Microloans from KIVA
Many business owners we work with need a small amount of capital to start or grow their businesses. Often, they have found that banks do not want to make small dollar business loans, due to the time and costs of doing so. A loan of $5,000 requires the same documentation and effort on the part of a lender as does a $500,000 loan, yet the return to the lender is much less on the smaller loan. Therefore, many commercial lenders will not make business loans for amounts less than $50,000; some lenders’ minimum threshold is much higher.
The options are limited for a business owner who wants to borrow $3,000 to increase her inventory or $8,000 to upgrade her store’s appearance. That is where KIVA comes in. KIVA’s goal is to provide access to small amounts of capital through crowdfunding. A business owner can borrow as little as $1,000 and as much as $15,000. Loans are free of interest and fees and require no collateral.
Loan applications that are accepted by KIVA are presented to microlenders—people like you and me—who want to give small business owners a hand-up. Borrowers are expected to request family members and friends to participate in the lending process, thus demonstrating your personal social capital.
Loan requests are posted on the KIVA website, along with the borrower’s loan profile. A borrower is expected to share his personal story (briefly), business story, and how the loan will be used. Potential lenders read the online profiles and make decisions about which loan requests they will help to fund. Each lender loans $25 or more on each loan they choose to support. Once the loan is fully funded, the funds are transferred to a local lending partner. The lending partner disburses the money to the borrower. As the borrower is able, she makes repayment to KIVA, who in turn repays the lenders.
Lending partners are local organizations that assist in the loan process by (1) screening borrowers, (2) posting loan requests, (3) disbursing funds, and (4) collecting repayment. The Virginia Black Chamber of Commerce (VABCC) serves as a trustee for the KIVA loan program. A trustee must sign off on the application.
If you have questions, please contact the VABCC KIVA team at 540-216-0021 or by email at info@vablackchamber.org.
Steps to Apply
- Review loan qualifications at https://www.vablackchamberofcommerce.org/kiva/
- If your business qualifies, apply for a loan using the online application.
- Create a compelling profile.
- Upload required documents, including incorporation documents, EIN, and business tax returns.
- Approval takes about 10 – 15 business days.
- Invite family members and friends to participate by lending to you.
- Fundraise. It typically takes 20 – 30 days to raise the funds you need.
- Begin repaying the loan in the month following disbursement. Repayment periods are typically between 12 and 36 months.