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Loans for the little guys

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Microenterprise lenders are filling this gap. These nonprofit institutions use private or government funds, or a mix of both, to help the smallest of small entrepreneurs who would otherwise have no access to capital.

Microlenders charge interest rates higher than those charged by banks - around 12 percent to 16 percent - but they also provide technical assistance in how to plan, market, and manage a business.

"We're really providing a hand up to people who are on the bottom of the economic ladder," says Christianna Beebe, director of communications for Accion USA. "The building blocks that so many of us consider fundamentals, such as savings, insurance, and assets, are out of reach for many of these people."

In Salfi's case, his business grew gradually out of making skateboards for his friends. He built "long boards," designed to bomb down hills at speeds as high as 65 m.p.h. As word spread about his product, he began selling a few to San Francisco stores, eventually starting Comet Skateboards with his best friend, Jonathan Reese.

"We financed it with money out of our own pockets, we had a couple of thousand dollars," says Salfi of the business's early days. "We'd be excited if we sold 20 boards ... in a month."

With a small loan from a friend and a credit card borrowed from a girlfriend, the two gradually grew the business up to two employees and sales of 50 to 60 custom boards a month, plus another 200 to 300 made for other manufacturers.

But when they were ready to expand again in 2001 and needed money to do so, they ran smack into the problem faced by most microentrepreneurs: They were turned down by a bank for a loan because they didn't have enough of a credit history or enough assets in their business.

A nonprofit's help

Through the grapevine, Salfi heard that the nearby city of Oakland was offering tax incentives to businesses willing to relocate there.

In addition, when he called the Oakland Business Development Corp., a nonprofit group contracted by the city to administer loans and aid to small businesses, he learned that microloans were also available.

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