This is a guest post from Alex Binkley, a Harvard and Boston University educated corporate lawyer. He has worked for and run numerous small businesses throughout his life, ranging from a small local recycling company to a rowing shell manufacturer. But it was after spending years helping both startups and public companies build and grow that he really noticed a lack of options for small businesses that needed capital. He helped start Funding Community with the goal of helping businesses gain greater control over their own destiny.
My local New York City coffee shop has a problem… its espresso is good but not great. The owners are itching to improve, but they have a business to run and baristas to pay so they just cannot afford expensive improvements like a better espresso machine. The shop’s cash flow is solid, but because the business is relatively new it does not yet have reserves for major improvements. And if you have followed small business news over the past few years you likely know there is little chance a bank would lend to my coffee shop.
Personally, I want to see this business take off, but I am only one person and despite my best efforts I cannot fund these improvements buying $2 cups of coffee all day.
Like many Americans, I have worked hard and always saved my money. I put a little in the market, but most stayed in the bank where it would be safe and grow with interest. Recently, however, my hard-earned savings has been wallowing in a bank account earning just 0.5%. Meanwhile my bank has been turning around and lending my money to its other consumer clients at 23%!
This is why we started Funding Community, the first US crowdfunding platform for small business loans. Funding Community lets small businesses borrow money on better terms and allows individuals to lend to support these small businesses’ loans. If my coffee shop were to start a campaign to buy a $5,000 espresso machine Funding Community would post the loan campaign to the platform at www.fundingcommunity.com where just about anyone from across the United States could lend anywhere from $25 to $1,000! Each month the coffee shop repays principal and interest, and at the end of nine months its loan is fully repaid.
That’s not all a lender gets though. We ask each borrower on Funding Community to provide a “reward,” like 10% off, to its lenders. That way lenders like me who already support the borrower are encouraged to come in more often, while other local lenders are encouraged to become customers and new champions of the business. Because I am lending to local businesses I want to patronize I get the opportunity to shape my own community’s growth!
While we would love all borrowers to be fully funded locally, there may only be enough local interest to fund a portion of each loan. Because our primary goal is to find funding for these great local businesses we will not leave out someone in San Francisco just because she cannot take advantage of the discount at my coffee shop.
She can still lend to the business because she likes how the shop looks and operates and has found Funding Community to be a better place to put her money.
Funding Community is trying to change how individuals can shape the small business landscape of the United States, while doing better financially at the same time. By lending in Funding Community everyone can do well by doing good.