A new crowdfunding tool for small business owners from Kiva Zip and LISC
Say you're a small business owner--maybe you have a couple of popular food trucks. But you need $3,000 to replace some equipment you don't have enough spare capital to cover that cost. You've asked a bank for a loan, but they rejected your request. Where can you turn? Kiva Zip and LISC.
Kiva, the worldwide microloan crowdfunding tool, has partnered with LISC to create a new opportunity for entrepreneurs. It combines Kiva Zip, an online crowdfunding tool for small businesses, and matching funds from LISC--and it may be the a solution that local entrepreneurs have been looking for.
If you use Kiva Zip to raise the loan amount you need--from investors like friends, supporters, and customers--LISC will provide matching funds to help you get to the full loan amount up to $5,000 total--all at 0% interest. Once you've used Kiva Zip successfully and paid back your loan within two years, you can use it again for a loan up to $10,000. Loans are disbursed and repaid through PayPal.
"Too many entrepreneurs and small business owners don’t have access to the capital they need to grow their business and build wealth,” says Chris Wiger, Twin Cities LISC Program Officer. “We believe that the resource created through the Kiva Zip-LISC partnership is one another way to serve that population and help their businesses thrive." Kiva Zip is complementary to the robust small business support efforts of local organizations including the pioneering Neighborhood Development Center, the Metropolitan Consortium of Community Developers and its members.
Funding based on character not credit reports
Unlike banks who loan money based on credit scores, collateral, and cash flow--Kiva Zip makes loans based on character, relationships, and reputation. Before going live on Kiva Zip, borrowers need to secure a minimum of 20 lenders from their own personal networks who agree to lend as little as $25, and work with "trustee" organizations who will endorse them online and help raise awareness of their fundraising effort.
Kiva Zip has already gotten traction in the U.S. More that 59,000 people have loaned more than $7 million to 1,500 borrowers through the online tool. Half of those loans have gone to female borrowers, and 60% of borrowers are ethnic minorities.
Five Twin Cities nonprofits piloting the new tool
Starting soon, local entrepreneurs in LISC's geographic focus areas can work with five Twin Cities nonprofits to get Kiva Zip-LISC loans as part of a pilot project to test the new tool. The nonprofits are the Northside Economic Opportunity Network, the West Bank Business Association, the East Side Enterprise Center, African Economic Development Solutions, and the Asian Economic Development Association. Each will work with LISC to figure out the best way to distribute available loan funds to interested small business owners.
“One of the biggest barriers for our entrepreneurs to get their business off of the ground is having access to capital," says Marcus Owens, Executive Director of the Northside Economic Opportunity Network. "Many times traditional lending doesn’t connect with our client’s needs either because of lack of credit on the borrower’s part or the amount is too low to lend from a bank’s perspective. Having Kiva Zip as a tool for our clients will help close the gap to access capital necessary to bring an entrepreneur’s idea to life.”
Wiger is hopeful about the pilot: "We're starting small to see what the demand is for this kind of loan opportunity here. But if it takes off, we'd like to be able to partner with other nonprofits and reach even more small business owners in the Twin Cities."