Geri Stengel, WE NYC Mentor
Easy no-cost funding
Accessing capital used to be especially hard if you didn’t have collateral or a good credit score. That’s no longer true. With a little help from your friends, you can raise money through Kiva. Typically five to 30 friends, family members, colleagues or customers lend you on average $75 each. The rest comes from the Kiva community of lenders. You can raise as much as $10,000. Best of all, these loans are interest-free.
Kiva started lending to microentrepreneurs in developing countries in 2005 and in the U.S. in 2011. Oprah named it her 2010 Favorite Thing. President Clinton is a fan too! It has lent $800 million. In the U.S., it has lent to food businesses, fashion designers, daycare providers, dry cleaners among others. Businesses borrow money to purchase equipment and supplies, pay for legal fees and licenses and rent space, etc.
Your character is measured by your ability to raise money from your community
My friend Holly Shapiro had exhausted other debt options when starting Go Go Golosh. Then, using Kiva, she raised $10,000 for shoe lasts to expand her line of high-heeled women’s waterproof overshoes to include women’s comfort, men’s and children’s shoes.
Twenty three of Holly’s friends – including me – lent her $25 each. “It was an easy ask,” said Holly. “All I asked for was $25 and the money would be paid back over the course of two years.” At the time Holly was raising money, an institutional funder was making a special two-for-one matching offer. The funder would match every $25 Holly raised with twice as much, meaning my $25 loan was worth $75 to Holly.
Your character is measured by your ability to raise money from your community.
The fact that Holly was able to raise money from her community gave other lenders the confidence that their money would be paid back. (About 90% of loans with community support get paid back on Kiva.) The rest of the loan was provided by people and institutions Holly didn’t know. She raised $10,000 in ten days. “It was an incredible emotional boast having friends, family and people I didn’t know support me,” said Holly.
If you don’t have a community that will provide initial support, you can still raise money on Kiva. However, you would start with a low funding goal, such as $500. Once you’ve paid back the loan, you can raise higher amounts.
How Kiva lends without charging interest
Kiva is able to provide no-interest loans because about one third of its lenders provide what is called a tip. These lenders agree to provide an additional 15% of the loan money to underwrite Kiva’s overhead.
Foundations and corporations contribute additional money. PayPal provides its processing services for free.
“People lend money on Kiva not to make a monetary return on investment, but a social return,” said Katherine Lynch, Kiva’s NYC program lead. “We call this social underwriting. Lenders want to make entrepreneurs’ dreams come true.”
How is Kiva different from other crowdfunding sites?
Typically, when you raise money on rewards-based crowdfunding sites like Indiegogo, Kickstarter and Plum Alley, you’re raising 80% to 90% of your money from people you know. With Kiva, it’s the opposite. You raise only 20% to 30% from people you know. The rest is truly from the crowd.
Another difference with Kiva is that you don’t pay any fees to the platform or credit card company. All the money is yours.
Kiva also requires considerably less additional time investment than other crowdfunding platforms. Often, it takes considerable time and even money to do a successful rewards-based crowdfunding raise. Not so with Kiva. You do have to fill out information about your company and how you’re using the money, but you don’t need to create a video or do a lot of outside marketing.
Finally, on other crowdfunding sites, funders are generally pre-ordering a product at a discount. With Kiva, they’re giving you a loan, which you pay back.
All this makes Kiva a platform well worth considering if your business needs money.