Are Microloans Your Best Hope For Getting Access To Credit?

In 2006, the economist Muhammad Yunus won the Nobel Peace Prize for his role in founding Grameen Bank, an organization that provides microloans to women in Bangladesh who would not otherwise have access to credit.  In 2008, Professor Yunus founded Grameen America, which operates on a similar model to provide microloans to women in the United States.  All applications and pre-disbursement personal finance training sessions take place at the local level, and applicants receive loans in cohorts of five loan recipients.  Grameen America currently has locations in at least 14 U.S. cities, including Miami.  This means that a Grameen America microloan could give you access to credit for your small business if you do not have enough capital to qualify for a small business loan, or even if you do not have a credit score or a bank account.  If you have already moved on from your small business venture, or if you are still struggling with debt after receiving a microloan, a Boca Raton debt lawyer can help you find other solutions to your debt problems.

Microloans Can Help, but Only If You Do Not Spend Them on MLM

MDRC is a nonprofit research firm that evaluates the effectiveness of social policy programs.  It recently published a report on the financial situations of recipients of Grameen America microloans.  To be eligible for a loan, applicants must be women, and they must use the loan money to establish or expand a small business.  Many of the applicants own hair salons, small restaurants, e-commerce stores on Etsy, and the like.  Some of them, however, hastily joined multi level marketing (MLM) programs to sell products such as Mary Kay cosmetics and Herbalife dietary supplements around the same time as they applied for the microloans.

The report found that most of the microloan recipients were in a somewhat better financial position a year after receiving the loans than a control group of women who owned similar businesses but did not receive microloans.  An exception was the women who invested in MLMs.  By now, the secret is out that MLMs are disastrous to the finances of almost everyone who tries to base a small business on their products.  Kelsey Piper alleges that, by classifying MLMs as small businesses eligible for Grameen America microloans, the microlender is only enriching the MLM companies and not the loan recipients.

The moral of the story is that, if you are planning on founding a small business, but you do not qualify for a conventional small business loan, you have plenty of options for obtaining funding for your business.  MLMs, however, are relentless in their pursuit of investment by people who can least afford to spend money on risky business ventures.

Contact a South Florida Debt Lawyer About Microloans and Other Ways to Get Funding for Your Small Business

A South Florida debt lawyer can help you if you have ended up deeper in debt after accessing sources of credit that were meant to be low-risk.  Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.

Sources:

vox.com/future-perfect/2022/5/18/23058596/microloans-encouraging-women-multilevel-marketing-schemes-mlm

mdrc.org/sites/default/files/Grameen_36-month_Report_FINAL.pdf