Many entrepreneurs take out bank loans or maybe even max out credit cards to launch their businesses. But what if you can’t get a loan and don’t have credit cards. Microloans can be a lifesaver for budding entrepreneurs who don’t have access to traditional financing.

The loans are allowing people like Mario B. Morales realize their dreams. Morales couldn’t get bank financing to launch his food truck business, Yummy Dog, which sells gourmet sausage dogs. Then he received a $5,000 loan from Accion Texas, according to this article in the Houston Chronicle. Microloans at Accion Texas range from $500 to $250,000, and the average loan in the Houston market is $21,000. Fixed interest rates range from 7.25 percent to 18 percent, the article said.

The goal is to stabilize communities

Organizations across the nation like Accion provide a variety of types of loans, including financing through the U.S. Small Business Administration 504 Community Development Corporation loans. The goal is to create and sustain jobs that help stabilize communities.

In Chicago, Sunshine Gospel Ministries in the Woodlawn neighborhood is working to help micro-business owners secure loans and become financially successful. Over the past two years, 70 business owners – people who cut hair, make T-shirts or do event planning out of their homes – have gone through the program, according to this WBEZ article.

Jittaun Priest, who owns a decorative painting business, completed the program earlier this year.

“My books are more balanced, and I believe that it’s given me more confidence to go out and talk to people more because I have a better focus of what I’m doing,” Priest told WBEZ. “I’m not all over the place like I was. The focus (is) helping me realize what my niche is, and go out there and make that step.”

Starting capital is an issue

Joel Hamernick, executive director of Sunshine Ministries, said the program was designed to provide jobs and address a lack of capital to start businesses.

“If you grow up in a cash economy where nobody has a bank account, everybody goes to the payday lender and the cash advance places to pay their bills, then you really don’t have the basic functional tools that allow you to save a tremendous amount of money over time and put you on a pathway where you can navigate to know when you’re being taken advantage of and when you’re not,” Hamernick said.

Business owners in majority minority census tracts were less likely to receive loans than business owners in majority white tracts, according to a study this year by the non-profit research group the Woodstock Institute, according to WBEZ. That’s where microloans come in.

In Detroit, for example, the Detroit Development Fund created a micro lending program for small businesses traditionally considered unbankable, according to this article in Crain’s. The Fund partnered with the Michigan Women’s Foundation, Detroit Micro-Enterprise Fund and Lifeline Business Consulting Services to provide the financing, coaching and development skills that business owners need to succeed.