Kiva Small Business Loan Review
Kiva is a nonprofit peer-to-peer lender that places a premium on popularity. Unlike most lenders, which use credit scores, accounting statements and other traditional gauges of financial success to decide who gets a loan, Kiva believes that if you can recruit a group of supporters on your own, then you have enough social capital to access its wider network of more than 2 million partner lenders.
It’s a novel concept that naturally appeals to the entrepreneur who lacks cash but is rich in friends. But is it right for you? Here’s more on what you need to know about Kiva, including the application process, pros and cons, and the maximum amount you can borrow.
How does Kiva work?
Kiva
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Types of loans
Peer-to-peer crowdfunded loan
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Better Business Bureau (BBB) rating
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Loan amounts
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Terms
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Minimum credit score needed
No minimum credit score required
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Minimum requirements
You must be 18, live in the U.S., use this loan for business purposes, not currently in foreclosure, bankruptcy or have any liens, and have a small number of your friends and family willing to make a loan to you (Nevada and North Dakota residents are not ineligible)
Pros
- Ability to borrow with no interest
- Loans are geared toward borrowers who are unbanked and have trouble qualifying for financial products
- Ability to market your product to 1.6 million lenders on Kiva
Cons
- You need to prove your creditworthiness by inviting friends and family to lend to you
- It can take a while to receive your loan since investors need to raise money
- No BBB rating
You start the loan process with Kiva by applying online. You’ll have to provide some basic information on your business, such as where it’s located, its name, how much you want to borrow and more. You’ll also need to eventually build a public profile for yourself with Kiva, which includes a photo of you and a short summary about your business.
Kiva doesn’t have a minimum credit score requirement for applicants, so it’s a much more accessible option for those who may be worried about qualifying with a lower credit score. That said, you have to meet certain criteria for Kiva to consider your application, including:
- You and your business are based in the United States but not in Nevada or North Dakota
- You’re over 18 years old
- Your business doesn’t involve any multi-level marketing, direct sales, gambling, illegal activities or investing in stocks and securities
- You can’t currently be in bankruptcy, foreclosure or under any liens
After you apply, Kiva gives you 15 days to raise money from people you know to help prove your venture’s importance to a community. The number of people Kiva requires for this initial round of fundraising varies from 5 to 35, depending on the size of the loan and other factors.
Once that initial 15-day period ends, your campaign gets shared with Kiva’s network of lenders that can pledge money to your business. You get 30 days to fundraise additional proceeds. Then, you’ll have up to 36 months to repay the loan.
One to six months after receiving the loan, you’ll begin making monthly payments directly to Kiva, which will then disburse the money to all of the lenders who supported your campaign.
How much can you borrow on Kiva?
Borrowers can crowdfund up to $15,000 through Kiva. Such small funding amounts are known as microloans. By contrast, other lenders typically let business owners apply for as much as $500,000 to $1 million. Some lenders may even let you apply for up to $5 million.
How much does Kiva cost?
Since it’s a nonprofit, Kiva offers 0% interest on loans for U.S. small businesses. Kiva lenders also don’t receive interest payments for the loans they fund. However, according to the Kiva team, if you’re looking to borrow money through Kiva’s international loan program, you may be charged interest by the company’s Lending Partners — microfinance institutions and other organizations in Kiva’s network that disburse the loan and collect payments. While the Lending Partners collect interest, Kiva does not.
The average global interest rate for microfinancing is about 35%, but rates can vary by region, according to the Georgetown Public Policy Review. Kiva says it aims to work with microfinance institutions with a social mission toward the underserved and that don’t charge unreasonable interest rates.
Kiva pros and cons
Consider the following pros and cons before you apply for a Kiva microloan.
Pros
- Offers 0% interest loan
- No minimum credit score requirement
- More accessible to entrepreneurs with lower credit scores
- Ability to market your product to 1.6 million lenders on Kiva
- Minimum $1,000 loans
- Repayment terms of up to 36 months
Cons
- Lending Partners may charge you interest
- You can only receive up to $15,000, so if you need to borrow more than this, Kiva may not be the best option for you
- You’ll have to crowdfund your loan, which can take a total of 15–45 days (when you account for the friends-and-family period and the public-fundraise period), so may not be ideal for people who need funding in a pinch
Kiva alternatives
If you aren’t sure if Kiva is right for you, here’s how it compares to some other small business lenders.
Kiva vs. Credibly
Kiva doesn’t have a minimum credit score requirement, but Credibly does: Borrowers should aim to apply with a credit score of at least 500, which still makes Credibly fairly accessible to those with lower credit scores.
Credibly
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Types of loans
Long-term loans, working capital loans, business line of credit and merchant cash advance
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Better Business Bureau (BBB) rating
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Loan amounts
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Terms
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Minimum credit score needed
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Minimum requirements
Must have been in business for at least six months and have average monthly revenue of at least $15,000
Pros
- Offers multiple options for small business financing
- Can get approved within four hours
- Low minimum credit score requirement
- Provides loan amounts of up to $600,000
- Funds deposited as soon as the same business day
- Considers overall business health as an approval criteria
Cons
- Requires an average monthly revenue of at least $15,000
Kiva vs. OnDeck
OnDeck is another traditional term loan lender — it offers loan amounts as high as $250,000, which is lower than what Credibly offers but still higher than Kiva’s maximum. Kiva does offer a longer repayment term than OnDeck: 36 months as opposed to 24 months. This can be a significant selling point if you’re prioritizing longer repayment options for a smaller monthly payment.
Another big difference is that OnDeck can get applicants funded as soon as the same business day (only available in certain states and for loan amounts of up to $100,000). Again, Kiva’s turnaround time is much longer since you’re crowdfunding your loan, so keep this in mind if you need funding in a pinch.
OnDeck
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Types of loans
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Better Business Bureau (BBB) rating
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Loan amounts
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Terms
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Minimum credit score needed
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Minimum requirements
In business at least 1 year, $100,000 annual revenue, business bank account
Pros
- Potential for same-day cash disbursement (only available in certain states, for term loans up to $100,000)
- Top-tier A+ rating with the BBB
- Low minimum credit score
- Fixed monthly payments
- 100% Prepayment Benefit option, so you can pay your loan off early without any penalty or fee
Cons
- Doesn’t lend to businesses in Nevada, North Dakota or South Dakota
- Early prepayment fee if you don’t qualify for the 100% Prepayment Benefit
FAQs
Do you pay back money from crowdfunding?
Whether you have to pay back money your business receives from crowdfunding depends on the type of crowdfunding you do. If you use debt-based crowdfunding, you do have to pay the money back since you’re borrowing money, similar to a loan. But with donation-based crowdfunding, equity crowdfunding and rewards-based crowdfunding, you won’t pay the money back.
How long does it take to get money from crowdfunding?
Because crowdfunding requires you to create a campaign and raise funds from a large pool of people, it can take a few months to complete your campaign. In fact, most crowdfunding platforms give you between 60 and 90 days to reach your fundraising goal. When it comes to the actual disbursement of the cash, timelines can depend on the crowdfunding platform you used.
What happens if you don’t reach your fundraising goal?
If you don’t reach your fundraising goal by your campaign deadline, all the money pledged to your business will be returned to investors, and you typically won’t be charged any fees.
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