"Imagine a large bank having to spend all those resources managing thousands of these different small loans," he says. "These big banks are looking to give a million or two or three. So if you have a food truck or a small alteration shop working out of your garage, you have to try other options."
Garcia says these alternative forms of financing often have a do-good element built in, so individual lenders can "do something right for people who need the money but are unranked or under-banked." That's industry lingo for an entire subculture of Americans with either no credit history, bad credit or a lack of financial literacy, a problem common among recent immigrants who easily fall prey to predatory lenders.
San Francisco-based nonprofit Kiva, perhaps the best-known microfinance outfit around, has mushroomed from a small lending project launched in a Ugandan village to become a powerhouse nonprofit, with 100 employees doing $100 million annually in loans to groups and individuals in 60 countries. In 2009, Kiva began domestic lending, partnering with Opportunity Fund in the Bay Area and other microlenders around the country.
CEO and co-founder Matt Flannery, 34, says that despite its growth, microlending in the United States faces different challenges than it does overseas. For starters, there are higher costs and more red tape getting a business up and running, he says. "These kinds of loans are really important," says Flannery, "and we need to make the system more efficient."
Rich Schlarb was a trucker in trouble when opportunity knocked. After starting his one-rig RLR Transportation in San Jose in 2006, Schlarb soon found himself swimming in debt from credit cards and other high-interest loans, including a nearly 15 percent truck loan from a local dealer. After his wife lost her job, Schlarb realized "that if I didn't reorganize all this debt somehow, we were going to be in serious trouble."
Securing a microloan for $45,000 took nearly half a year of vetting. But when he locked it in February, Schlarb was able to pay off the more onerous loans, then use his savings for deferred maintenance on the truck. "If it weren't for the microloan," he said, "I don't think our business could have kept going."
Two bay area stars of microfinance
Leader: Eric Weaver, CEO and founder
Staff: 43 employees, with 13 of them in the microloan program
Lending activity: To date, more than 1,700 small-business loans totaling over $19 million
Lending last year: provided 387 small business loans totaling $4.9 million; offers loans ranging from $500 to $100,000 at low, fixed interest rates
Offices: San Jose (main office, 111 W. St. John St., Suite 800), San Francisco (785 Market St., Suite 1700) and a lending office at Plaza Adelante in San Francisco's Mission District (2301 Mission St.)
For more information: www.opportunityfund.org or (408) 297-0204
Leader: Matt Flannery, co-founder & CEO
Lending activity: To date, $255 million to borrowers around the world
Lenders: Over 630,000 people have made a loan through Kiva
Borrowers: Over 660,000 have received loans through Kiva
Sphere of service: Kiva works with a network of 145 microfinance institutions in 61 countries, including the United States
Location: 875 Howard St., Suite 340, San Francisco
For more information: www.kiva.org
Source: Opportunity Fund, Kiva
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