CARTOONS BY CHRIS BRITT

ADVANTAGES
Less strict qualification. It can be easier to obtain a microloan when you have less than
stellar credit or insufficient business experience. The lender will look at your character as
a borrower more closely than a regular bank would.
Limited borrowing amounts. These can be great starter loans because the dollar amount
is smaller. There is less risk and a higher likelihood the lender will be repaid.
Favorable rates and terms. Because most of these loan programs are local in nature
and created through grant funded revolving loan programs designed to strengthen
communities, you are able to get better rates and terms than traditional bank financing.
DISADVANTAGES
High costs. In order to cover the costs of administering the loan, microlenders need to
charge more despite the loan amounts being smaller. It basically costs just as much to
issue $1,000 as it does $100,000.
Stricter criteria. The revolving loan funds can be subject to certain requirements on
which businesses qualify, how much they can lend and even where they can lend.
Potentially higher interest rates. Depending on your business qualifications, microloans
can charge rates above normal bank financing.
MICROLOAN EXAMPLE
OlyKraut is​ a ​small, ​woman-owned​,​gourmet sauerkraut company in Olympia​, WA​
that began in 2008. Early on, the owners took advantage of training ​from Enterprise
for Equity that led to microloan funding for ​expansion. Enterprise for Equity, offers a
full menu of business training, technical assistance and support services to low-income
entrepreneurs. The owners started their small enterprise on a shoe string and once their
product became popular, used two consecutive microloans under $10,000 to expand
production with a kitchen upgrade and some additional equipment. They recognized
that honoring their values by sourcing locally, using only organic ingredients and paying
their employees well would give them an edge in the market. The infusion of cash was
vital to the company’s success and enabled them to grow. In 2009, they purchased 1,400
lbs. of cabbage from local farms,​ ​and in 2015 that number reached 50,000 lbs and that
number continues to grow. The amount of local produce purchased as a measure of
success is as important to them as the financial bottom line.
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