Micro Enterprise Lenders

Building Small Business in

our Communities

Association for Enterprise Opportunity

AEO is the national trade association for Microlenders.

AEO has over 400 member organizations across the United States.

Website at:

www.microenterpriseworks.org

What is Micro Enterprise Lending?

Micro enterprise lending is an income generating strategy that helps low-income people start or expand small businesses.

Goals:

To develop increased income and assets

for Micro entrepreneursTo build local economic development by

increasing job opportunities for

customers

Characteristics of Micro Enterprises

Primarily sole proprietorships

Small scale loans – typically up

to $35,000

A Typical Microlender

Characteristics:

Supports smaller scale loans

Serves 200 people per year

Makes an average of 50 loans per year

Has a portfolio value between $500,000

and $600,000

Services provided by Micro Enterprise development organizations

Training and Technical Assistance Before loan services

Help the customer define and clarify:Business visionBusiness planTarget marketPricing strategy

Services provided by microenterprise development organizations

Graduation and Follow-up ServicesPost loan services

Assist entrepreneurs success:LicensingSoftware ApplicationsMarketing

Available CapitalTwo Common Loan Models

In-House Loans Provide loans directly to entrepreneurs

Loan Pools Have special loan pools set up with

banks that lend funds

Types of Loans

Individual LoansLoans range from $500 - $35,000Given to an individual or an individual

business

Peer Group LoansLoans range from $500 - $750Short-term loans of less than one yearOnce loans are repaid, the borrowers

can go on to borrow larger sums

What to look for in a MicrolenderLook for a Microlender that will: Understand the customer’s need for

credit planningQ: What credit planning does the lender provide the customer?

Provide training and follow-up services

to borrowersQ: Does this Microlender help develop business plans and other skills needed for a business?

Does it help assess whether self-employment is the right option for the customer?

What to look for in a Microlender (Continued)

Look for a Microlender that will:

Make good loansQ: What are the loan policies and underwriting guidelines? How are loans assessed? Do they provide credit counseling?

Manage portfolios wiselyQ: How is risk assessed? What is the default rate?

Evaluate outcomes and successesQ: What benchmarks guide the program?

What AFPs and Telework loan programs bring to MicrolendersThe opportunity to reach people with disabilities

Clients with disabilities who are well- prepared and motivated customers

Credit enhancement tools, such as loan guarantees

Resources:Association for Economic Opportunitywww.microenterpriseworks.org

Abilities Fundwww.abilitiesfund.org