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2011: The year of alternative lending

Jan 02, 2012 Philip Burgess

Alternative lending had quite a year, as banks and major lenders continued to strap their credit policies and hold back small businesses' financing efforts. Credit unions enjoyed a wave of new accounts as consumers left banks in droves in response to few credit decisions and proposed debit card and checking fees. Community Development Financial Institutions also enjoyed a surge in activity. These organizations focus on business development and entrepreneurship on the local level, particularly in low-income or under-served communities. Micro lending was also popular in 2011. Traditionally, these small, low-risk loans have tokens of the developing world, used to finance entrepreneurship and business endeavors in emerging economies. However, in response to continued economic troubles, the appeal of micro-loans has gathered a strong footing in the U.S. "Often they are granted to women and minority entrepreneurs and to companies that have been established in economic empowerment zones," explains Small Business Trends. "Often the startup businesses in these neighborhoods are created by individuals who lack collateral or a long credit history and therefore are unable to meet even the most minimal qualifications of traditional creditors."