The microlending lo-down.
By Elliot Owen
So you want to start a business, but like many entrepreneurs, don’t have the means to get it off the ground. We all know the development of great ideas into self-sustaining hustles takes time and money, but what is lesser known is how to reel in enough resources to get the ball rolling.
Here’s the thing: if you’ve got the time, Kiva, an international microfinancing nonprofit, can help you with the money
The 11-year-old San Francisco-based lending organization uses a relatively simple lending model. A borrower applies for a loan – the loan is underwritten and approved – the loan’s details are uploaded to Kiva for editing – the loan is posted to Kiva’s website where lenders crowdfund the loan in amounts of $25 and up.
“I couldn’t believe how hands-off it was,” Renee Geesler, co-founder of Oakland-based Mamacitas Cafe told Ui Culture. Last year, when Geesler and Shana Lancaster, the cafe’s other co-founder, contacted Kiva, they had a business plan in hand. Kiva worked with them to write a loan and within three months, they’d secured $10,000 for their small business.
“We’d gone to banks,” Geesler said.
Banks and other community lending institutions make it hard to get money. There’s so much red tape to get through. Kiva provides loans to businesses that don’t have access to conventional loans.
Geesler and Lancaster used their loan to scale their business from a small pop-up, to one with a semi-permanent location and expanded catering capabilities.
“Kiva made it really easy,” Geesler said.
Hailed as the first person-to-person microloan website, Kiva lets lenders, people like you and I, browse the profiles of entrepreneurs all over the world until something sparks our interest.
Maybe it’s a small business offering a unique service you would use, or a fellow artisan working in your same field except in another country, or even someone who needs house repairs done to fix damage caused by civil unrest in their region. If a borrower can express a need, Kiva makes sure you can meet it.
Most recently, Kiva celebrated the ‘Summer Games’ in Rio by highlighting loans from “28 Kiva countries that have yet to win a medal.” Lenders clicked through borrower profiles from Palestine, Mali, Bolivia, Samoa, and more to help fund loans that make direct and immediate impact.
A Palestinian student’s university tuition, a Sierra Leonean women’s entrepreneur group looking to re-stock body care supplies to sell, and a Bolivian farmer’s corn harvest costs are just three loans featured in the ‘Summer Games’ section.
A few U.S. Kiva loans up right now include a former stage actress in New York looking to start a special needs child care business, a Kansas City entrepreneur looking to buy supplies for a community garden, and a California comic book fan trying to secure the funds necessary to turn a character design into an actual children’s toy.
Every penny lent goes to the borrower, too; Kiva gets no cut. The nonprofit also forgoes charging borrowers interest or fees on their loans in 80 of the 83 countries it currently operates in. To date, over $880 million has been lent to borrowers through the platform.
“Neither Kiva nor Kiva lenders make any money from the loans they facilitate,” Kiva’s president, Premal Shah, told The Guardian.
Because of this, Kiva is able to partner with groups based on social motive, rather than profit motive.
Geesler verified that motive. Mamacitas Cafe is a mission-based establishment that hires and trains young women, mostly of color, to work at the business. Geesler said their Kiva loan process was so easy in part because Kiva shares their socially-conscious values.
“Kiva and Mamacitas Cafe are in alignment in that way,” Geesler said. “Not only does Kiva provide those funds, they’re supportive of like-minded businesses, which is an added benefit.”
If you’re a lender, the next step after contributing to a project is waiting for your loan to get reimbursed which, if you’re wondering, happens 97.1 percent of the time — higher than most commercial banks in the U.S.
After repayment, instead of pocketing the money, most lenders are already looking for another Kiva loan to support, keeping the circular motion of funds intact.
“It’s a neat way to sustain momentum and re-lend to other businesses,” Geesler said.
If a Kiva loan fails to fully fund within a 30-day period, contributing lenders receive their money back and Kiva uses company reserves to pay for the loan. Like most nonprofits, Kiva sustains itself through individual donations (which are tax deductible), and grants and donations from foundations.