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Kiva Loans: Everything You Need to Know

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You might be most familiar with Kiva as the nonprofit providing microloans to refugees and other business owners in developing countries. But the San Francisco-based 501(c)(3) also has offices in the U.S. and provides no-interest loans to business owners here who have been excluded from traditional types of financing.

Members of the general public who want to see entrepreneurs succeed can fund loans for business owners in their own communities or across international borders.

Before you apply for a Kiva loan — or make a loan through the organization —  here’s an overview of what you need to know about how the platform works.

What is Kiva?

Kiva began in 2005 to alleviate poverty in struggling communities around the globe. Kiva relies on crowdfunded donations, as well as grants and support from sponsors, to fund loans. It has since funded more than $1 billion in business loans throughout 82 countries.

Here’s how to make a loan: Kiva is similar to other crowdfunding platforms in that anyone can give money online, in increments of $25 or more. But because Kiva funds loans, everyone gets paid back — though lenders don’t expect to recoup 100% of their investment. You can choose where your money goes, lending to people nearby or across the world. Once the loan is repaid, you may support a new Kiva loan for another borrower or withdraw your money.

Here’s how to apply for a loan: When a borrower applies for a loan, the application goes through underwriting and approval processes, which we’ll describe in greater detail below. The loan is then posted on Kiva’s website and becomes available for crowdfunding.  There are two types of Kiva loans for U.S. business owners:

  • Partner loans: This is the primary way most business owners worldwide receive Kiva loans. Field Partners are nonprofit organizations, microfinance institutions, schools or social enterprises in communities where Kiva borrowers are located. These Field Partners also provide services, such as entrepreneurial training and literacy education and, as a result, field partners may charge interest.
  • Direct loans from Kiva do not include interest, but they are only available in the U.S. and are made through PayPal. They may be seen as riskier than partner loans where Field Partners follow up on loans and collect repayments. Borrowers repay direct loans through PayPal payments without any follow-up from Kiva.

How to lend through Kiva

You can browse Kiva loans by category, by country or by search terms, such as agriculture or retail. Once you choose a loan, you can contribute as little as $25 and see who else has supported the borrower.

If lenders do not fully fund a loan in 30 days, you would receive your money back. The borrower would not receive any funds, unless they are working with a Field Partner that pre-disbursed the loan with its own money.

All money transfers are made through PayPal. If a borrower is behind on payments or defaults on the loan, Kiva will notify lenders through email.

Lending through Kiva does come with risks. You may lose some or all of your investment as Kiva does not guarantee repayment. Although the repayment rate for all Kiva loans exceeds 96%, the repayment rate for direct Kiva loans in the U.S. is 78%. Direct loans are at a higher risk of default because Kiva does not follow up with the borrower to collect repayments. Direct loan borrowers are also typically startup businesses, which tend to be risky borrowers during their first years of operation.

If you lend internationally, you also have the risk of losing money through currency exchange. You would bear the risk of loss if the U.S. dollar appreciates more than 10% against the borrower’s local currency.

Applying for Kiva loans

Kiva focuses on business owners who can’t access fair and affordable sources of financing. Kiva also works with businesses creating social impact in their communities. Typical Kiva borrowers include farmers, artisans, shopkeepers, builders, restaurant owners and students.

To become a Kiva borrower in the U.S., you must meet the following criteria:

  • Be at least 18 years old
  • Currently live in the U.S.
  • Use the loan for business purposes
  • Run a business that isn’t engaged in multilevel market or direct sales, pure financial investing or (obviously) illegal activity
  • Cannot be in foreclosure, bankruptcy or under any liens
  • Be willing to have a small number of friends and family make a loan to you.

If you meet those minimum requirements, follow these next steps:

  1. Apply online.

Kiva’s online application asks for your personal and business financial information, but you do not need to submit any financial documents or meet any credit requirements that a traditional bank might require. You will also need to prepare a public profile, including a photo of you and your business. Kiva will ask you to explain what your business does and how much money you need and why.

On your application, you can request your loan amount and terms – up to $10,000 and up to three years to repay the loan. However, Kiva makes the ultimate decision on how much you’ll get. New businesses are likely to get $5,000 or less, while established, revenue-generating businesses may receive higher amounts.

  1. Prove creditworthiness.

Kiva relies on “social underwriting” when approving borrowers. To demonstrate your social capital and creditworthiness, Kiva asks you to gather people from your personal network to lend to you before your loan is publicly posted. You would have 15 days to recruit five to 35 lenders, depending on the size of your loan.

  1. Fundraise.

After you privately raise money from your personal network, your loan will be public on Kiva’s website for 30 days. Kiva recommends borrowers leverage their network and spread the word about their business. Including a captivating story and high-quality photos on your profile could make your business more compelling to lenders. You can also start conversations on your page to stay engaged throughout the fundraising process.

  1. Repay your loan.

When your loan is fully funded, you’ll receive the money in your PayPal account in five to seven days. Your first payment is due through PayPal one month after you get the funds. Payments are due on the same day of each month based on your repayment schedule.

Who is Kiva best for?

For business owners who have struggled to secure traditional bank loans, Kiva may present a viable financing alternative. Kiva doesn’t require a minimum credit score and doesn’t ask for collateral or documents demonstrating cash flow, though receiving the endorsement of a Kiva Trustee may improve your chances of approval.

But that doesn’t mean Kiva will approve any business in any condition. Businesses must be able to demonstrate some social capital by having a small group of friends and family willing to lend money to the company. Businesses also cannot be in foreclosure, bankruptcy or under any liens.

Also, Kiva does not work with businesses involved in multilevel marketing or direct sales, or any illegal activity such as gambling or scams. Businesses involved in pure financial investing are also excluded. 

Kiva’s due diligence when verifying direct loan applicants includes researching the business online and confirming the borrower’s PayPal information. All applicants are also screened through the Office of Foreign Assets Control terrorism database.

If you fall behind on your payments or default on your loan, you will not be eligible for another loan from Kiva. Direct loans are defaulted if the total amount is not paid within six months of the due date. However, Kiva may exempt certain loans from default because of extenuating circumstances. This may make Kiva an attractive financing option for business owners facing hardship.

The bottom line

Kiva melds business lending with social good, prioritizing financially disadvantaged business owners, as well as those making an impact in their community. By relying on crowdfunding, Kiva is able to fund business loans through the generosity of the general public.

Although Kiva is a nonprofit, borrowers are held accountable for their debt and must repay lenders. Kiva believes this model promotes mutual dignity for both the lender and borrower.

Kiva may not be suitable for all business owners looking for financing, but it may be a good fit for social enterprises that have trouble securing traditional small business loans. Kiva doesn’t hound its U.S. borrowers for payments or charge interest, instead relying on business owners to make the appropriate payments on time. For businesses that don’t meet traditional lenders’ requirements, Kiva may be a way to borrow and repay money without the added stress of high interest rates.

And for those who are interested in lending through the organization, potential lenders can feel good about giving through the platform; Kiva received an overall 4/4 stars from Charity Navigator, which tracks a nonprofit’s transparency and accountability.


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