As power is restored and cleanup is underway, the effects of Superstorm Sandy may seem to be waning. But, for small businesses located in the path of the superstorm, the consequences of the storm could mean lost equipment and inventory and depleted customers. For some small businesses, microloans and small grants have acted as a major contributor to their survival.
After the storm, JP Morgan Chase Foundation partnered with Accion, a microlending organization, to offer a Sandy Recovery Business Loan to small business who were hurt. Borrowers were not required to make payments until three months after taking out the loan, and JP Morgan Chase also provided borrowers with a grant the size of 15 percent of the loan.
The microloans made through the program are also processed in about 10 days, an important factor in the time-sensitive nature of small businesses. For one pie-maker in Long Island, his story detailed by Fox Business, the power outage caused by the storm depleted his supply of pre-made pies and desserts. Even after the storm, there were few customers in the mood for pies. The $10,000 loan and $1,500 grant allowed his business to stay afloat.
The growth of microlending in the U.S.
Microlending organizations, typically associated with developing countries, are now increasingly used by U.S. small businesses and for-profit banks, as opposed to non profit organizations. Lending smaller loans to businesses may seem unappealing, since they often require the same amount of paperwork and effort that million dollar deals have, but without the higher payments.
But, for businesses interested in making microloans to small business, especially businesses dealing with disaster or other unexpected situations, tools such as credit application software can give lenders the ability to make smaller loans while still keeping the costs needed to originate loans to a minimum, servicing both small businesses and lenders.