Since 2011, almost 60,000 lenders have generated over $7.7M in small business loans here in America. These loans can be used for any business expense and charge 0% interest! Some may believe this is impossible…but not for Kiva Zip.
Most of us are familiar with the typical business loan process. Receiving support from the bank typically requires proof that you can fulfill your obligation. This makes sense, but how can small business owners prove their creditworthiness if some have no recorded history of success? This does not mean those business owners are not worthy of the same financial support than other, mature firms. Kiva Zip is a new program that addresses this very issue. Their belief in “character-based lending” has helped provide possibilities for over 1,500 small business owners right here at home.
How They Do It
Character-based lending works exactly how it sounds. Kiva Zip approves loans based on personal merit and community validation. Until recently, the only loans approved by Kiva Zip were by business owners who had been endorsed by a trustee. A trustee is an organization or an individual who has worked with a small business owner and is able to provide a good-faith endorsement of their “credit worthiness”. The odds of loan approval and fundraising speed greatly improve if a small business owner has a strong relationship with a trustee who provides an endorsement for them. Thanks to PayPal, direct deposit services are free for borrowers and lenders that receive and make Kiva Zip loans; Kiva Zip manages the flow of these funds.
This allows Kiva Zip to offer a 0% interest rate for borrowers!!!
If you’re interested in applying for a Kiva Zip small business loan, here is a breakdown of the process:
- Apply for a small business loan on kivazip.org
- Seek endorsement from a trustee (optional)
- Reach a specified headcount of invited lenders during a 15-day private fundraising period
- Fully fundraise in an additional 45-day public crowdfunding period (fundraising is all or nothing)
The Importance of Community
Collaboration is the key to Kiva Zip’s success. Small business owners must receive a certain portion of the loan through private lenders during a “private fundraising period.” This is a time during which a small business owner is asked to show that they have their support of their community, a “vouch” for their ability to repay the loan. Inviting lenders to the platform also allows Kiva Zip to grow its base of lenders. If the small business owner is able to reach the required headcount of invited lenders, Kiva Zip will then list the remainder of the loan on the Kiva Zip website and enlist their global community for further support. Every lender that provides funds is showing belief in the small business owner and their undertaking.
Kiva Zip believes in transparency and therefore allows lenders and borrowers to communicate directly. Often times this creates a more personal investment from both ends of a loan. Character-based lending allows communities to get behind small businesses here at home.
[dt_call_to_action style=”1″ background=”plain” content_size=”normal” text_align=”left” animation=”none” line=”true”]Special thanks to fellowship member Shannon Kossick for sharing this great resource with us.[/dt_call_to_action]