By Mark Williams
The Columbus Dispatch, Ohio
WWR Article Summary (tl;dr) Small Business Owners in Columbus who are having a tough time getting loans through traditional lending sources now have an additional option, crowdfunding lending platform “Kiva.org.” Kiva Columbus, us.kiva.org/columbus will be available to small businesses across the city.
The Columbus Dispatch, Ohio
Small-business owners in central Ohio now have access to a new lending platform to help fund their business. And it won’t cost them a dime in interest or fees.
Kiva.org, a San Francisco-based nonprofit that works to use the crowdfunding lending program to alleviate poverty around the world, plans to launch today Kiva Columbus, us.kiva.org/columbus, with financial backing from local governments, charities and businesses.
Small business owners seek loans through the website. Individuals who loan at least $25 can pick who should get their money.
As the loan is repaid, lenders can either lend to another person or take their money back. Neither lenders nor Kiva make any money from the loan. Kiva depends on donations to cover operating expenses.
The loans are meant for mom-and-pop shops, corner stores and other small businesses that wouldn’t qualify for a traditional bank loan because the business is too young, too small or the owner doesn’t have a good enough credit score or collateral.
“What’s really cool is that the crowd decides what things are worth investing in,” said Reese Neader, who has been working for the past year to raise money from local sources to get the program off the ground.
“This initiative is a virtuous circle of opportunity for Columbus where the return on investment is measured more by character than credit scores,” Mayor Andrew J. Ginther said in a statement. “We’re giving residents a critical way to directly support the small businesses that are the backbone and creative engine of our local economy, and in turn Columbus entrepreneurs get access to the capital that they need to grow.
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Bill LaFayette, an economist who started his own small business, Regionomics, said trying to get a business off the ground and getting access to money can be tough and that’s why programs like Kiva are helpful.
“Yeah, it’s very difficult because you’re basically trying to get a personal loan for an enterprise that is untried and untested,” he said.
As part of the new campaign, every dollar that an individual lends to a Columbus borrower will be matched, up to $5,000 per loan, by a local supporter up to a total of $100,000.
Kiva says it has already connected thousands of small-dollar lenders to 61 small businesses across Ohio, including businesses owned by small farmers and neighborhood shops. Neader said more than 20 loans for $100,000 have been made in central Ohio, including food-and-beverage businesses and retailers. Many are owned by women or minorities.
With the launch of the local website, it will be easier for lenders to specifically target a local business owner.
Kiva, citing Small Business Administration data, says traditional lenders reject 80 percent of small-business loan applications and that Hispanic and African-American business owners are denied loans up to three times as often as white business owners.
As with traditional lending sources, business owners must detail what their plans are for the money and how they plan to pay it back. Neaders works with them to prepare their applications.
In addition, a borrower must recruit 10 to 15 friends and family to chip in at least $25 — showing their ability to earn the trust among those who know them.
Neader said if a borrower is unable to get money from friends and family, they are unlikely to do well on the Kiva website.
Kiva said 95 percent of loan requests are fully fundraised and said 88 percent of the loans made through the website are repaid.
While lenders can take back their money once the loan is repaid, most turn around and lend the money elsewhere. The typical lender invests $50.