Recently Washington
State Department of Commerce and Community
Sourced Capital, launched a campaign aimed at
bringing zero-interest crowd-sourced loans to small businesses in all of
Washington’s 39 counties. So what is community sourced funding and how does this program work for businesses.
FOR BUSINESS BORROWERS
Essentially Community Sourced Capital is a portal to crowdfunding. A portal hosts funding requests so that crowds of people primarily in the community where the business is located can make small investments to support economic development in their neighborhood.
To start a business will submit a loan application to Community Sourced Capital and pay a fee to become a member of the portal. The application is checked for financial integrity and community connection, history of sales and existing debts that might compromise the ability to repay the loan. Promotional material indicate loans are at zero interest but there are monthly fees. Loans must be repaid in three years or less.
FOR COMMUNITY SUPPORTERS
The amount of money loan is divided into units called squares at $50 each. Supporters can may as many $50 squares as they wish to support to business. Squares do not return interest to the supporter. AS the business repays the loan the payment is divided and shares paid into the squareholders account. Monthly statements and short updates are also provided to squareholders.
TO FUND OR NOT TO FUND
Like all crowdfunding site the business seeking funds will need to make a serious marketing effort to campaign for local supporters. Steps include creating awareness of the funding request, making sure the request has a social value that the community will want to support. In the end it will be the community supporters who determine if the business gets a loan. In most crowdfunding campaigns that were successful typically had great marketing efforts.
