Kiva Comes to Town
Global micro-loan program for small businesses expands to Milwaukee, and city fund will match its loans.
Rock Paper Scissors. Photo from Kelly Everson.
Urban Milwaukee’s store and offices are in the Colby-Abbot Building at 755 N. Milwaukee Street, just north of Mason Street and not far from Hotel Metro. We were happy to find out recently that we’re getting a new neighbor in the storefront just to the north of us: Rock Paper Scissors, a gallery that will showcase work by local artists when it opens in spring.
This enrichment of our neighborhood is benefiting from another welcome development in town: a new micro-loan program called Kiva City Milwaukee.
Rock Paper Scissors Owner Kelly Everson is one of eight local entrepreneurs participating in Kiva City Milwaukee, which was officially announced by Mayor Tom Barrett early last week.
The program provides micro-loans to small businesses and startups that might otherwise have trouble borrowing from traditional lenders. What sets the program apart is its business model: Surprisingly, all the loan money comes from crowdfunding. It allows anybody, anywhere to become a lender.
Lenders anywhere can use Paypal to wire loans as low as $5 to businesses they choose. The loan is at zero interest, so lenders earn nothing but the good feeling they get from helping hustling entrepreneurs succeed.
“I think it’s a great program,” says Everson, whose loan became open for public support on Feb. 9. Contributions have come in from lenders all over the world, she says.
As of February 24th, she’s raised 100 percent of her $7,500 goal. She accumulated loans from 123 lenders in six countries.
For Everson, the process has been exciting, but nerve-wracking. Every day meant watching the dollar amount rise as the deadline gets closer. “It’s kind of like a reverse Ebay bid,” she says.
The Kiva City Milwaukee initiative is a partnership between Kiva, the City of Milwaukee, and the Wisconsin Women’s Business Initiative Corp. The local program will provide additional support for Milwaukee small businesses that can be matched by a city fund. Once they apply for a loan, businesses will have access to a rotating pool of $140,000 (provided by the Milwaukee Economic Development Corp.) that will provide one-to-one matches for every micro-loan they receive.
Milwaukee is one of 10 other cities in the United States to become Kiva Cities.
Based in San Francisco, Kiva says it has provided nearly $650 million in loans to small businesses and entrepreneurs all over the world, including the United States. Kiva says it charges no interest on their loans, and has experienced a worldwide repayment rate of almost 99 percent.
So lenders sole motivation is is to feel good about loaning the money? That’s noble… but I’m surprised it works very often!
As opposed to GoFundMe, where people help others out with no expectation of seeing the money again. Or Kickstarter/Indiegogo where people get trinkets if the project succeeds. It’s not actually as new a concept as it seems.
That part that interests me is that this is a non-profit, so they might actually pocket less of the funds (or be supported by other means). Either way, the availability of cash is a big reason businesses fail. Hopefully they find success here and small local businesses find their lives a little easier.
One of the main attractions for this program is that the loans accrue no interest. Businesses/entrepreneurs have ample opportunity to start turning a profit before they begin paying back their loans, and even then they pay back the exact amount they borrowed. Likewise, lenders see an exact return on the amount they lent.
Maybe this is another option for startups in light of today’s JS story about angel investors making sweet deals for themselves that screw over the startup organization.
My husband and I have loaned money to KIVA businesses throughout the world – mostly to people/areas affected by severe poverty. While it isn’t a lot of money to us, it is to the folks who are trying to get a business off the ground in 3rd world countries.