3 Worrying Trends for Main Street, and How Loyalty Bonds Can Help
Over the past few weeks, the Honeycomb team has been working hard to serve local small businesses as they struggle through our current economic uncertainty. Below are the three most important lessons we've learned and why we just announced the launch of Honeycomb Loyalty Bonds:
1) The Paycheck Protection Program missed those with the greatest need. Beyond the headline-making blunders by large banks and the Small Business Administration, it is clear that PPP overlooked Main Street businesses and minority and women-owned businesses in particular. Because the PPP was administered by large banks and pre-approved SBA lenders, many small businesses without a formal banking relationship were left out in the cold. The Center for Responsible Lending estimates that perhaps more than 90% of Black and Latino-owned businesses will be excluded from PPP.
2) Restarting isn't going to be easy for small businesses. Many business owners are already facing the impossible decision between health risks and financial disaster. Many millions of consumers will now face this decision in the coming weeks. Yet, even if a business can reopen, most will be operating with restrictions and would-be clients who face their own financial and health concerns. With notoriously thin margins - as businesses reopen at reduced capacity and face unchanged overhead costs, there will be some tough months ahead.
3) Gift cards are great, but they come with a potentially fatal flaw. By now we have all heard how important it is to buy gift cards to support our favorite small businesses, and it is absolutely true that gift cards are one way to plug the financial gap businesses are facing. But if a business reopens, at limited capacity, even a few customers shopping with gift cards could disrupt an already delicate cash flow as businesses are forced to honor the gift cards while simultaneously experiencing months of below-average cash and credit card sales. Sadly, we may find that some businesses scrape together enough resources to survive the shutdown but will be unable to survive a cash flow crunch from gift card redemption.
These trends are worrying, but they are not insurmountable. Ken Martin and I founded Honeycomb because we are inspired by the passion and creativity of small business owners. We want to give small business owners a new tool as they embark on the road to recovery, so we are excited to announce Honeycomb Loyalty Bonds.
Loyalty Bonds are a gift card subscription sold at a discount to customers and distributed to customers over time. Much like a traditional bond, the Loyalty Bond allows businesses to get cash in the door now to cover expenses and prepare to reopen, while spreading the outflow over time. The Loyalty Bond will also act as a customer loyalty program where top customers keep coming back as new gift card disbursements are issued.
We encourage you to visit www.honeycombcredit.com/bonds to learn more about purchasing a Loyalty Bond from a small business or to share the program with your favorite small businesses.