Need Less than $10,000? Here's One Way to Get It

International microlender Kiva is expanding its services to entrepreneurs in the U.S.
July 24, 2012

International microlender Kiva—perhaps better known for the sort of loans that allow businesses in Third World countries to buy cows—is slowly expanding into the U.S.

The nonprofit lender, which lets ordinary people loan as little as $25 toward businesses they want to support, currently is offering loans to entrepreneurs in Detroit, New Orleans and now, Los Angeles. It’s also allowing entrepreneurs anywhere in the U.S. to raise money on its website

Yesenia Monroy, co-owner of a small Los Angeles health food restaurant called Café 22, got a $5,000 Kiva loan to pay business license fees and hire a delivery person.

"I went to three different banks," she told the Los Angeles Times.

Jumpstarting Hiring

Kiva founder Premal Shah, who formerly worked at PayPal, said Kiva wanted to contribute to the health of neighborhoods and to jumpstart small business.

"We know that small businesses in the U.S. are the backbone of the economy," Shah said. "Two out of three jobs are created by small businesses every year."

So far, Kiva has offered six loans in Los Angeles, ranging from $5,000 to $10,000. Uses for the money included paying rent (for a business), materials and promotion. Half the businesses were food businesses, including one that uses pushcarts to sell ice cream and Mexican style popsicles.

SBA Getting in the Act

The Small Business Administration also recently showed the love to food trucks, with Administrator Karen Mills sampling from local trucks and pointing to the agency’s 110 microlending partners that can lend up to $50,000. She said the agency had begun using a new predictive index—as opposed to credit scores—to encourage banks to work with small loan applicants.

“We had a record lending year last year, but there are still gaps, and one of those gaps is small loans, particularly for the young businesses,” Mills told The Washington Post. “But our microlending is starting to grow very quickly, much more so than in many years, and we are putting a big emphasis on getting those small loans to entrepreneurs.”

The businesses that get the Kiva loans will be charged 8.5 to 10 percent interest. Payback schedules vary. If the borrowers default on the loan, the individual donors don't get any of the unpaid money back. (Most of them commit only very small sums—Kiva recommends $25.)

Edwin De Rosal, co-owner of Cafe 22 (and Monroy's husband) says the loan is key "to get our business out of this little bucket that we are in."

Would you or have you used Kiva? What has been your experience?

Photo credit: Kiva