Backgrounder
Today I’m going to ask you to use your imagination and dream a little.
Imagine that you have the opportunity to borrow a small amount of money. Then think about how you could use this money to improve your business.
If you are a farmer you might want to consider planting a new crop. For example, if you grow potatoes, you could buy and plant seeds of another crop which can be harvested earlier or later than the potatoes. This is a way to earn more money and earn it at a different time of the year.
Or you could use the loan to buy a cow or another kind of livestock. If you buy a cow you can use some of the milk to add nutrients to your family’s diet. And you can sell the rest of the milk to make some money.
Maybe your business is selling fruits and vegetables at the market or by the roadside. One way to improve business would be to build a stall or a small shed to shelter your produce from the rain and the sun.
If you are a dressmaker some borrowed money could buy you some beautiful new materials. If you are a carpenter you could buy some new tools. A new tool could help you work faster and produce more goods to sell in a shorter time. Whatever your business may be, having some extra money can be helpful because it gives you more bargaining power. If you are paying with cash you can choose to buy the products you need from the person who is asking the lowest price. Also, you can buy a lot of goods at one time which reduces the price per item.
If you don’t have a business or a steady income, a loan could help you start a business for the first time. You could keep some small livestock or do beekeeping. You could start a small soap-making business. You could become a shoemaker. The possibilities are endless.
But now, think of your own situation. Does it seem unrealistic to think of borrowing money? Unless you already have some money saved, getting a loan is usually difficult, if not impossible. Most banks won’t lend you money unless you already have some money, land, livestock or something else of value that you agree to give them if you can’t pay back the loan.
But this is not true of all banks. In some places there are banks that will lend you money even if you have nothing. That’s right. These banks don’t require that you have some land or livestock or an expensive house before you can borrow money. In fact, sometimes, the poorer you are, the more willing they are to lend you money. These banks know how important your business is, even if it is a very small business. And they know that you can be trusted to pay back the loan.
Banks that lend money to poor people work in different ways and have different names. Some are called credit unions. Some are operated by non-profit organizations, others by large banks. They lend a small amount of money to each person or group of people. They do not operate like the big commercial banks that work only for large profits.
These banks make small loans because they know that small businesses are a very important part of the economy. They want to support you and their job is to help you develop your business.
There are a number of ways that these banks operate. Some of them lend money to individual people. Some of them lend money to groups of people. In this case, if you want to borrow money you must first find three or four friends or neighbours. Then you can borrow as a group. Each member of the group receives part of the loan and each person can use the money they get for their own business. But if one member cannot make a payment, the other people in the group have to get together and make the payment. The group then works out among themselves how to get the money back from the member who has not paid.
Some of these banks offer much more than just a loan. They also provide training and business advice to the borrowers. So they help you to make decisions about spending the money in the best way possible.
Here’s an example of a woman from South Africa who put her loan from one of these banks to good use.
Her name was Faith Moshiamonyane. Faith didn’t have much money. She lived in a two-room shack. She supported her family by selling arrangements of plastic flowers. But her dream was always to use real flowers. When she heard about a local lending program she joined immediately.
At first she borrowed 140 dollars. With this loan she went after her dream. She bought a large supply of real flowers and used them to make many beautiful flower arrangements. Faith made a good profit from selling these flowers. With the money she earned she was able to move into a large store on a busy road. It took her twelve months to pay off her loan.
When she repaid the loan she applied for and received a second, bigger loan of 200 dollars. With this loan she bought business cards advertising her flower arrangements for weddings and funerals. With all the new customers who contacted her because of the business cards she sold more and more flowers and earned more money.
Faith was very proud that she had managed to improve her business and earn enough money to pay her daughter’s tuition at nursing school.
This is just one woman’s story. Millions of other small business people have made their dreams come true with small loans. What is your dream?
More livestock to provide meat and manure? New farming equipment? Don’t allow a lack of money to keep you from pursuing your business goals.
Now you know about loans for small businesses. The next step is to find out how you can join a small loans program and get the credit you deserve.