Livingston Parsons III.
"Most of the programs offer incentive pricing, so if a person has
a good repayment history, their rate will drop."
The Foundation
for International Community Assistance (FINCA) hopes to reach
100,000 borrowers throughout the Americas by the end of 2001. It
makes U.S. loans of $500 to $6,000, much higher amounts than in
the rest of the world, where the average FINCA loan is $145. Generally,
FINCA charges 3 percent to 4 percent per month for its loans. Most
of FINCA's funding comes from the U.S.
Agency for International Development.
For a state-by-state listing of U.S. microcreditors,
log on to the Association
for Enterprise Opportunity Web site.
For a list of Community Development Financial
Institutions (CDFIs), visit the CDFI
Coalition Web site.
Jay MacDonald
is a contributing editor based in Florida
--Posted: Oct. 13, 2000
|
