July 17th, 2013 Raising Capital with Funding Community
On July 17, 2013, OLC attended the New York Entrepreneurs and Startup Network, a kibitzing version of the tech world. The group joined the format of most tech startup events in the city and opened the floor to business pitches, giving Pitch Night competition in its format of 60-second presentations 60 floors above the Empire State Building.
The meetup’s format went beyond networking this time, as organizers Nick Tang and Cedric Wong said they know the significance of raising funds these days. So as Tang asked 15 or so presenters to fall in line and make their pitches, he gave this reminder, “We grow as fast as our resources.”
The presenters were a mixed bunch—many in the non-tech variety, a few in the service industry and some who actually presented in Pitch Night a week ago, like Bluwired which pitched how it can run analytics with sensors placed in a physical item, say, a piece of clothing.
The non-tech businesses included a man who pitched neckties for wintertime followed by a woman who promoted a soon to be launched trade-your-closet site. What you don’t hear often is an online magazine idea, especially one for film enthusiasts called Next Breakout Hit, presented by a gentleman in his sixties.
The beauty of the tech startup world is that it’s not judgmental. You could be the oldest guy in the room like the last presenter, a man in his 80s perhaps who called for better ways to understand technology.
After the hour-long pitches, Alex Binkley, a Harvard and Boston University educated corporate lawyer, took the stage to talk about Raising Capital with Funding Community, a crowdfunding platform for small business loans.
Individuals make loans to support small businesses in their community and are repaid principal and interest every month. These supporters also receive "rewards" like store discounts from the borrowers they have supported.
How does it work? Small businesses apply to Funding Community for a loan. Funding Community then asks the community which small businesses it should support. Individuals show their support by making an interest-bearing loan to Funding Community so it can make a similar loan to the small business.
To sign up, create a profile by giving information about your business and the loan you are looking. Having a reward system is important and the site gives a discount and other perks that is supposed to turn lenders from passionate supporters into champions of your business. Will it support your cash flow in the process? That remains to be seen. Next step is to encourage customers, family and friends to support your loan.
How does the loan mechanism work? Individuals lend $25 to $1,000 each to support your loan. Once it is fully funded, Funding Community deposits the money directly to your account and automatically withdraws your payments each month.
At present, the company can only lend to businesses in New York State.
By borrowing money on Funding Community, you will reportedly receive better rates and access to capital than from traditional lenders. You will also have the ability to turn each and every lender into a customer and champion of your business.
The rewards system considered:
• 10% off any product during the term of the loan
• Buy one, get one free during the term of the loan
• One free product when the loan funds
What about interest rates? Your interest rate will depend on your company’s operations and type, as well as the credit score of your owners and/or personal guarantors.
“Because our primary purpose is to support small business growth we strive to offer lower rates than you could receive from a bank,” Binkley said.
Launched last May 2013, Funding Community currently has a 21-day time limit on all loan campaigns, so get your ideas funded, whether you’re choosing established crowdfunding sites or new ones like Funding Community, which has lower interest rates.