What happens to local businesses looking for funding on crowdfunding sites when they can’t reach their goal? That’s the problem that a new program from crowdfunding platform Honeycomb Credit and DreamSpring, an Albuquerque-based Community Development Financial Institution (CDFI), aims to solve. Through the partnership, DreamSpring make loans to businesses that haven’t raised the amount they were shooting for.
The partnership also helps DreamSpring, which focuses on underserved small businesses that typically can’t get funding from mainstream institutions, expand its reach in a way that aligns with its mission.
Honeycomb’s crowdfunding platform is the brainchild of George Cook, CEO of a family-owned bank in rural Appalachia, and small business owner Ken Martin. Formed in 2017, it provides a way for individuals to invest in community ventures with a minimum of $100.
A Win for Everyone
Francisco Lopez, DreamSpring’s chief operations and innovation officer, met Cook and Topiltzin Gomez, Honeycomb’s chief of staff, at a fintech and financial services conference in Las Vegas last year and quickly realized the two organizations were highly simpatico. Lopez also learned that some Honeycomb clients didn’t reach their crowdfunding targets. That presented a perfect opportunity for DreamSpring to step in and lend Honeycomb’s clients the amount they still needed.
It was a plan likely to benefit DreamSpring, which could develop new customers already vetted by the platform, along with Honeycomb, which would be able to provide a solution to users in need of filling that financing gap. And, of course, crowdfunding clients would be able to get the funding they were seeking.
After that, DreamSpring designated a loan officer to work with Honeycomb clients and also developed an application process. According to Lopez, they’ve been able to create a highly streamlined system, because they can tap the work Honeycomb has already done. “We piggyback on Honeycomb’s due diligence,” says Lopez.
So far, they’ve made about six loans for a total of $400,000. At $30,000 to $40,000, the loans are larger than the typical DreamSpring loan of $15,000.
A Plan to Expand
DreamSpring was founded as Accion New Mexico 28 years ago, one of four members of the Accion network, serving five states in the southwest. In 2019, they decided to go out on their own, with plans to expand.
Traditionally, the organization had relied on loan officers who would meet with people in the community. “It was a very high-touch model,” says Lopez. But expanding meant embracing an online model and forming partnerships with fintech companies, linking up with such online marketplaces as LendingTree and Lendio, to name just one example. They also launched their own digital marketing campaign on Facebook and other places to reach out to potential borrowers and donors.
Now, DreamSpring is in 26 states, with plans to be in 50 by 2024. A team of 13 loan officers, based primarily in the five legacy states, work with clients in all the areas DreamSpring serves, usually doing so virtually. Clients can apply online and connect with a loan officer or go through the whole process virtually.