It's tough to bootstrap a craft or artisanal manufacturing business. That's because it's rare that profit – in the short term – is sufficient to fund expenditures for the accounts receivable, inventory, equipment, and marketing required for growth. Sooner or later, you're likely to need some kind of external financing. The problem is that small-scale makers of consumer products don't fit the criteria required by the usual suspects. If you need a few thousand dollars to maintain your business momentum, you may want to consider a Kiva Zip microloan as an alternative.

I spoke with Warren Vaughan and Heather Kearney about their experiences as a Kiva Zip lender and borrower, respectively. Their insights will help inform your decision about the conditions under which it might make sense for you to consider this innovative and inexpensive growth capital. First, though, let's explore the structural reasons that gave rise to Kiva Zip.

A Misfit with Traditional Sources of Funding

Small makers of consumer products aren't a good fit for traditional sources of business capital:

* Credit cards are readily available but expensive. The annual percentage rate (APR) on credit card balances can range from 15% to 30% or more. Furthermore, you may find that credit can be withdrawn if you maintain a balance for an extended period of time.

* Bank loans are for established companies that need to borrow tens of thousands to millions of dollars.

* Venture capital is for hyper-growth companies that offer the potential for a relatively quick "exit" by investors.

* Raising equity capital or loans from friends and family can place an inordinate strain on personal relationships if not structured carefully.

* Emerging peer-to-peer loan markets such as Lending Club can be a good alternative to credit cards, because they offer fixed rates and extended repayment terms. However, unless you already have an excellent credit rating, the rates on such loans can be very high.

What Bankers Want

Bankers are risk-averse – for good reason. A while ago, I spoke about why the behavior of bankers is easy to understand and anticipate.

The Pressure for Banks to be Big

Finance wants to be big. It's easy to understand why. After all, which is likely to be easier and more profitable as a lender: making 1 x $1,000,000 loan or 1,000 x $1,000 loans? The economies of scale of finance is reflected in the growth in the average size of commercial banks over time:

* In 1994, there were 10,453 commercial banks that had, on average, $384 million in total assets.

* By 2014, the number of banks had fallen to 5,643, but their average size had grown to $2.5 billion in assets. The largest banks in the U.S. now have total assets of $2 trillion or more.

Source: FDIC

One consequence of these trends is that it's increasingly difficult for banks to know their customers personally, even as technology has enabled lenders to access growing amounts of data about potential borrowers.

Character Has Gone Missing from the Credit Equation

Historically, lenders have relied upon the "4 C's" to assess the creditworthiness of a prospective borrower:

* Character is a qualitative assessment of a borrower's trustworthiness and will to repay a loan in a timely fashion.

* Capacity refers to the anticipated cash flow of the borrower relative to scheduled debt service payments.

* Capital is a measure of the strength and liquidity of the borrower's balance sheet.

* Condition means the environmental conditions that could impact the borrower's ability to repay its debt over time.

As banks have grown in size and, consequently,