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Loans for the little guys

'Microlending' evokes programs to aid high-risk entrepreneurs abroad. Why it may show up on your street.

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Starting a business was the last thing on Jason Salfi's mind in 1996, when he sat on a dock in Sausalito, Calif., and started making "long board" skateboards.

All Mr. Salfi wanted was a board to replace the outdated 1970s model he'd been using, which, he recalls, "was just a big oak plank."

Little did he know that he was on the way to becoming a "micro- entrepreneur" success story - joining the ranks of a growing number of Americans who have become part of a "microenterprise" movement

The movement is based on grass-roots financial principles developed in the 1960s to help the poorest of the poor start their own businesses in third-world countries. America's microenterprise sector boasts an array of entrepreneurs, including immigrants, women, senior citizens, and small inventors.

"It's amazing who's involved," says Mark Cousineau, executive director of the Connecticut Community Investment Corp., a nonprofit microloan lender. "It could be your neighbor. It could be you."

Small microlending programs, run by churches and other socially active organizations, have been around in the US for at least the past 20 to 30 years.

But the movement didn't begin to formalize until the early 1990s, when several programs took shape. For example, the Small Business Administration's microloan program, which has loaned some $200 million since it began in 1992.

For lenders, a high-risk

According to a 2000 study commissioned by Accion USA, a nonprofit organization and the largest microlending network in the US, there are some 13.1 million microentrepreneurs across the country.

By definition, a microentrepreneur runs a business with fewer than five employees, has a strong personal involvement in the business, and likely has no credit record or assets.

Microenterprises generally require less than $35,000 to launch, and microloans usually run from $500 to $50,000.

Banks routinely reject loan requests from such businesses because the costs involved are too high and the returns too low, leaving many would-be entrepreneurs locked out of the traditional financial system.


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