Mom and pop business owners often struggle to find enough capital to get their ideas off the ground and succeed, research shows. Kiva Dayton’s recently launched crowdlending platform aims to help solve this problem.
Kiva is similar in some ways to the Kickstarter creative crowdfunding site, where entrepreneurs must meet a deadline for raising money, and promote their fundraising campaigns through their social networks.
Now, the Downtown Dayton Partnership is offering to commit the first 20 percent of each Kiva loan to help potential business owners build buzz and raise more funds through the platform.
The partnership’s Vice President of Economic Development Scott Murphy says the program fills a critical gap in commercial lending.
Many new business owners can’t afford a big down payment on a business loan. Or, they’re often rejected by commercial lenders unwilling to take a risk on someone without an established business track record.
“An entrepreneur who just needs an additional piece of equipment that allows them to produce something that they can’t produce now, which allows them to cater to customers that they can’t do right now, and so this microloan program is a great way to not only pay the loan back, but to also grow their business,” he says.
Murphy says supporting small, and micro, businesses is good for the Dayton region's economic diversity.
“For us to have a thriving small business and startup ecosystem, we can’t just focus on technology-based or high-growth startups,” Murphy says. “There are plenty of service-based companies, retail businesses, and more that provide important contributions to our economy. These businesses need to have funding outlets as well."
According to a study by the U.S. Small Business Administration’s Office of Advocacy, inadequate capital is the major obstacle facing small businesses when it comes to growth, expansion and wealth creation.
This, the agency says, is particularly true for women and minority-owned businesses.
"Studies indicate that women entrepreneurs have less access to financial capital or make less use of it than male entrepreneurs. Research shows that the characteristics of women-owned firms may help explain why women obtain smaller loans, pay higher interest rates, must put up higher collateral, and are dissatisfied with the bank loan process," the study finds.
All Kiva loans are zero percent interest and they’re small, with no loans over $10,000.
Business owners who succeed in raising funds through the platform have to pay the loans back within 36 months.
The partnership invites anyone interested in contributing to the DDP seed fund to contact Murphy at firstname.lastname@example.org.