For the past few weeks, the coronavirus (COVID-19) has caused massive disruption to our communities, the stock market, and our daily lives. We know that small businesses like yours are facing unprecedented uncertainty. We also know that there are hundreds of people in your community and the Honeycomb network that want to support you.
To help support small businesses in these uncertain times, Honeycomb has launched its Honeycomb Relief Loan Program. This webinar introduces how our investment crowdfunding model works, our Relief Loan program for impacted small businesses, and where we may fit into your COVID-19 cash flow strategy.
Get started on applying to the Relief Loan program here.
Read below for a transcribed version of the webinar:
Hi everyone, welcome to the webinar. My name is Topiltzin Gomez. I am the Philly City Manager for
Honeycomb Credit. I know that right now it's some pretty crazy times out there, so I hope that we're able to deliver something that is valuable to you. We're really excited to share our resource with you.
The way that we're going to structure this is first, I am going to explain what investment crowdfunding is. Second, I'm going to talk about Honeycomb Credit's relief loan and how we're using investment crowdfunding to help businesses in these tough times. Then, we're going to talk about how you can get started and what the process looks like running a Honeycomb campaign. Let's get into it!
About Investment Crowdfunding
First, I want you to meet Naomi. Naomi will help us understand the concept of investment crowdfunding. Naomi, she is the owner of the Pittsburgh Juice Company. She needs $35,000 to purchase a juice delivery truck. Her business is growing and she's looking to deliver her juice to coffee shops around the city. She needs this truck, but like most business owners, she doesn't have $35,000 in the bank, and it's way more than she wants to put on her credit card. So she takes a look at her financing options.
First, she thinks about going a traditional crowdfunding route with a website like Indiegogo or a GoFundMe, but she realizes that she doesn't want to ask for charity when she's running a
growing business.
Next, she takes a look at some of the micro lenders in her area, but she realizes that those micro lenders are not going to get her to that full $35,000 that she needs. She takes a look at Kabbage or another online lender that can give her that some capital tomorrow with a couple of clicks, but she reads the fineprint and finds out that these services tend to have some pretty high APRs. So she chose not to go down that route.
And of course, she took a look at a traditional bank, but what she found was that most banks, and you know most business owners can also tell you this, most banks aren't willing to lend to early-stage businesses, but especially when they're just turning a profit. She had nowhere to turn, and that's where Honeycomb Credit came in.
Honeycomb Credit is an investment crowdfunding platform. We're a website where small business owners can borrow funds from their customers, their fans, their community members, or really just any friendly stranger in their community.
That's what investment crowdfunding is, right? We're giving business owners like you the opportunity to borrow capital from anyone in the United States.
Naomi was one of our first customers, and as you can see here, we were able to help her raise the funds she needed to buy that juice truck. But when it comes to investment crowdfunding, it's about more than just the money.
Naomi got the opportunity to get media exposure from her campaign as she was giving people an unprecedented opportunity to become investors in a local juice shop.
As people found out about the campaign, she got new customers, people who wanted to kick the tires on the business and see if the juice was any good, see if this was a place where they wanted to put in a $100 or $1,000 investment.
As a result, she saw increased sales during her campaign, and by the end of it, she got 67 investors in her business. 67 people that all chipped in a hundred or two hundred dollars to help her get that juice truck. Now these people are getting paid back over the term of the loan.
But here's the thing, they're only getting paid back if the Pittsburgh Juice Company remains a viable business. So she's not only got capital, she's got investors who are committed to her success.
And here's what I think we're bringing to the ecosystem in a nutshell: small businesses get these low-interest loans that help them grow or hold through tough times.
They do it in a way that doesn't require equity dilution. You're not selling up a part of the business to get investors.
These are simple debt investments, and because this is a public opportunity for people to invest, you're generating buzz for your growth, or for your relief project.
So whether it's helping the business stay strong through coronavirus, or opening up a second location, it's really important for you and your brand to be out there as much as possible. Honeycomb gives you that opportunity to turn this financial need into a marketing asset.
Your investors have the ability to invest $100 or more in Main Street. They get to participate in the financial success of their favorite businesses, so you can imagine that as a community, we're creating a world where small business owners and their most loyal customers have a stronger relationship. Now, you can actually get to know who your regulars are, because there are investors in your business.
Honeycomb Relief Loan Program
We believe that this is not just a way for businesses to grow, but also a way for businesses to hold strong in tough times. That's why we're introducing the Honeycomb Relief Loan Program.
Basically, we are giving businesses the opportunity to run investment crowdfunding campaigns where they could borrow between 10,000 and $50,000 from their fans, community members, and friendly folks on the Internet.
And when you're thinking about this option, I can imagine that some of you are thinking yeah that sounds great, but why don't I just go the GoFundMe route? At the end of the day with Honeycomb, you have to pay the money back. Why not just get it from donations?
And I hear where you're coming from, but what we have seen is that when a business runs a campaign on Honeycomb, their average investment is $1,000.
When people are thinking about investing in the business they're actually deploying larger sums of capital than if they were donating out of the goodness of their heart.
That's why for situations like this, when you want to get a significant amount of cash in the door, we think investment crowdfunding can really help offer that short-term relief.
And we don't stop there. We also know that these are some pretty crazy times right now. Taking out a loan, you should not be expected to pay that back immediately, at least not full principal and interest.
What we're offering is a 45 day payment free period for a business once they raise their funds.
Next, we're giving you six months of interest only where you don't have to pay principal and interest until right around the holidays. Think about this as a loan that is sensitive to the current situation.
But as I said before it's not just about the capital. This is also a long-term marketing investment. This is a chance for you to share your story with your fans, with your community, and really galvanize support around your business, so that people can stand with you in these tough times, not just as customers or folks buying a $20 gift card but as investors committed to the long-term success of your business.
Relief Loan Options
Really quickly, we're going to talk through the terms and you can learn more about the terms on the website. But we basically have two options so that you can kind of see what you might get based on where your business is.
Option 1 is for businesses that are three years in operation, they show the profit in 2019. This is our premium option where businesses are eligible to borrow 10,000 $50,000 for a 42 month loan with that introductory rate at 3.75% and that would be your rate for the interest only period. And then the 5% loan would kick in for the remaining 36 months of this 42 month loan.
And of course, there is no prepayment penalty on a community-sourced loan. Let's say you strike it big with an SBA loan, and you find yourself well capitalized. You can absolutely refinance a Honeycomb loan whenever you want at no cost.
Option 2 is for businesses that have been break-even or maybe showed a loss in 2019. They're eligible for ten thousand to twenty five thousand dollars but all the other terms are the same, except that the interest rate would be a little bit higher. As I said, there's no prepayment penalties. If you do happen to find yourself in a better economic position, you can always refinance that.
Where does Honeycomb fit into your COVID-19 plan?
I've been talking to a couple of business owners and here's how we're thinking about it. First, there are grants and local funds, things that need to get done in the short term.
If you're based in Philadelphia or Baltimore, I know that the cities have created these piles of money, that are either going to grants, that are going to small businesses affected by COVID-19, or to zero interest loans. Those are highly competitive given their very generous terms, so I would absolutely make sure that you are submitting those applications.
One, because they're kind of limited and time-sensitive, but two, because they're relatively fast processes. You don't have to gather as much as you would for another type of loan application.
Then there are the longer-term options such as the SBA loan. It's a little bit of a longer application, and I was just having a chat with some of the SBDCs here in Pittsburgh, and they've been telling me that businesses can expect to hear back within 6 to 8 weeks.
If you're like most businesses out there, that can be a lot of time with no cash coming into the business. Even though these are great loans, most people are thinking about them as a long-term solution.
In that medium term, that's where I see Honeycomb fitting in. We have a quick application and we can
get a decision to you within 24 hours. You can raise the funds in as low as 30 days with six months interest only and no prepayment penalty. This is a great way to galvanize your community, get capital into the business quickly, but also refinance that or keep the loan on the books in a way that doesn't hurt your bottom line.
What would it take to get started with Honeycomb?
First, you would need to have an introductory conversation with our team. We would talk a little bit about your business, about how you envision the campaign working, and how we can help.
Then we would encourage you to complete our credit analysis application, where you will submit basic financial information. It's a little bit leaner than the SBA application, so if you're getting those documents together, I recommend just applying for honeycomb as well. And then based on that application, we would get a decision to you within one to two days, right now taking about 24 hours. That decision might come to you in the form of multiple term sheets where you get to pick what makes the most sense for your business and for your potential investors.
After signing that term sheet, we'll work with you to build your campaign. We've run about 50 campaigns as a company and we have an 85% success rate, so we can help you realize what messages resonate.
What you will essentially be doing is guiding your customers and community to the campaign page so they can consider making an investment. The minimum investment is $100.
During the campaign you'll be sharing your campaign with your friends, family. You'll be telling your customers about it so instead of sitting with your hands folded, hoping that this thing blows over, you can start telling the story of what makes your business special.
And of course, we'll be doing that on our end as well. We have a network of about 1,000 Honeycomb investors, and they’re constantly looking for new businesses to support new Main Streets to help. So we will be sharing that network with you as well.
We're also going to be offering our ongoing marketing and outreach advice. You'd be paired with our customer success lead who can help you week by week hit those campaign milestones, so that by 30 days, you are well on your way to either being fully funded or very, very close.
What types of businesses could be a good fit for Honeycomb?
Typically businesses that have at least six months of operating history, a dedicated loyal following, and a capital need between 10,000 and $100,000. You can imagine that this describes many salons, many gyms, restaurants, food manufacturers. Businesses that have a touchpoint with their community, businesses that people care about and relate to and look forward to interacting with every day.
Those are the businesses that we think are good fit for Honeycomb, and we think that if you are in that category, this could be a great way for you to turn this lull in business into an opportunity to build a stronger relationship with your community and get a couple dozen investors along the way.
If you leave this webinar knowing one thing, I want this to be it. That during these tough times, the community you have built as a business owner is one of your biggest assets. There's a lot going on right now but there are people out there who support you, whether you know them or not. There are strangers out there who believe in the power of Main Street.
We at Honeycomb would love to help you connect with those people and help them make you stronger on the other side. If you want to get started on your application, or learn more about the terms of the relief loan program, you can visit honeycombcredit.com/relief