Small business owners struggling to make ends meet may be interested in two new programs aimed at offering financial assistance to entrepreneurs in hard times. And they come from two organizations you’re probably already familiar with and trust.
The first opportunity is through Kiva. Kiva has been lending financial assistance to business owners in Africa and other developing countries since 2005. However, they realize that hardship happens everywhere, not just in developing countries. And just last week they brought their microplatform lending program to the US in a special pilot program, allowing lenders to make small loans to low-income U.S. entrepreneurs to help give them a boost.
Just as it always has, Kiva will act as the middleman in the transactions between between US entrepreneurs and those wanting to donate. Lenders will be able to browse entrepreneur profiles created on the site and then make a small donation to help (the average donation is around $400) the small business of their choosing. The entrepreneurs are then responsible for returning the money back to the lenders, who can then either keep it, donate it back to Kiva or lend it to another entrepreneur.
Right now, the program is still in beta mode, which means it’s closed to the public. But the current test run will feature 45 US businesses in New York, San Francisco, Boston, Atlanta and Miami, and is definitely worth keeping an eye on. If you want to help or just watch what they’re doing, you can get more information from Kiva’s partners OpportunityFund.org or Accion USA. I’ll definitely be watching to see what happens. This could create an unbelievable support network for budding US entrepreneurs.
The other program small business owners will want to read up on comes from the US Small Business Association. Just yesterday, the SBA launched the America’s Recovery Capital program that was enacted as part of the government’s $700 billion recovery package. ARC is now accepting applications and is expected to run through the money quickly. Which means act fast or lose out.
ARC will offer established SMB owners up to $35,000 in short-term relief if they can prove they’re facing “immediate financial hardship”, like declining sales and revenues, difficulty in making payments on existing debt, hardship paying employees and/or rent, etc. However, note the word “established” in the eligibility requirements. It looks like if you’re a brand new start up, you’re out of luck.
According to the requirements, to be eligible for the loan your business must be at least two years old, you must have been profitable for at least one of the past two years and have a solid plan for how you’ll be profitable in the future. The loans offered through the ARC program are intended to help SMB owners pay off other loans or debt, not necessarily to help you get going. For example, if you have credit card debt related to running your business, you can use the loan for that. If you want to use the money to expand your business in some other fashion, don’t get too excited. On the upside, SMB owners who are granted a loan won’t have to worry about repaying it until 12 months after their last loan disbursement and its interest free for five years.
The SBA will be offering these ARC loans until September 30, 2010 or until the SBA goes through the $250 million allocated. My guess is the latter will happen first. If you want to get your hands on some of the loan money, head to the US Small Business Association Web site for more on the ARC loan program, as well as an application.
With so many SMB owners facing hard times, it’s nice to see a bit of a relief aimed at them.
While I think ARC is a great resource, I like Kiva a lot more (because the government isn’t involved). Think about it, the government can’t pay off its own debt yet they’re helping small businesses pay the bills?
Good point Robert. I’m just happy to see that someone is willing to step up and offer help. It’s discouraging to witness small business owners struggling to stay afloat. Will be passing these programs along to others who may need assistance.
Robert: Heh, yeah, can’t argue that. However, for right now Kiva’s program is closed to the lucky folks already inside. The rest of us just have to watch from the sidelines and see what happens. I think it’s going to be pretty successful though.
Hey Lisa, this is helpful. You keep your finger on the pulse of what SMBs care about. Just last week a client prospect of mine asked me about finding private equity or a loan for growing their company. These resources will help.
I’m also a fan of Netbanker, which you may know. Jim Bruene writes exclusively around online banking in his in-depth reports, but also at the Netbanker blog. While the focus is not exactly around small businesses, he posted about Kiva and has written quite a bit about micro-finance, which is a growing trend.
I am curious as to the investment motives simply to shore up ones balance sheet? Are investors entitled to convertiable warrents? How is the cost of debt priced?
It’s starting to feel like a small turn-around is in the works – the news is sounding positive (instead of the barrage of negativity at the beginning of the year). Thanks for reporting on what may be a life-saver for some small business owners.
TJ: Thanks for the tip on Netbanker. I have to check out that site. I think micro financial products and services will be a big thing in the future.
@Martin I agree. There are a couple of microfinance entities here in the Seattle area. Doing really cool work. I’m a huge fan of Netbanker and I think you’ll enjoy them. The blog shares a lot of details and ideas. Then they have paid reports you can purchase with a bit more in-depth coverage.
Lisa, thanks for sharing all these. Really thank you!
Great! getting a loan for $35,000 with no interest will relief viable small businesses facing immediate financial hardship to help ride out the current uncertain economic times and return to profitability.
Thanks for the information on small business lending. I recently put together a list of links that small businesses can use when evaluating lending sources. It is on my Florida Small Business blog (http://floridasmallbusiness.blogspot.com/2009/06/access-to-capital.html). I appreciate the information because now is the time that small businesses need to know how they can succeed.
TJ: Could you use micropayments at Starbucks in Seattle?! 😉
One big problem for borrowers is locating a loan from a lender who is not their bank. Many of the banks want to provide loans to current customers only, especially if they hold a loan from that customer. Also, many banks have additional requirements for the loans beyond what the SBA has required. But not one of the banks is happy about having to process and underwrite a loan package for a $35,000 loan that requires nearly as much information as a needed for a regular sized SBA 7(a) loan.
My company, Business Borrowers Alliance, is contacting the large and mid-sized banks to learn if they are participating and what their specific requirements are.
We provide direct assistance and help to businesses throughout the complete ARC Loan application process.
For more information, contact us at 866-944-3866, email@example.com or visit http://www.businessborrowersalliance.org
Our small business readers need a new program from the federal government. We think the SBA needs to stop dancing with bankers who will not give loans and make loans directly to small business.
I’m writing to you from Hermanus, South Africa.
In October 2008 our local fish factory (operational for the last 30 years) closed down due to bad management and wrong business choices made.
This now affecting 104 (previously disadvantaged) households where most of the workers being the bread winner.
We are now reaching out to whoever we can, to assist us financially to get the factory going agian with the ownership in the hands of the workers.
I am a young woman in Swaziland looking for funds to start up a farming business so please get back to me if you are willing to help or know of someone who can help
Cyril Ikechukwu A
I am a retired Nigerian who has dependents and children in school.I have set up a small business I hope will be able to help .I have discovered that plastic bags/polythene bags are in needs and so I have decided to venture into this area.I wish to set up manufacturing plants.From the assessment the cost of the equipment is about 45,000 dollars.
I am a genuine struggling man but I have no capital to start.I am looking for a kind philanthropist or investor who can help me.He may not give me money but can help me order the equipment.I promise to pay back with interest as soon as the business is in progress.I need to assure that Nigeria with a population of over 170 million people is a very potential market for a successful business venture.
i am a single mother with 3 kids and would like to open a business but dont really have capital ,i am anot luking for much if you can please give me a loan ,im from namibia