Business owners all over the country say it is almost impossible to be approved for a bank loan. The banks are very careful, demanding documentation and projections that are very hard to satisfy. The banks demand good credit scores and collateral, but with real estate prices still down, business owners often find they don’t have enough collateral to guarantee their loans.

The big banks throw the blame on the customers. They say people are applying less for loans, afraid to expand because they do not know what the next day will bring.

As reported in the New York Times, Mr. Bernanke said: “It seems clear that some creditworthy businesses – including some whose collateral has lost value but whose cash flows remain strong – have had difficulty obtaining the credit that they need to expand, and in some cases, even to continue operating.”

Some small business owners found it helpful to try microlending.

If this concept sounds foreign, it’s because it is. Microlending has been operating in developing countries for over two decades now. Muhammad Yunus, the founder of Grameen Bank, a nonprofit organization based in Bangladesh, has received the Noble Peace Prize for his work in microlending, granting small loans mainly to poor people. Now Grameen Bank has arrived to the United States. Together with another organization called Kiva, which has lent more than $150 million in 53 countries, they are widening their loans to Americans.

The trend is growing. Cities like New York and San Francisco have introduces their own microloans programs. “Everyone is knocking on our doors, even those with good credit,” said Galen Gondolfi from “Justine Peterson,” another microlending company based in St. Louis.

There are more than 360 outfits for microlending in the United States, some have been operating since the 80’s and experts expect the numbers to rise as long as the bank remains tight.

According to another article in the New York Times, microlending programs in the United States typically lend up to $35,000 to small businesses with less than 5 employees. The interest rate is a bit higher than the bank rate, between 5%-18%, but the documentation required is reasonable.

While banks rely mainly on credit scores, the microlenders consider passion and commitment as well. They require participation in marketing and business-plan workshops and money management courses that can help the small business owner even more in the long run.

The article tells the story of a small business owner (a wine shop in St. Louis) who tried to get a $50,000 loan from his longtime bank. He was rejected because the bank claimed he had too much debt. Another bank turned him down as well. He applied for a microloan and he got $15,000, for 10 years with a 12% interest rate. He had to scale back his plans, he says, but “It’s the only way to go.”

Grameen bank has opened 4 new branches in NY and one in Omaha and has plans to open branches in San Francisco, Washington, Boston and North Carolina.
Kiva works in a different way. It uploads the business profile onto their site. People browse the site and decide, based on the business owner’s profile, who they would like to loan money to. Kiva distributes the money. Borrowers can ask for as much as $10,000, and Kiva made almost one million dollars in loans up till now.

So if your bank has turned you down for a loan, don’t despair. There’s another way to go.