Innovative Microloans for Rural Businesses
The Kahiau Rural Business Development Microloan Program and the Hawai‘i Food Producers Fund are two microloan programs aimed at increasing access to capital for rural businesses in Hawai‘i.
Many aspiring and existing small businesses lack access to sufficient capital to launch, sustain, and grow successful enterprises. According to a 2013 Pepperdine University study on access to private capital, 68.7% of businesses with revenues under $5 million reported difficulty accessing debt financing – 55% attempted to raise funds through bank loans, and only 34% of applicants were successful. Similarly, the Small Business Access to Capital Survey conducted by the National Small Business Association in 2012 found that nearly half (43 percent) of small-businesses are unable to find any sources of capital for their business, including loans, credit cards or investors. This inability to secure financing caused 32 percent of respondents to cut their workforce, 20 percent to reduce employee benefits, and 17 percent to fail to meet demand for their product or service.
This trend is present in Hawai‘i. As reported by the Hawai‘i Institute for Public Affairs, secondary data suggests that Hawai‘i’s businesses are undercapitalized, and Hawai‘i consistently ranks in the bottom ten states in the nation in loans guaranteed under the U.S. Small Business Administration’s 7a Loan Guarantee program, despite being the eighth most entrepreneurial state in the nation according to the 2013 Kauffman Index of Entrepreneurial Activity.
The Kahiau Rural Business Development Microloan Program offers low interest microloans up to $15,000 and business development services to entrepreneurs that demonstrate a commitment to nonfinancial values – namely, serving the community, protecting the natural environment, and strengthening culture. The program aims to expand access to capital for businesses that ensure a sustainable future for Hawai‘i, particularly businesses operating in the arenas of renewable energy, local food production, and ecosystem health. For more information, click here.
The Hawai‘i Food Producers Fund provides a dollar for dollar match for loans made to Hawai‘i Island food producers through Kiva Zip. Through its innovative crowd-funding and social underwriting model, Kiva provides 0% interest loans up to $5,000 (or up to $10,000 for farmers) to entrepreneurs who would not qualify for conventional loans. For more information, click here.