The Kiva City hubbub

Elevating the “unbankable” business owner should become an economic win-win for Madison.

From the pages of In Business magazine.

February 4, 2019 marked an important milestone for small businesses in the Greater Madison area.

That’s the day Madison was publicly announced as a Kiva City, or Kiva Hub, as it’s more properly known by the global organization based in San Francisco. It may take a while for the significance of this three-year pilot program to gain footing here, but the hope of Nichole Crust, Kiva Capital Access Manager, is that Kiva will soon become a household word.

In fact, planning for the Kiva City designation has been underway for several years.

The international funding program was first brought to the state by the Wisconsin Women’s Business Initiative Corp. (WWBIC), whose President and Chief Visionary Officer, Wendy Baumann, was the first to urge Milwaukee Mayor, Tom Barrett, to fund the microloan program in the state’s largest city.

Says WWBIC’s Baumann, “I had heard and studied Kiva in the developing world and attended global microcredit gatherings where I learned even more about this disruptive model for microlending. I thought, “We have to bring this to the U.S. and to Wisconsin!’” Prior to that, Kiva officials admitted to Baumann that they did not have Wisconsin on their radar. “Well, now you do!” she responded.

Former Madison Mayor Paul Soglin was equally interested, as was Madison Gas & Electric. Pam Christenson, MGE’s economic development director explains: “Wendy was the powerhouse behind this. Then, I was invited to Milwaukee and saw the amazing progress they were making and thought, ‘Wow, we need to do that here!’” Doyenne Group joined in and the race to become a Kiva City was officially on. WBD, Wells Fargo, The Evjue Foundation, and the State Bank of Cross Plains are also supporting the program here.

“I thought, ‘We have to bring this to the U.S. and to Wisconsin!’” — Wendy Baumann, WWBIC

Kiva was founded in 2005 as an international nonprofit. It is an online crowd-funding loan program that allows person-to-person business lending to entrepreneurs who may have been considered “unbankable” in the past — women, people of color, veterans, immigrants, or lower income entrepreneurs and business owners.

The Kiva US platform features no-fee microloans of between $1,000 and $10,000 at zero percent interest. For an entrepreneur with a good idea and notable skills, it can help get them over the hump and on the path to financial security.

Borrowers can use the loans for a variety of reasons, including but not limited to purchasing or upgrading equipment; business management software; raising money for inventory; renovating a space; paying for certificates or licensing; tradeshow booths; or getting a website or marketing plans in order. The Kiva platform made it to the United States in 2010.

Crust is employed by WWBIC but moved to Madison in January full time as required by Kiva in order for a city to become a Hub. Currently, there are only 19 Kiva cities nationwide. Milwaukee was No. 11 as a result of Crust’s efforts, and shortly after she moved here in January, Madison became No. 18.

Funding sources

Kiva US supports entrepreneurs or small business owners who in the past may not have been able to find funding from a bank for any number of reasons — poor credit, lack of capital, etc., but becoming a Kiva City also comes at a cost.

Specific Kiva Hub program costs depend on each city and the scale of the program. For Madison, the total cost was $250,000 of which $50,000 went to Kiva. WWBIC raised the additional $100,000, and Baumann says they’re working on securing grants for a $150,000 pooled-match fund for Kiva Greater Madison, as well.

The Kiva.org website allows individuals to loan $25 or more to help others around the globe through PayPal. Lenders choose whom they would like to support based on what touches their soul. Borrower profiles include a photo as well as a detailed explanation about who they are, how much they are hoping to generate, and why.

For example, there’s Boniface in Kenya, who hopes to raise $1,450 for a biodigester to turn farm waste into resources and expand his milk production; or Rana in Lebanon, who seeks a loan of $1,500 to help pay for her son’s first-grade school tuition fees. Because everything is done online, the Kiva website tracks the number of lenders, how successful each borrower has been in raising the funds, and how many days are left in their 30-day funding period. If the borrower fails to reach their monetary goal, lenders are reimbursed for the full amount.

With the Kiva platform now established in the U.S. including the Dane County area [https://us.kiva.org/greatermadison] individuals around the world are free to lend to low-income entrepreneurs here, as well.

While any small business owner over the age of 18 can apply for a Kiva loan, Crust says the organization typically draws the line at established companies with annual revenues over $100,000.

“Kiva is for everyone,” Crust states, “but it really targets those who have traditionally been unbanked or financially underserved.” However, if a business has revenues of $100,000 or over and the owner falls into one of those categories, they can still apply. Companies don’t need to be startups to apply, although many are.

“We see Kiva Greater Madison as another great tool for the economic development continuum in a community,” notes Baumann. As businesses thrive and grow, the hope is they’ll climb the lending ladder from microloans to bank financing.

It’s already happened, in fact, with one local business, Slide Gourmet Potato Chips, owned by serial entrepreneur Christine Ameigh, whose $10,000 microloan for an electric slicer helped scale the full-fledged potato chip business that supplies — at last count — 34 retailers from Madison to Milwaukee.

“You can always choose who you want to lend to, but the point isn’t to pay off these little loan amounts, it’s to help your neighbor.” — Pam Christenson, MGE

Madison Gas & Electric has a longstanding interest in making the community stronger by supporting entrepreneurship for everyone, and Kiva is one way to do that, notes Christenson.

“When I’m choosing companies to loan to, I look in my backyard first, but I still want to make loans to people internationally,” Christenson explains. “You can always choose who you want to lend to, but the point isn’t to pay off these little loan amounts, it’s to help your neighbor.”

Kiva’s social underwriting process requires borrowers to secure their first loans through family and friends. The number of friends and family needed to lend over a 15-day time period is determined by the borrower's risk and loan size. Kiva considers it their “social collateral.” Christenson says it’s a good litmus test toward an entrepreneur’s viability.

The lender payback period begins 30 days after the loan is funded.

“We encourage small business owners to be in a position to have some money coming in so we’re not setting them up for failure,” Crust says, “because they need to begin paying these loans back right away. In Wisconsin, Kiva has a 95 percent success rate of people funding their businesses.”

As an international organization, Kiva loans fully funded $1.25 billion globally, $29 million nationally, and $1.25 million in Wisconsin through December 2018. Crust argues that even more was funded when considering “recycled” money, when lenders receive payback on one loan and reinvest it in another.

“The loan payback is vital for Kiva to keep working. I see it as a revolutionary way to lend,” Crust adds.

With her feet firmly planted in Madison now, Crust is focused on reaching greater Madison’s underserved entrepreneurs and helping those that qualify onto the Kiva platform.

(Continued)

Unlimited potential

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!”

CAM-do approach

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.”

(Continued)

Business to business

Christenson urges the Madison business community to get involved either as lenders or trustees.

Corporations can establish a Kiva fund that employees can donate to in any number of fun ways, and then decide as a group where or which business to fund.

They can also purchase Kiva gift cards that allow individuals the freedom to do their own research on their own time as they become lenders to other entrepreneurs hoping to get over a hump.

“Banks should be all over this!” Christensen states.

“Kiva assumes the risk on people who today may be considered ‘unbankable’ but who may seek more traditional loans as they grow their businesses.

“If you’re the entrepreneur, there aren’t many barriers to entry. If you’re the lender, it’s an easy way to put your money to good use and support young businesses. Everything helps our greater Madison community, and that’s why we support it.”

Ruth Allen, owner

Ruthie’s Comfort Food Catering and Food Truck Inc., aka Ruthie’s Inc.

Loan Amount: $3,000

For: License and insurance renewals; getting equipment out of storage; purchasing goods; and repairs to hot dog cart

Applied for loan: February 2019

How long before fully funded? 30 days

Business Model: I prepare home-style meals in a commercial setting. In other words, I bring my kitchen to the streets.

Are you in your payback period? My lenders receive payment from Kiva every month for their generous donation to my business.

Prior to Kiva, had you tried to get funding before? I knew my credit was not up to par to apply for a traditional loan through a bank or finance company. I also knew that my family members were not able to loan me money.

Would you recommend Kiva to others? I would, especially if traditional funding is not possible due to credit hang ups, whether because of low credit scores or not enough established credit. This is the perfect option to get it done!

In your opinion, what should entrepreneurs and the greater Madison business community know about Kiva? Kiva is a valuable asset for those who want a chance to prove themselves. It’s a dream granter for the dreamer who can’t see any other way to make their dream a reality. It’s a way to become self-sufficient and a blessing from a community of friends and strangers that believe in your vision just as much as you do. Kiva revived my hope and fueled my desire to succeed.

Any final thoughts? My Kiva experience has been awesome. I’ve been able to purchase some equipment, made scheduled payments that get applied directly to the principal with no finance charges. Thanks Kiva for making my business dreams a reality!

Namgyal Ponsar, owner

Little Tibet Madison

Loan Amount: $10,000

For: Walk-in cooler

Applied for loan: January 2019

How long before funded? One week

Business Model: Family-owned restaurant offering traditional homemade Tibetan and Himalayan food

Prior to Kiva, had you tried to get funding before? I thought about applying for a WWBIC loan but didn’t have to because of Kiva.

Did you prepare a business plan? Yes, WWBIC helped me.

How did the personal fundraising go for you? Family and friends all came out to help and support me.

Would you recommend Kiva to others? Definitely! I think it is such a great platform for small business owners and entrepreneurs to start and grow their businesses.

In your opinion, what should entrepreneurs and the greater Madison business community know about Kiva? Kiva is for entrepreneurs all over the world to use. It brings people together because people enjoy helping other people succeed.

Any final thoughts about your Kiva experience? I feel very lucky to come across Kiva and use this great platform to start my business. For me, Kiva is like a big extended family with family members scattered all over the continent, spreading love and kindness and giving hope to the dreamers. Even though I never met my lenders, I still feel very close to them and think about them each time a customer compliments my food and leaves my restaurant with a smile on their face. Because of my lenders’ generosity and their belief in me, I am happily doing my dream job.

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