Richmond’s biggest employer is pitching in a second round of funding to a local micro-lending program.
Capital One is putting up $25,000 to Kiva City Richmond, a business lending program run by the crowd-funding site Kiva. The money is a revolving fund that will be used to match private loans to local businesses through Kiva’s online lending program.
It’s the second $25,000 loan pool Capital One has put up for Kiva borrowers since Kiva City Richmond launched about eight months ago. Since then, Kiva City Richmond has facilitated more than $100,000 in loans to 23 local businesses.
Local loan recipients include woodworker Steve McAlpin, who makes custom walking sticks for veterans; stuffed-animal entrepreneurs Meagan and Phil Barbato; and Happy Tomato owner Elizabeth James, who used a $5,000 loan to buy packaging for her marinara and pizza sauce and expand her reach in retail stores.
James raised $2,500 from 103 donors/lenders in about 24 hours. That was then matched by Capital One. She’s since put her products in 22 stores, including three Whole Foods locations, and is now paying back her loan.
“There is no interest, and when you’re a small company, you’re really looking at whatever bit of money you have,” she said.
Kiva lets anyone send participating businesses a loan of as little as $25.
The loans are interest-free, so lenders do not stand to make a financial gain through the program. The loans are not guaranteed, though Kiva’s website boasts a nearly 99 percent repayment rate. Richmond-specific loans have been paid back at a rate of 92 percent, according to the company.
When a loan is paid back, lenders have the option to loan that money to another business or pull it out of the Kiva system.
To qualify to borrow money through Kiva, a business must be endorsed by a Kiva-trusted local business entity. In Richmond, Kiva’s list of about 15 trustees includes Bizworks Enterprise Center, Blueberry Marketing, Second Look Capital and Vermeer Consulting Group.
Jonny Price, senior director of Kiva Zip, the wing of Kiva that administers Kiva City Richmond, attributed the 92 percent local payback rate to the trustee system and a new policy that requires entrepreneurs to round up 15 loans on their own before Kiva will publish their business online.
“You’ve got to demonstrate your entrepreneurial spirit, frankly,” Price said.
Entrepreneurs can aim as high as $5,000 for an initial campaign but they must hit that goal to receive any loan money. After paying back their $5,000, companies can push for bigger loans in the future.
Kiva has set up city-specific programs with financial backing from corporate partners in at least six other cities. Capital One matches loans dollar for dollar in D.C., as well, and has committed $500,000 to matching loans over Kiva’s entire platform.
Kiva does not take a cut of the money donated across its platform. The nonprofit is funded by optional online donations, grants and corporate sponsorships.
Crowdfunding has become a trendy fundraising method in recent years, giving rise to several for-profit and nonprofit platforms offering both loans and grants.
Kickstarter allows perspective fundraisers to offer rewards, such as free company products, in exchange for grants, but is open to any 18-year-old businessperson with a bank account and a credit card. Kickstarter requires a fundraising goal, however, and no funds are provided if a project doesn’t hit the amount it asks for.
Locally, 2-year-old startup Bonfire Funds crowdfunds projects by selling T-shirts. The firm lets anyone launch a campaign on its website with a shirt design. If the design sells 50 shirts at $25 apiece, Bonfire prints and ships the T-shirts keeping a cut of the $25 charge to produce the shirts and run the business.
The trend also spawned Richmond-based Fundroom, a startup online platform that looks to connect investors with companies trying to raise capital.