The Kiva City hubbub
Elevating the “unbankable” business owner should become an economic win-win for Madison.
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With only 5 percent of Kiva’s global lending currently going to the United States, the program’s potential for growth is significant.
Long before Kiva and Crust arrived in Wisconsin, some savvy area entrepreneurs were already working through the organization’s platform. In fact, since 2013, Kiva lenders have funded 27 small businesses around the area for a total of $142,000.
Among them: Giant Jones Brewing Co., a woman-owned craft brewery, received $10,000 from 94 lenders; Lushlife Vegan Bakery, which specializes in vegan wedding and other celebratory cakes, received $5,000 from 79 lenders; and Wisconsin Mujer/Midwest Mujeres, a strategic marketing, outreach, and engagement consulting business, received $1,000 from 31 lenders.
Others include EleBalloons, Gurke Consulting, Kate & Co. Gifts, The Ugly Apple Food Cart and Catering, and the aforementioned Slide Gourmet Potato Chips.
Meanwhile, Madison’s official debut as a Kiva City steams ahead. Since February, 10 business loans have already been fully funded, with a total of $52,000 loaned. “Sixty percent of our loans go to women, 58 percent to people of color, and about 15 percent of loans are going to people claiming immigrant status,” Crust states.
A quick check of the Kiva Greater Madison website recently found three Wisconsin businesses looking for lenders:
Mandy in Madison was seeking a $5,000 loan to help her complete her website and support production of her health and wellness product line. She was 43 percent funded with nine days to go.
Melanie in Verona said a loan of $7,000 would help grow her online coaching business through increased marketing and advertising. She’d raised 30 percent of her goal ($4,850) with 10 days left.
Daren in Milwaukee was looking for $10,000 to purchase commercial kitchen equipment for his business. Daren was 77 percent funded with 13 days to go.
“It’s really important that we’re reinserting human relationships back into our financial systems.” — Nichole Crust, Kiva Greater Madison
Others are in the pipeline, Crust promises, but confidentiality is guaranteed until they officially appear on the Kiva site. “I can tell you that we currently have 22 small business owners in the greater Madison area who are in the process of filling out Kiva applications.”
Kiva microloans support people with a dream who, for whatever reason, lack adequate capital to fund their idea or purchase the equipment necessary to grow.
Character counts, Crust says. “We really want the small business owner to work in private fundraising. That part of the application is also a good judge of character.”
Once accepted as a Kiva company, the platform allows for back and forth communication between borrower and lender, providing a more personal, albeit rare, citizen-to-citizen lending model. “It’s really important that we’re reinserting human relationships back into our financial systems,” Crust opines.
She shares the story of Namgyal Ponsar, the owner of Little Tibet [insert below], a Madison food cart startup. Ponsar dreamed of having her own restaurant one day and was asking for a $10,000 loan for a walk-in commercial-grade cooler so she could expand to what is now her brick-and-mortar location.
One of Little Tibet’s lenders posted a note to Namgyal’s page through the Kiva website. It was from an Australian couple that posted a note on the website saying they’d be visiting Madison and hoped to meet her. By sheer coincidence, Crust was at Little Tibet earlier this year, overheard a couple speaking with an Australian dialect, and asked them if they were lenders through Kiva. It was the same couple!
“Turns out they were friends,” Crust notes, “but since learning about Kiva, they’ve been providing loans to people
all around the world. That’s the human connection of Kiva. It’s really amazing!”
When a potential borrower fills out a loan application online, it hits Crust’s inbox and she’ll reach out to them within a couple of days to provide direct support.
“I want them to start the application process, and if they’re nervous or if there’s a language barrier, we have ways to overcome that, as well.” They fill out their own application and write their own stories, but she provides guidance.
People can lend to Kiva from anywhere, but a Kiva City designation means a Capital Access Manager (CAM) like Crust is available for one-on-one help. A CAM’s role is to establish partnerships and drive growth; connect with all applicants in their market to set expectations, help the business owners craft strong profiles, coach them through fundraising, and engage with them throughout their loan repayment.
The organization heavily relies on trustees, which Crust describes as a local business or individual that can provide business advice and technical or educational support to the small business community. Trustees publicly vouch for Kiva business owners, almost as a character witness. Trustees do not assume any financial responsibility for them. “As a Trustee, you care about Kiva, small business, and can provide some sort of business support. It’s very relationship-based,” Crust explains.
For WWBIC, Wisconsin’s largest microlender, Kiva is a perfect fit. “It gives us an opportunity to help underserved markets and is another tool to support small businesses,” Crust explains.
“It’s also a fascinating process that I believe can change the way lending is done in the United States.”
Luckily for Madison, Crust has done this all before. “By the time I had two years behind me in Milwaukee, a lot of people had heard of Kiva. I want it to be a household name when they need a small business loan, just like people know they can get a WWBIC loan or a bank loan. Kiva loans should be on the table, as well.”
There are other goals she must meet, as well, to ensure the program is successful long after its 3-year pilot period. In 2019, for example, she needs to hold at least 20 outreach events and support 40 small business owners. Just a few months in, Crust has already met with more than 60 economic development organizations.
Lending it forward
Finding lenders, Crust says, has not been a problem. “People in Madison want to start lending here.”
The Kiva platform allows anyone to become a lender with as little as $25. When they get paid back, they can choose to reloan their money toward another entrepreneurial business. It’s the ultimate form of lending it forward to ensure other business dreams succeed.
“It’s known as an evergreen fund,” notes MGE’s Christenson. “Very rarely do people ask for their money (cash) back.” And that’s exactly the point.
Small business applicants that get accepted by Kiva into the program have 15 days to secure their private funding commitments from their inner circle.
“If they don’t reach your first loan in that time, the money you collected gets returned to the lenders,” Crust explains.
If they do, they move on into the public fundraising process and Crust gets more involved, working with her resources to find lenders. “That’s where the international network comes in,” she says.
In the public process, the business goes “live” on Kiva’s platform and becomes visible to 1.7 million lenders from the global Kiva community.
Lenders must be paid back within a specific time frame depending on the size of the loan. For example, a $1,000 loan amount must be paid back to lenders in one year; while a loan of between $6,000 and $10,000 must be repaid in 36 months.
That’s what separates Kiva from other crowdfunding programs like Kickstarter, IndieGogo, or Go Fund Me, which are intended as gifts or grants that will never be returned.
There’s another important difference, as well. “I’ve seen statistics that say 70 percent of crowdfunding comes from people you know. Kiva is the opposite. You don’t know these lenders because Kiva is an international audience of lenders for small businesses.”