Before a chance meeting in 2013 with Accion, a nonprofit microlender, Kris Schoenberger pulled in $20,000 to $30,000 annually through his mobile catering company, BBQ’d Productions. Catering was his side gig at the time.
A little more than a year later, Schoenberger’s business in Third Lake, Illinois, north of Chicago, had grown to include a full-service restaurant. His revenue from July 2014 to July 2015, the first year of business for the restaurant, soared to $2 million.
Schoenberger gives a lot of the credit to Accion, which lent him about $7,500 to help upgrade his catering operation from a grill in the back of his truck to a fully equipped catering trailer. He says an Accion loan officer helped him save nearly $6,000 on the trailer.
“Not only do they give you the money,” Schoenberger says, “they also teach you how to make the most out of that money. I would not be where I’m at today if it weren’t for them. Any time I have a problem or question, I can always call them.”
This type of financial and business education is central to the mission of most nonprofit microlenders. Rather than lending money and leaving borrowers to fend for themselves, microlenders provide counseling and mentoring to help entrepreneurs succeed.
Nonprofit microfinance organizations also help people in underprivileged and underrepresented communities access the capital they need to start businesses, buy homes or build credit, often when they can’t get financing through a traditional bank.
In recent years, microlenders have become more visible as traditional lenders, such as banks, pulled back on small-business lending during and after the recession.
Microlending has been growing in the U.S., according to the latest information from the Aspen Institute, whose FIELD program collects data on microlenders across the country. Total microloans disbursed in the U.S. jumped to $209 million in 2014, up 47% from $142 million the previous year. The total number of microloans rose to 56,351, a gain of 49% from 37,927.
Germaine Seufert took out an $18,000 loan from Accion, after being declined by a bank, to buy a bus to help expand her organization’s summer camp. Seufert is the director of Consultants for Children, a Colorado company that provides in-home and small-group services for children with autism and other developmental disabilities.
Before approving the loan, Accion made a site visit, called business references and looked over the organization’s books. The whole process took about four weeks, Seufert says.
When she went to Accion to refinance the loan to buy a second bus, the process went much more quickly.
“It took more time for me to pick out the vehicle,” she says. “But once we had the appraisal done, they immediately approved the loan.”
Founded in 1961, the global nonprofit Accion helps millions of people in more than 20 countries secure financing. Among those countries: the United States.
The organization offers microloans and general small-business loans in the U.S. in amounts ranging from $200 to $750,000. Accion offers loans to help businesses in specific industries — including child care, food and beverage, spa and salon — as well as those that are in the nonprofit sector or aiming to go green. Accion’s lending activity in the U.S. is committed to helping underserved entrepreneurs, including women, veterans, people with disabilities, Native Americans and other minority business owners.
Many nonprofit lenders are local, serving specific regions or communities. California-based Opportunity Fund is one. The microlender has been serving residents of the state since 1994, with more than $100 million in microloans.
Laura Hanson, a co-owner of Watershed Nursery in Point Richmond, California, was one of those people. In 2008, Hanson borrowed $10,000 from Opportunity Fund to expand the nursery, which she and her co-owner started in the backyard.
“They were offering better rates. It felt more attractive and straightforward and helpful,” Hanson says. “We had a person who was on our account who was accessible and answered questions. I felt like they were there to help us.”
In addition to microloans to small businesses, Opportunity Fund also promotes microsavings. This program matches every dollar saved by low-income clients with $1 from Opportunity Fund and $1 from donors.
Opportunity Fund doesn’t simply give money, though. The organization provides basic financial literacy education to clients to help them learn to budget, save and spend wisely.
NerdWallet staff writer Benjamin Pimentel contributed to this report.