Bee Roll needed money to fund the growth of his business, Beezy’s Café in Ypsilanti, Michigan. It had no collateral to offer banks in exchange for a traditional commercial line of credit.
The restaurant, though often packed with customers and the recipient of many rave reviews on Yelp, was not earning enough to fund significant growth. Most of the company’s profits are directly reinvested in the purchase of supplies or other small improvements.
But it’s not like Beezy’s has nothing to offer potential investors. The restaurant has developed an incredibly loyal clientele. And now there’s a startup trying to monetize that loyalty in the form of business loans.
ZipCap is a San Diego-based startup that offers what it calls “loyalty capital.” The idea is to support small local restaurants, shops and other establishments with low-interest loans based on the promises of their loyal customers.
For Beezy’s Café, the first guinea pig in ZipCap’s loan program, that meant finding the restaurant’s most loyal repeat customers – its “inner circle” – and asking them to commit to spending a set amount of money over a period of time. of determined time. In this case, Roll signed up 130 inner circle members who pledged to spend $475 over the next year.
She was able to borrow $10,000 in loyalty capital with a 12-month repayment schedule and an annual percentage rate of 3.99% based on those promises. For Roll, this opportunity should allow him to continue to grow a business that has become a mainstay in the community. She told the New York Times:
“I want to have access to cheap money so I can continue to do great things for the community. When I first started explaining the concept of pledge, people were like, ‘Is this okay? help you? Great, I’m in!” It really shows how vital their support is to us. There is trust and an ongoing relationship.
This is also part of ZipCap’s goal. The company wants to help businesses that have a real impact on their local communities stay open and thrive. And for these businesses, finding loyal customers shouldn’t be too difficult.
To benefit from the loyalty capital program, companies must have been open for at least two years in the same location and register at least 100 members of the inner circle. It’s still an experimental program, so the amount he’s willing to lend based on inner circle pledges could change depending on the outcome of lending to companies like Beezy’s Café.
However, loyal customers are extremely important for business success. So if ZipCap is able to accurately assess the value of having such customers, it could be a system that works for both businesses and lenders.