Kiva Launches MicroLending For U.S. Small Businesses

Kiva.org, an online microlending company has partnered with Visa Inc. and former president Bill Clinton to implement its international lending model to help U.S. small business owners.

Kiva began in 2005 and has helped small-time entrepreneurs get funding for their businesses by connecting them with lenders who pool their resources for the loans, sometimes contributing as little as $25 a piece. The loans are typically about $7,000 or less, a very manageable sum for a community of lenders to contribute. And for some small businesses that amount is the difference between success and failure.

“In this economy where lending has tightened up, these kinds of alternative sources of capital are becoming more and more necessary,” says Kiva president Premal Shah, as quoted in a Wall Street Journal blog .

After identifying some of the U.S. cities where small businesses were hardest hit, Visa and Kiva have begun the Kiva City initiative in Detroit and plan to expand into other cities like Milwaukee, Pittsburgh and Cleveland.

The money from these loans will usually be used for things like rent for retail space, equipment costs, or other day-to-day expenses. The Wall Street Journal piece quotes Shah’s example of a daycare.

For instance, Shah says a home-based daycare business may require a few thousand dollars for permits, staff and toys, but isn’t likely to qualify for a traditional bank loan. “Right now, there’s just not enough access to microfinance on the ground to serve these needs,” he says.

If effective, this initiative could be answer to many American small business owner prayers, as up to 15,000 small businesses closed their doors between 2006 and 2008, based on a survey from Kiva and Visa. Many of those probably just needed the kind of cash Kiva City could offer.

“Since launching in the U.S. two years ago, we have worked with our partners to replicate our successful global model, empowering each and every American to help our economy by adding as little as $25 to a small business owner’s loan,” said Premal Shah, president of Kiva.org in the company’s press release. “But as our study shows, the needs in the U.S. are widespread and many regions simply don’t have microfinance institutions operating at scale. Now, spurred by Visa’s commitment to small business, we are able to expand our reach and, as a result, open new avenues of capital for small business owners across the country.”