How Can You Start a Loan Crowdfunding Campaign?
As we begin to emerge from quarantines and lockdowns, there are a lot of reasons to feel relief. Far fewer people are getting sick, restrictions are lifting, and businesses of all sizes can get back to something resembling their normal operations. Thanks to federal funding programs like the PPP (Paycheck Protection Program) and EIDL (Economic Injury Disaster Loans), many small businesses were able to offset the effects of the pandemic and keep themselves afloat.
For new and up-and-coming businesses looking to expand for reasons outside of pandemic hardships, funding may remain a source of struggle. Small business lending outside of the pandemic offerings has actually decreased significantly during the last year. In fact, this is not uncommon during a recession; when economic times are good, banks are typically eager to lend, but when the economy is down, they pull away from riskier loans. So how can small businesses looking to grow find funding while we’re still in a recession?
This question hits home in particular for Nippitaty, an organic craft distillery in North Charleston, South Carolina. They were recently seeking funding to move their warehouse to a larger, more central location. The move will enable them to increase the capacity of their tasting room, produce more spirits, and grow their sales and distribution teams. It was a big undertaking and Nippitaty ultimately enlisted Honeycomb Credit to help crowdfund the $30,000 they were seeking.
Honeycomb Credit is a unique crowdfunding platform whose goal is to turn everyday people into investors in the companies that they contribute to. They specialize in loan crowdfunding, which enables small businesses to borrow capital directly from customers, who then are paid back and earn interest once the business is up and running. Through Honeycomb Credit, Nippitaty raised nearly $68,000, more than double their $30,000 target, to revitalize their distillery and grow their business.
We spoke to Traxler Littlejohn, owner of Nippitaty, about his experience with Honeycomb and the successful crowdfunding campaign.
HRN: What did you want to highlight about your business for investors? What makes it unique?
Traxler: I wanted to highlight a couple of things. Certain people have asked how they can support us, how they can support us aside from buying product, and this is the perfect opportunity for the regular everyday person to invest in a business that they know and love or, you know, in Main Street America versus Wall Street.
I thought that Honeycomb gave such a great opportunity [with] a minimum investment of one hundred dollars all the way up to however much you might want to invest. And we also want to feature that we’re certified organic and make handcrafted spirits and cocktails. And with this raise, we wanted to bring that to once again, a better location where people can have easier access to our spirits and our cocktails.
HRN: How did you decide to go the route of loan crowdfunding with Honeycomb Credit?
Traxler: We tried to do a Kickstarter program and it didn't fare very well. Honeycomb Credit, they basically contacted me during our Kickstarter campaign. We wanted to let Kickstarter run its course and give it the honor it deserved to try. And then when it didn't work, I reached back out to Honeycomb and said, ‘Hey, let's do this.’
HRN: What’s the difference between a Kickstarter and a Honeycomb Credit campaign?
Traxler: There's a lot of stories out there, a lot of breweries where Kickstarter might be [good] for a new, different, bold idea. Or [if] you have a large following with people with a big disposable income who don't necessarily want a return on their investment and are more altruistic than anything. It’s not an investment, it's a donation, so you're looking at someone's generosity of the heart.
Whereas with Honeycomb, it’s truly an investment. You can explain to someone that ‘if you invest X, you're going to get Y’ on a quarterly basis for the term of the loan, which is five years. And while it's not windfall profits, it makes someone realize, ‘Hey, I can support a business I like, I can support a small business and I get a return on my investment.’ So it's really just hitting all those boxes that someone would want to do.
HRN: In addition to return on investment, you offered investor incentives?
Traxler: The investor incentives [started] at the $1,000 level. We want to put people's names on our rejuvenation wall. We just want to honor them at another level and put their name on the wall or someone's name ‘in memory of’. And then we also added private tasting events where, at the $2,000 level, you and 10 of your friends could come for a private tasting event. You get a private tour with me. And then we did the same thing at the $4,000 level, where instead of 10 people, you could bring 20 people. And that just gives someone who's willing to invest that much money just makes it a little bit more personal for them.
HRN: What would be your tips for other businesses considering launching a loan crowdfunding campaign?
Traxler: Most importantly, you have to humble yourself. You cannot just say ‘let's do this,’ start it, and then step back. It is a lot of work. You basically are one level below a spammer by constantly emailing, calling and reaching out to people. It is scary as hell because it starts off slow and it picks up speed, and you just have to be realistic with your goals.
You need to be ready to constantly bug people and still be honest and show them your real personable side, not that you are pure business, but show them that you're a real person and you're like everybody else and you're just trying to make your dream happen. I always tell people, people can help make your dream happen, which is kind of a part of their dream sometimes. Watching someone succeed, they can be part of this beautiful event. That's what really grabs people into it. And you have to just be ready to talk to people and put yourself out there.