Did you know that you can use Kiva to get funding for a business?
Within 30 days, you can raise upwards of $10,000 for your small business or micro venture!
In fact, more than 2.5 million people have used this crowdfunding platform to raise more than $1 billion.
Now… here’s the cool part… each loan has 0% interest. Wow.
This means that when you raise money on Kiva, you won’t have to pay back any interest for your loan. You just gotta pay back the principle.
Historically, I think that most people have associated Kiva with micro-financing activities in developing countries.
However, Kiva is also available for US-based business owners. Believe it or not, but over 90% of US borrowers reach their fundraising goal!
With this article, I want to explore how you can use Kiva to secure startup capital for your business (and how it works).
Borrower Requirements
Kiva is an extremely unique crowdfunding website. You don’t have to provide a minimum credit score, cash flow documents, or collateral.
One of the website’s primary values is to encourage society to move towards a “social underwriting” model, where “someone’s creditworthiness is determined by the strength of their character” rather than their credit history.
To get started, you must:
- Be over 18
- Be based in the United States
- Use the loan for business reasons
- Not be in financial distress (bankruptcy, foreclosure, etc).
- Not be involved in any of the business activities they outline on their website, like multi-level marketing.
You can seek a loan for $10,000 or less, which could go to a variety of expenses like hiring, inventory, marketing, and more.
These loans have the goal of serving small business owners who are either “financially excluded” or that are trying to create a “social impact.”
Loan Due Diligence
Once you submit your loan application to Kiva, your data will undergo due diligence by a staff member.
In order to have your application approved, you must have endorsement of a Kiva Trustee or another organization/individual that connects borrowers with Kiva.
If you don’t have either of these, you can also have your application approved by undergoing a successful 15-day “Private Fundraising Period” where your friends and family are invited to support the loan.
You MUST recruit a certain number of lenders from your own social network in order to be listed on the larger Kiva marketplace.
Depending on the size of the loan and other aspects, you might have to recruit from between 5 and 35 lenders from your own network.
Where Your Funds Go
When you pass the private fundraising period and go live on Kiva, you will have up to 30 days to get funding for your loan.
Lenders on the Kiva platform can choose to support your loan for $25 and up. In this way, the loan is “crowdfunded.”
After you hit your goal on Kiva, you’ll then have the money deposited into your PayPal account. Simple!
You can then use the money to fund the expenses that you listed in your application. Just remember that you are going to have to pay back this loan over the course of 1 to 3 years in monthly installments.
You won’t experience any interest or fees.
Repaying Your Loan
Once you pass through this entire process and your loan is crowdfunded, you’ll have the funds deposited into your PayPal account.
From this point on, you will need to begin repaying the loan inline with your agreed repayment schedule. You will repay the loan through PayPal.
If you are at any point unable to make the scheduled repayments, Kiva will attempt to reschedule the repayments.
However, if you are still unable to repay this loan, then the loan will default. You will not be able to get any further funding for future loans on Kiva until you’ve repaid your previous loans.
Conclusion
At the time of writing, Kiva has worked successfully in 83 different countries with a 96.9% repayment rate. Insane!
These loans have been used to help fund agricultural, eco-friendly, and livestock businesses. They’ve also been used for educational causes and to fund women-owned businesses.
I think it’s a wonderful community and a great way to give back to the entrepreneurial community. You can get started by lending business owners as little as $25.
When your loan is repaid, you can then take that money and either withdraw it or go and fund other loans out there. It’s one virtuous cycle of giving!
