At least at conventional financial service providers like large banks, who are currently hesitant owing to uncertain economic trends, the lending spigots are closing for smaller businesses.
And that’s motivating at least some SMBs to look into alternative sources of funding, like soliciting funding from their clientele. According to The Wall Street Journal, attempts are being undertaken to offer bonds to end customers and the broader public.
These companies—more than 1,300 since 2017—are searching for investors, according to how it operates. The Journal claims that the capital might be as low as $10 per individual.
Regulation crowdfunding is the term used to describe the activity (which the Securities and Exchange Commission has permitted). Additionally, crowdsourcing is made possible by debt-fundraising sites like Honeycomb Credit and Mainvest.
The drive for this type of financing, which we can refer to as hyper-localized lending, highlights the value of community-based lending and the ways in which smaller businesses can at least partially capitalize on the positive word-of-mouth and customer loyalty produced locally.
Additionally, it draws attention to some of the difficulties experienced along Main Street and in many industry sectors. As evidenced by statistics in a series that is ongoing and focuses on the possibilities and problems that these smaller businesses face.
We just discovered that 40% of SMBs are still more concerned about inflation than they were a year ago. Additionally, 15% of them are worried about the possibility of falling revenue.