Fortunately, you don’t have to live in one of these places in order to take out a Kiva loan for your small business. If traditional financing hasn’t worked out for you or you’re interested in a crowdfunding model, a Kiva loan may be a viable funding option.
However, before you pursue Kiva loans, you should be aware of all of your funding options. In addition, Kiva small business loans come with certain disadvantages. Due to this, you might find that other loan products are better suited for your business.
In this blog post, we'll explain what you need to know about qualifying for Kiva small business loans.
What are Kiva Loans?
Kiva offers short-term business loans of up to $10,000 with repayment terms ranging from three and 36 months. The greatest benefit of a Kiva loan is that it comes with a 0% interest rate.
Another reason Kiva stands out from other business lenders you may have come across is that individuals, instead of banks or other financial institutions provide the funds. Kiva users can connect with small businesses across the globe and contribute money to their ventures.
While this is similar to crowdfunding
, Kiva is a lending platform rather than a donation site, meaning these individuals will be repaid. Kiva looks at each borrower’s ability to repay their loan and creates repayment terms that align with their budget and lifestyle.
How Does Kiva Work?
Since Kiva loans are different from traditional small business loans, it’s important to familiarize yourself with how the funding process works. If you’d like to take out a Kiva loan, you’ll need to first complete an online loan application.
Once you’re approved and complete your private funding goal where you secure loans from individuals you know within a 15-day period, your details will be posted to Kiva’s loan page so that anyone can see it.
It will be your job to do outreach and promote your campaign. Kiva recommends taking these steps when managing your funding campaign:
- Share your campaign on social media
- Send personalized emails to individuals that lend money on Kiva
- Text the link to your Kiva campaign to people that will also share it
- Make sure your loan page is robust and well-optimized.
Hopefully, individuals who believe in your business will fund your loan and you’ll receive the money via PayPal once it’s fully funded. You’ll repay the money you borrowed, based on your agreed upon repayment schedule. Unfortunately, if you don’t put in the effort and fulfill your funding goal, you won’t receive funds.
Kiva Loans Pros and Cons:
Before you apply for a Kiva loan, consider these advantages and drawbacks:
The Pros of Kiva Loans
Zero Interest Rates
Kiva loans are zero interest loans so their lenders and the organization itself doesn’t make a profit. This can save you thousands of dollars over the life of your business loan, especially if you don’t have the best credit score.
You Can Qualify with No Credit or Bad Credit
Unlike most business financing lenders, Kiva won’t pull your credit score
or look at how long you’ve been in business. Instead, they’ll ask that you’re “willing to demonstrate your social capital by having a small number of your friends and family make a loan to you.”
Once you receive a Kiva loan, you can use the funds for just about any business expense. It may help you cover the cost of a commercial property, new equipment, payroll, inventory, marketing, or anything else you need to run or grow your business.
You Can Apply for More Than One Loan
When you utilize the Kiva lending platform, you’re not limited to one loan option. In addition, once you successfully repay your Kiva loan, you can apply for another one.
The Cons of Kiva Loans
Interest to Local Field Partners
Even though you won’t pay interest on lender funds, you will be on the hook for interest to local Field Partners, if they’re involved in your loan. It will cover the operational costs of administering and collecting loan payments in rural communities. The good news is that if you have a U.S. based business, you probably won’t work with a Field Partner.
Small Borrowing Amounts
Compared to other business financing lenders who offer loans for hundreds of thousands of dollars or more, Kiva loans only go up to $10,000. If you’re a newer business or require large amounts of financing, Kiva probably isn’t the best financing option.
15-Day Private Funding Goal
Depending on the size of your small business loan, Kiva will require you to secure loans from between five and 35 people you know. As long as you can do so within 15 days, Kiva will make your fundraising stage public.
You won’t receive any loan amount unless you promote your campaign and generate enough interest to meet your funding goal. The lack of guarantee can be nerve racking, especially if you really need the funds.
Kiva Loan Alternatives
Although you may benefit from pursuing a business loan from Kiva's lending platform, there are other business financing options to consider as well. Below, we'll provide a list of other popular funding options that you should research before pursuing a Kiva Loan:
1. Installment Loans
If you want an installment loan
, you may benefit from applying for a loan from a reputable business financing lender.
2. Business Credit Card
Many business owners utilize credit cards to make a variety of purchases. However, you must pay off your balance on-time to avoid credit repercussions.
3. Merchant Cash Advance
Does your business accept credit card payments? If so, you may qualify for merchant funding.
4. Equipment Loan
If you need financing specifically for equipment, an equipment loan may be a viable option.
5. Inventory Loan
Do you need funds for business inventory? If so, you should consider pursuing an inventory business loan.
6. Business Line of Credit
Many business owners seek credit lines that they can borrow against when they have business expenses.
7. SBA Loans
If you're unable to secure traditional financing, you may be able to qualify for an SBA small business loan.
Conclusion: Consider Your Business Financing Options Before Pursuing a Kiva Loan
Even though Kiva has lenient requirements, compared to other lenders, it’s not right for every business.
In addition, it's important to remember that a successful Kiva campaign takes time and effort. If you’re not willing to work hard to meet your 15-day private funding goal and promote it, a Kiva loan may not work out. So, before you take the plunge, consider all your loan options and determine which one makes the most sense for your unique situation.