By Steven Emmen, NFU Intern
Access to capital is one of the toughest hurdles a beginning farmer will overcome. Beginning producers frequently don’t have collateral to offer lenders. And it can be hard to build a good credit score as a farmhand or apprentice. New farms may also lack accurate income projections that are used by FSA to evaluate loan applications. That’s why alternative means to accessing capital can be beneficial to beginning farmers and ranchers.
Since 2005, the non-profit Kiva has been helping producers and businesses internationally by crowdfunding microloans that are $10,000 or less. The most astonishing thing about this capital is that it can be acquired with no interest.
To get started, a producer needs to set up a profile and apply for a loan. The two types of loans offered are direct and partner loans. Partner loans are done with a Kiva “field partner” and usually include interest to compensate the field partner. However, if you are in the United States, you are able to set up a direct loan linked to a PayPal account and pay zero interest. Direct loans are approved through a friend, family or Kiva-approved trustee vouching for the borrower.
Loans applied for can be $10,000 or less and can have varied payback periods. It should be noted that applicants for a loan are going to have to pull out those farmers-market-skills and sell themselves appropriately. You can see other projects or businesses currently being funded to judge what it will take to really sell your project.
Once your profile is made and loan approved, you will enter a loan disbursal period. This is a time when lenders help with crowdfunding your loan. Lenders can be anyone and are allowed to fund anywhere from $25 to the entire loan. Kiva prides itself on the return rates and currently advertises a 97 percent return rate. Once the loan is repaid, the amount will land in the lender’s Kiva account and can be reinvested into new projects.
This is not your typical loan service that mom and pop would have used. With technology comes new and innovative things in every part of our lives and finances is no exception to it. Kiva from a distance has done an excellent job of connecting borrowers and lenders. They have recently just surpassed $1 billion in loans funded in 84 countries. To learn more about getting a micro-loan, visit Kiva.org and learn how you can both borrow and lend.