When Carl Lewis needed a refrigerated dessert display case for his 48th Street Grille in West Philadelphia, he applied for a $5,000 zero-interest loan from crowdfunding website Kiva.org.
"I envisioned opening this restaurant. I applied to several banks for a loan, and they all turned me down," said Lewis, whose Kiva Zip loan was underwritten by 185 lenders as far away as Sweden and Australia.
The money-raising initiative will now be available to more small-business owners and aspiring entrepreneurs with the launch of Kiva City Philadelphia on Tuesday. The program was announced jointly at Lewis' restaurant by Kiva.org president Premal Shah, Mayor Nutter, and Alan Greenberger, director of the city Commerce Department.
Philadelphia is the 10th U.S. city to join the Kiva program, aimed at starting or expanding businesses that might not otherwise qualify for traditional lending.
The nonprofit Kiva has facilitated "micro loans" to small-business owners in 80 countries for a decade, with 1.2 million lenders funding $650 million in loans.
Borrowers are vetted and must be endorsed by a "trustee," such as a community group, that's been approved by the nonprofit. The entrepreneurs must find 15 friends or associates to underwrite them online before the Kiva loan proposal is listed publicly for crowdfunding.
The borrower can receive an initial Kiva Zip loan of up to $5,000 (pledges start at $5). In Philadelphia, loans will be matched dollar for dollar by PNC Bank, the Zisman Family Foundation, Nancy and Greg Wolcott, and Friends of Kiva City Philadelphia, the nonprofit said.
Grants to help the program get started will come from the Barra Foundation, the Philadelphia Foundation, the city Commerce Department, the Zisman Family Foundation, and the Mayor's Fund for Philadelphia.
Lewis' lifelong dream was to open his own restaurant, after working nearly four decades in the restaurant and hospitality industry for InterContinental Hotels and Marriott Corp., and as executive chef at Temple University Health Center.
When he learned that Kiva "was giving out these micro loans," he applied. With his first $5,000, plus a $15,000 interest-free loan from the Hebrew Free Loan Society of Greater Philadelphia and a Small Business Administration loan from the Enterprise Center in West Philadelphia, Lewis then was able to get a bank loan.
Five weeks ago, he opened the 48th Street Grille near 48th and Spruce Streets, serving fresh Caribbean American fare.
Fourteen Philadelphia entrepreneurs have received Kiva loans thus far. Among them are Peter Merzbacher, founder of Philly Bread, a bakery in the Olney section, who received a $5,000 loan underwritten by 135 lenders. Arthur Verbrugghe, who started a custom-clothing workshop in Roxborough, Atelier Arthur L.L.C.. received a $3,000 loan from 86 lenders.
At Kiva.org/Philadelphia, small-business owners can apply for micro loans "with zero percent interest, no fees, no mandatory credit check, and no collateral requirement," Nutter said.
"We call it social underwriting," said Johnny Price, senior director of Kiva Zip, on hand for the announcement. "Normally, a bank will employ financial underwriting. They will look at your credit score, your collateral, and cash flows."
Kiva looks at a borrower's character, Price said. "We ask borrowers to recruit 15 people from their network to fund their loan in private before we post it publicly on the website. Since we rolled out that innovation, we've seen a significant improvement in our repayment rate: 90 percent in the United States right now."
"It's kind of how banking was done 100 years ago, where people vouch for people," said Ziva.org president Shah. "When businesses pay back the loan, they can qualify for larger loans from the Internet community. It becomes almost a public credit score, where local banks can get off the sidelines and begin loaning to people like Carl."