Long a staple of third world countries, microloans are becoming more popular in the United States as banks continue to be stingy with credit.
One such lender is the Latino Economic Development Corporation, a nonprofit microlender based in Washington, D.C.

They don’t operate exactly like microlenders in the developing world, some of which issue interest-free loans and let recipients repay whatever they can, whenever they can.

In contrast, American microlenders charge competitive interest rates, and the loans must be repaid on time. Defaulting on a microloan has the same consequences as defaulting on a bank loan.

The LEDC issues loans ranging from $500 to $50,000. Often in the past, those who came to the LEDC to apply for a microloan had little or no credit history.

But Rob Vickers, director of lending at the LEDC, says the profile of his average microloan applicant changed dramatically during the credit crisis.

“I was seeing clients that I couldn’t believe weren’t bankable coming in, and thinking, ‘Wow, this person has a credit score in the mid-700s, their business existed for more than two years, and yet, not only are they not able to obtain a bank loan, but they’re having their credit line slashed.’”

Listen to the whole story at NPR.