Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Aug 3, 2021

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A pair of Rutgers University students has made an online microlending organization. Four years ago, the pair created The Intersect Fund, a microlending organization based in New Brunswick. In October of 2012, Intersect received $600,000 in federal and private funding. Intersect focuses on lending loans to small minority and women-owned businesses that are in under-served urban areas.

Since 2008, Intersect has lent 175 short-term business loans for a total combined value of over $300,000. Companies that have received Intersect’s financial assistance have ranged from hot dog vendors to hair salon operators. The Intersect Fund’s co-founder and executive director, Rohan Matthew, can now lend as much as $1 million in short-term business loans over the next two years.

Matthew believes lending this amount of money out could potentially lead to the creation of 300 jobs with low monthly payments and options for significant long-term growth potential.

“I can tell you that most of the ideas concocted in a Rutgers dorm room are not good ideas. This one is different,” said Matthew at a news conference in Newark where the new funding was announced, according to the website NewJersey.com.

Intersect intends to expand from the Newark and News Brunswick region in addition to increasing its staff size.

The majority of the Intersect’s financing came from a $300,000 grant from the Community Development Financial Institutions Fund, a program from the U.S. Treasury.

An additional $200,000 in funding was obtained from Capital One Bank.

Matthew and his co-founder Joseph Shure developed their idea for Intersect after walking past shuttered storefronts in New Brunswick. While neither one has a background in finance, they both saw the clear need for financing options for interested borrowers in the inner city that do not have access to traditional funding.

Matthew describes his company’s business practice as more akin to “nano-lending” than microlending. They offer an average loan size of about $1,500. Once they obtain new funding they hope to be able to offer financing of up to $20,000.

These loans are short-term, lasting from 12 to 18 months, and they carry interest rates around 15 percent. While it is certainly higher than an average business loan from a bank, it is still less than the interest on a credit card.

What Else Should You Know about Microlending?

While microlending has become increasingly popular across the world, many people don’t know much about it. They may associate it with companies that allow “investors” to invest as little as $50 to lend within their communities and paid back with a certain amount of interest.

In reality, the concept came from The Grameen Bank and founder Muhammad Yunus in 1983. The original idea was akin in some ways to what Intersect has done. Yunus took his own money to lend to the poorest of the poor in his native Bangladesh. Loan amounts were small. $25-$50 loans were not uncommon. The idea was to help these poor individuals to start businesses that would allow them to pick themselves up.

The Grameen Bank and microlending expanded to offer cell phone rentals people could use as a business model in some areas. Lending was exclusively to the women of the house, and women have since taken over in running the every day processes of giving money, taking payments, assigning loan responsibilities, etc. In its traditional context, microlending maintains almost 100% repayment, success for the women involved in building sustainable businesses, etc.

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Could Microlending Be Used for Student Loan Borrowers?

Microlending in the US has been used for business loans as well as personal loans. Generally speaking, it’s used for small amounts to be repaid fairly quickly. So any student loan deferment or student loan reform would not likely be based on a microlending platform. The differences between federal student loans and private loans will likely continue to direct the industry.

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