“Access to capital.” That’s one of the top challenges entrepreneurs that we support face when trying to grow their business. At LAUNCH we try to narrow the gap between those who can easily start new businesses and those who find themselves always struggling to get their business off the ground. Our program started shortly after the recession and we knew that the only method to start a business would be to self-fund or most likely use a lean startup model.
Often referred to as “bootstrapping” the lean startup model understands that the entrepreneur will need to grow the business organically from the same cash that they generate through sales. Often micro business entrepreneurs hold one or two jobs, while trying to get their business up and running, receiving no income from the long hours invested in getting their own venture off the ground.
No startup is a guaranteed success. Yet, there is a significant difference when an entrepreneur can dedicate their time to getting their business off the ground, versus when they are finding themselves stretched thin between work (sometimes two jobs), home, and a startup. Investment capital for a micro business is practically nonexistent, leaving the entrepreneur searching for alternative forms of revenue, particularly in the area of loans. Nonetheless, the options for those who are looking for non-collateralized loans under $50,000 are practically nonexistent. Traditionally it is said that banks are looking for the 5 C’s of lending: character, capacity, capital, collateral and conditions. For many micro business owners, it’s hard to meet (much less guarantee) the repayment on the conditions required from banks. This leaves the entrepreneur in a position of having to grow her business at a pace that can often be more disheartening than the normal challenges of business entrepreneurship.
Early in September of last year, I had the privilege of meeting with the team of Kiva US (formerly Kiva Zip). Kiva is a microfinance nonprofit that has been serving in the crowd lending field internationally for close to a decade. In the last few years, Kiva has explored the possibility of lending to US micro business owners through a similar crowdlending platform they have employed elsewhere.
One of Kiva’s mottos? “Dreams are Universal. Opportunity is Not.” Through a system they refer to as social underwriting, Kiva makes it possible for a micro business owner to get a loan of up to $10,000 at 0% interest over a maximum of three years. Their reasoning is that if a person is able to get up to 35 friends and family members to lend them $25 or more, then the person has proven to be of the right character, and Kiva can ask the world (literally) to consider lending the same amounts to this individual. With 400 lenders (at the maximum loan amount), at $25 each, the business owner can not only get their loan funded, but can also have a community of individuals who are monthly being reminded and encouraged by the borrower’s success to support that borrower by becoming a patron of their business.. As the lender gets paid back, they can choose to retrieve their funds or to reinvest those funds in another microbusiness owners’ success. If, like me, you see your lending as a contribution, you can also perceive that you are able to reproduce the impact of your contribution over, and over, and over in the life of multiple individuals.
At LAUNCH, we are encouraging some of our business owners to pursue Kiva loans. In many of the cases, a loan of $5,000 - $10,000 may be exactly what is needed to move a dream to a real life opportunity. It may help purchase a piece of equipment or initial inventory, pay for the front costs of a leased office space, or simply provide working capital to help keep the business afloat during the payment terms of some of their clients.
After spending a couple of days with the folks at Kiva, and learning what cities like Milwaukee, Rochester, Louisville and Columbus were doing in embracing Kiva as a citywide initiative for their business owners, I am very excited about the possibilities for LAUNCH entrepreneurs.
Consider looking at Kiva for your micro business financing and join us in supporting LAUNCH business owners.