Famed businessman Norman Ralph Augustine once said, “It’s easy to get a loan unless you need it.” The strained economic climate that we live in today has many small business owners and entrepreneurs truly feeling the pain behind Augustine’s sentiment.

This idea was certainly top of mind to David Taliaferro, Director of Microfinance for Access Ventures, when his organization began discussions in 2013 about expanding their business model to provide microloans for their clients. These discussions centered around small business owners, who are regularly dismissed for traditional loans because of their lending risk.   

“It’s really challenging for a small business to find a loan if they are looking for something in the $3,000-$5,000 range,” Taliaferro says. “What you have is this gap where small businesses struggle to find the capital they need in order to get to the point where they’re taking out those larger loans.”  

Taliaferro’s research led him to a potential partner, a company with tenure in microfinance and an Internet model to back it up.

Enter Kiva.org, an industry leader in the world of microfinance with a decade’s worth of global experience helping to alleviate poverty by reaching underrepresented and financially excluded entrepreneurs. In fact, since they were founded in 2005, Kiva.org has utilized a network of more than 1.3 million lenders to fund $800 million in loans with a somewhat shocking repayment rate of 98.42 percent.

With their international lending platform in place, Kiva.org began experiencing domestic lenders that sought ways to extend their hands, and their money, to local borrowers. The company answered that call with their second-generation platform, Kiva Zip, which increased the amount that borrowers were able to access and developed a currency for peer-to-peer lending using PayPal.

Kiva City Louisville is Born

As a way to spread the Kiva platform throughout the United States, the organization utilizes full-time staff called Kiva Fellows and establishes Kiva Cities as home base for the Fellows. In January 2014, after Taliaferro had completed the necessary training to become a Kiva Fellow himself, Kiva City Louisville opened for business.

In its infancy, Kiva City Louisville has already seen great success, funding 57 loans in the state of Kentucky and in parts of Southern Indiana—loans that amount to an economic boost of more than $300,000. Taliaferro attributes this success to many factors, the biggest of which is the community’s embrace of the platform.

“We have many organizations that were willing to put dollars behind the project and have remained engaged making endorsements and promoting the platform,” says Taliaferro of the group of Kiva City trustees and supporters, which includes Access Ventures, James Graham Brown Foundation, Owsley Brown II Family Foundation, Paul Ogle Foundation, Horseshoe Foundation, Metro-United Way, and Stock Yards Bank & Trust.

Kiva’s unique personality and platform have also driven the product’s success in the market, according to Kiva City Louisville’s second full-time Fellow Josie Raymond.

“People have come to me and said, ‘I really didn’t feel good about asking for donations or begging for money,’ but they say they like Kiva because they can promise someone’s going to get paid back,” says Raymond of the biggest difference between Kiva and other internet crowd funding or crowdsourcing applications like Kickstarter or GoFundMe.

“The PayPal repayments make it so that they aren’t going to have to tap that person on the shoulder to ask when they’re getting their money. It takes away some of that awkwardness,” she continues.

Making a More Meaningful Connection

Perhaps the biggest advantage of the Kiva Zip platform for lending is the organizations’ success in repayment, owing, in part, to the requirement that borrowers recruit a portion of their lenders from their personal network.

“Kiva has found with 90 percent accuracy that if you get your neighbor, your customer, your grandma or your friend to lend to you, you’re going to pay it back whether your idea works or not,” says Raymond.

The internet-based platform allows lenders to connect with their investments in a more meaningful way because they are, according to Raymond, choosing to invest in a person and an idea rather than simply a business model. With this in mind, borrower profiles on Kiva feature a photo of the borrower with information about them and their business. Notably absent from the site are business plan documents, which are routinely required for traditional loans.

“There are no business plans on Kiva Zip, so lenders are really looking to make that personal connection and make that investment in the individual and their hard work and good ideas and passion,” said Raymond, who regularly counsels borrowers on how to optimize their profiles for maximum effect.  

While borrowers are diverse and include existing brick-and-mortar stores hoping to expand as well as entrepreneurs who possess only an idea, a trend has started to form in Kiva City Louisville’s base of borrowers. According to Raymond, of the 57 loans funded through Kiva City Louisville, the majority have gone to food producers, a gap that was recognized early in the process by Taliaferro and Access Ventures.

The first Kiva City Louisville loan funded allowed Luke and Katherine Groce, who own Groce Family Farm to, in part, purchase a tractor and also to purchase their first crop of piglets in an effort to diversify their then vegetable farm to include pastured pork. For the Groce’s, first-generation farmers who own a 20-acre farm in Crawford County, Ind., the Kiva Zip loan met their needs perfectly.   

“It’s almost like you couldn’t design a more perfect loan for somebody trying to start up a small pasture pork operation,” says Luke Groce, who added that he shares the Kiva Zip platform with many others in his industry.

An added benefit to the Kiva Zip loan process, according to Groce, is the relationship he has developed with the 80-plus lenders who funded his loan.

“Not only did it allow us to have the capital on-hand and to hold onto that interest free, but it’s been a marketing boon just because people in the community where we sell all of our products got interested in it,” says Groce. “They see on their PayPal accounts every month that they’ve gotten a couple bucks back from us and that’s one of many things that’s helped us stay top of mind with our customers and investors and people who have already shown an interest in our farms.”

Hidden Benefits

Sherry Hurley, who received a Kiva Zip loan to help expand her Farm to Fork Catering company, saw yet another hidden benefit to her loan process.

“I felt really validated,” Hurley says. “This is my first business. I don’t have a culinary degree and I don’t have a business degree, so a lot of this for me was learning on the job. So, to have people be willing to invest in me really validated that I must be doing something right and that what I was doing was benefiting and making an impact.

“We are not just a catering company; the original focus was how can we support farmers in a bigger way,” Hurley explains.

Hurley utilized her Kiva loan funds to update her computer hardware and software and to add an employee, which she says led directly to her company’s recent growth.

“I can look back now,” recalls Hurley. “And I can see that I really don’t know what we would have done if I hadn’t gotten the loan.”