Alternative Methods Of Micro Financing

Alternative Methods Of Micro Financing :

       Alternative Methods of Micro Financing is a great way to finance your home.Micro loans are a part of micro-financing services, where financial assistance is extended to poverty-stricken individuals who lack steady employment, a decent credit history and are usually not considered as bankable. These loans are provided to the poor as a part of financial support so that these people can start a small business and can fend for themselves. Micro-credit is a global concept that was initiated in Bangladesh and pioneered by Mohammad Yunus, a 2006 Nobel Peace Prize winner. Currently, this concept is under operation in 43 countries.

       As a part of its large-scale objectives, United States Small Business Administration also operates a micro loan program. This is the largest federal program solely dedicated to support the credit needs of very small businesses and self-employed entrepreneurs. The micro loan program offered by SBA is intended to provide micro credit in the form of small amounts to newly-established businesses and start-up firms who are unable to secure credit through conventional banks.

        Under the micro loan program, borrowers can obtain credit up to a maximum limit of $35,000. However, the average loan limit is $13,000. These are low interest rate loans that are operated through a network of community-based non-profit intermediates. Under the micro loan program, funds are disbursed to these non-profit agencies through which borrowers can avail the credit.

        Micro loans are available to borrowers at convenient rates and terms. These loans are offered for a maximum term of six years at an interest rate of eight to ten percent. The terms of the loan are dependent on various factors including the size of the loan, purpose of the loan, end utilization of the funds and the requirements of the intermediary lender. Similarly, the interest rates over a micro loan also vary depending on the intermediary lender.

        Apart from lower interest rates and convenient terms, micro loan program offers a unique advantage. Borrowers taking credit through this program are provided with business-based training and technical assistance through the intermediary lenders. Many times, business owners must fulfill the training requirements before applying for a micro loan.

         Generally, the number of micro loan borrowers defaulting with their monthly payments is significantly low when compared to the conventional loan borrowers. Due to this fact, various lending agencies offer attractive benefits to those borrowers who pay back their loan amounts within the stipulated period.