Sure, banks do not like to provide small business loans. Too much work, too much risk and no money in it for them. A plethora of online credit providers has moved in to fill the gap. Supply meets demand. But sometimes fast finance from an online lender comes with a bit of a trap.
Some businesses may pay interest rates between 20-99% to online lenders for short term loans. That’s a pretty steep fee for a small business that is trying to survive.
Honeycomb Credit, a Reg CF crowdfunding platform in the small business loan sector, may be the solution to your woes. That is IF you happen to be located in Ohio, Pennnsylvania, or the state of New York.
The young FINRA regulated investment platform reports that it is expanding its loan crowdfunding model to help small businesses refinance pricey credit card debt or high cost loans.
Honeycomb sites three recently completed successful refinancing campaigns:
- Vico Restaurant
- Pope’s Kitchen,
- Mompops
Honeycomb says it is currently working with Pittsbugh’s Iron Born Pizza to refinance a high interest rate loan on their books.
The platform wants to expand this model to more small businesses in need of capital.
To quote Honeycomb:
“The consolidation of the banking industry and increased regulatory pressures have made it difficult for banks to lend small dollar amounts to most businesses that lack at least three years of stellar operating history. As a result, credit cards and high-interest rate online lenders are an increasingly popular source of funding. The 2019 Federal Reserve Small Business Credit Survey showed that 52% of businesses relied on their credit card to finance growth projects. Many small businesses who are initially drawn to credit cards’ introductory 0% APR period find themselves shocked as credit cards phase in their regular APRs ranging from 18% to 24% or more.”
Honeycomb adds that 32% of small businesses seeking financing applied to online lenders such as Kabbage, OnDeck, Square Capital, or CANCapital. The company says that quick and easy financing can often be joined by sky high-interest rates.
George Cook, CEO of Honeycomb explains that Honeycomb Credit seeks to provide businesses a quicker way to refinance debt while enabling their community to invest in their success.
“We believe that instead of paying principal and interest on a loan to a faceless credit card company or an online lender, businesses should be able to refinance and repay fair-interest loans to their neighbors and customers – keeping the money local.”
Honeycomb provides the example of Vico Restaurant in Hudson NY. The restaurant was able to borrow $40,000 from 24 community investors at a 12% interest rate.
Vico’s owner, Mark Ganem, was able to use the money to refinance short-term debt, free up cash flow, and begin planning an interior renovation of his restaurant.
Ganem said that a big comment from potential investors was “Isn’t 12% expensive?”
What they did not know was that 12% was less than half of what he was paying from another online lender.
Honeycomb Credit is available for businesses to borrow up to $100,000. Community members may start investing for as little as $100.