Bijou Nails in Milwaukee was able to replace equipment and expand advertising to new markets thanks to Kiva funding
The presence of unique locally owned businesses is one of the key amenities offered by downtown districts. These small businesses support local sports teams, shop at local businesses and provide goods and services tailored to the local customer base. However, by virtue of being small, these businesses often face greater challenges getting started, getting the word out, and capitalizing on growth opportunities. Fortunately, there are several tools available to businesses and the communities that support them, which can provide support and capital to sustain a strong local business climate.
Crowdsourced funding with Kiva
One constant limitation for many small businesses is a shortage of capital for startup, inventory and expansion. Most entrepreneurs do not have a successful business track record when opening, and may be classified as high-risk to traditional lenders, resulting in an average startup business capital of only $5,000.
Fortunately, there are many tools available today to allow local investors to fund businesses that they support. One such tool is Kiva, which offers 0% loans to entrepreneurs and small businesses with small and midsize funding needs ($1,000 to $10,000).
The premise is simple: a business is verified through the platform, and then must demonstrate local support for the project by soliciting at least $25 from 10 to 20 friends and relatives. Once this occurs, the project is posted to the international platform, where it can be supported by the more than 1.5 million lenders already dedicated to funding small business initiatives. Funds are pledged and paid through the PayPal platform, and then are repaid by the borrower over a three-year period in the same manner. This platform not only provides affordable capital for business expansion, but also includes a built-in marketing tool to grow a business’s customer base: Individuals that support your project financially are significantly more likely to be loyal customers in the future.
In addition, woman-, veteran- or minority-owned businesses in Main Street or Connect Communities downtown districts can receive matching funds from WEDC (subject to available funds). Under the match, for every dollar raised on the platform, WEDC will fund an additional dollar of the project, resulting in a shortened fundraising period and 80% greater chance of meeting funding goals. For motivated borrowers, the entire process from application to launch can be completed in a matter of days, and most fundraising periods last less than one month.
While virtually any type of project can be funded through the system, the best type of project is one that offers a defined and visible outcome. Some examples might include the addition of an ice cream machine/cooler, additional fitness equipment, new patio seating, a new product line, a delivery bike, etc. These projects are easy to describe and highly visible when complete, and they provide a defined service or option for customers. Success stories from Wisconsin communities have included Elegant Arrangements by Maureen in Watertown, which was able to add a line of Wisconsin-themed gift baskets to its floral business; 360 Athletics in Middleton, which was able to purchase additional gymnastics equipment for its studio; and Bijou Nails in Milwaukee, which was able to replace equipment and expand advertising to new markets.
Businesses interested in using the program to fund a project can visit the Wisconsin Main Street Kiva site, and anyone interested in supporting small business initiatives can visit kiva.org to search for deserving businesses by geography, location or project type and make a contribution.