Pharmacist Le Scott was burned out after living and working for a pharmaceuticals company in Atlanta when she decided to move home to New Orleans to start a business. Her plan was to get out of the pharmaceutical industry and move into nutraceuticals by opening a retail shop in the city that would sell food products marketed with disease prevention benefits.
Ted Jackson, The Times-Picayune Le Scott, left, is opening a shop in New Orleans that will sell food products marketed with disease prevention benefits. Scott and 14 other local entrepreneurs are part of the inaugural group of borrowers in a microlending program that launches in New Orleans today.
With business plan in hand, she applied for a bank loan, but was denied.
"This was more than opening a business, this was rebuilding my life," Scott said.
The setback at the bank turned out to be temporary. Scott's store, Optimal Wellness 55, will open today, thanks to a $10,000 investment through Kiva. a nonprofit organization that allows individual investors to make loans as small as $25 to a business of their choice around the world.
Kiva, which often goes by its domain name Kiva.org, is best known for its efforts to alleviate poverty in developing nations, where it has made a name for itself by lending to farmers.
The nonprofit group recently expanded its mission to include the United States. The Kiva City program launched in Detroit in June. It is being unveiled in New Orleans. the second city on its roll, today.
"Here in the United States we know that small businesses are the backbone of the economy," Kiva President Premal Shah said. "What we're trying to do is help small businesses that are currently unable to get a loan."
New Orleans, with its high number of small businesses, presented a "pretty compelling case about why small business support was important to job creation," Shah said.
Kiva decided to launch in New Orleans after being contacted by local business booster Pamela Senatore. Senatore said she felt compelled to contact the organization after seeing many worthy business owners get turned down for loans because their credit scores and other factors made them subprime candidates.
"This isn't about credit scores," Senatore said of the Kiva loans. "It's about the character of the individual. It's character lending."
Kiva has partnered with GoodWork Network, a nonprofit microbusiness development agency, and ASI Federal Credit Union locally. The former will assist businesses with advancing their operations to the point where, if it is determined they need a loan, they can be passed on to ASI, which has been given a $1.25 million lending capacity through Kiva.
"It's about creating jobs," Senatore said. "It's about giving people opportunities."
Internationally, Kiva has worked with microbusiness owners in 60 countries including Peru, Ecuador, Bolivia and Azerbaijan.
It works this way: Social investors, as they are called, go onto the nonprofit's website and read the stories of the businesses. They can choose to read all the stories or to drill down to only those from a certain region or industry or from only female or male business owners. Then, they can make a loan of as little as $25 and as much as $10,000 to the business owner of their choice. The lenders are repaid but do not collect a return on the investment.
the lending concept has worked because individual lenders feel a connection to the businesses they invest in.
"The connection is a pretty deep one-on-one and person-by-person," Shah said. "When there's a connection, there's empathy, a generosity and people are willing to take a $25 bet at zero percent."
According to the Kiva.org, the nonprofit group has provided $237 million in loans from 600,000 lenders around the world. The loan repayment rate is almost 99 percent.
When the Kiva City program launched in Detroit earlier this summer, the five profiled Detroit businesses were completely financed in three hours with an average loan of $5,000, Shah said.
"People talk about buying locally; I think you can now lend locally too," Shah said. "It's about forming community around these small businesses and nurturing them right when they need the help."
The program is targeted to "microbusinesses," those firms with one or two employees for which a relatively small investment could have a major impact on operations. Take, for instance, Mignon Alexander, a New Orleans family child-care center operator who was turned down for a bank loan because her request was too small. Alexander needed just more than $5,000 to purchase equipment and to start an emergency reserve fund, as she moved her two-year-old business, Phenomenal Kids Development & Learning Center, from her home in Mid-City to a stand-alone site on North Broad Street.
"They required more assets than I have," Alexander said.
Alexander was able to get a loan through the Kiva program and will open at her new site with two new employees next month.
It's not that business owners like Alexander have bad business plans, but often that they just aren't attractive to traditional lenders, said Sarah Taylor, senior vice president of ASI.
"The people have the capacity, the smarts." Taylor said. "They just don't have the capital. We are a city where people tend to do business with the people they've always done business with."
ASI will make all lending decisions for the Kiva program. The credit union will put up the money, which will then be paid back by the social investors.
ASI will continue to make traditional loans, but it will look for standout businesses to include in the Kiva program.
"This is character-based," Taylor said of the Kiva pool. "If we look at the story and it is compelling, we'll put them in the Kiva bucket."
ASI was given permission initially to lend $150,000 to the first 15 businesses but will have a $50,000 monthly Kiva lending limit going forward. There is no minimum loan amount, but a maximum of $10,000. The businesses have three years to repay the loans at 15 percent interest.
Scott of Optimal Wellness 55 and Alexander of Phenomenal Kids join 13 other local entrepreneurs in Kiva's unveiling of its New Orleans network today. The program is open only to businesses in Orleans and Jefferson parishes. But Senatore said she hopes it will expand in the future.
Social investors have 30 days to invest in one of the 15 businesses.
"We see it as a key to the recovery and microlending in the community," said Adele London, business development director of the GoodWork Network. "This is not Wal-Mart. This is not a megacenter. This is a lot of (Le Scotts)."
Jaquetta White can be reached at firstname.lastname@example.org or 504.826.3494.
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