Over the past year and a half, 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 how Honeycomb crowdfunding loans can potentially help small businesses still finding their way out of the pandemic:
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 the 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.
Unfortunately, this isn't just specific to the PPP when it comes to small business lending. Black-owned businesses only receive 3% of SBA funding, and lending to small businesses in general have been on a decline for almost a decade.
2) Restarting after the pandemic 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.
We've already noticed the reverberating consequences of the past year on small businesses, especially the restaurant industry. Crowdfunding offers an opportunity for these businesses to bounce back by relying on their greatest resource - their customers. This can not only help them get the capital they need, but also strengthen their customer relationships, which can help them weather through tough times.
3) Gift cards are great, but they come with a potentially fatal flaw.
At the start of the pandemic, one way in which we sought to help was 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 encourage you to visit www.honeycombcredit.com/grow to learn more about crowdfunding a small business loan or to share the program with your favorite small businesses.
If you're a small business owner, you can learn more by filling out the form below to receive more information about how a Honeycomb Credit can help you grow your business.