Community Sourced Capital (CSC) has brought forth a model of loaning out reasonably large loans at an interest-free rate. This model will be implemented throughout the state of Washington in a deal with the Department of Trade.
Co-owners of Intrigue Chocolate in Seattle, Aaron Barthel and Karl Mueller, were out seeking a loan to finance their move to a bigger commercial space in a new location. They were irritated by banks that wanted them take high-interest credit debts. They turned to Community Source Capital, which is a company based in Seattle that established an online crowdfunding platform that helped them raise more than $400,000 in interest-free loans. Most of the money came from local individuals, friends and family (Tu, 2015). Mueller said that they knew that banks aimed to give loans of over $60,000 making the Community Sourced Capital more important to the small business owner who could not obtain a loan. Small enterprises seeking smaller loans often got little help from financial institutions.
It is a philosophy that the local government Department of Trade believes may help promote the development of minor enterprises in the remote and rural portions of Washington. The involved parties launched a plan that aims to increase Community Source Capital’s outreach in the state. The partners hope to reach more owners of small businesses and help them get funding. CSC, which gave out its maiden loan in early 2013, is one company among the numerous crowdfunding businesses including Kiva and KickStarter. They give people and businesses an audience to run their drives to increase capital for their ventures.
KickStarter focuses on contributions while offering bonuses along the way whereas other companies like Kiva build funds to give loans to persons and companies that work towards eradicating world poverty. Community Sourced Capital focuses on raising money from members of the community who want to show support to small local enterprises. The members of the community give out interest-free loans.
CSC works because of a trust-based system. Businesses that get approved for loans are given a four week period to campaign for their projects. The projects are usually for $ 5,000 to $ 60,000. Individuals who wish to fund the project go to the company’s web page and purchase "squares". A square stands for a $50 loan that is interest free (Tu, 2015).
If the project is effectively financed, the proprietors begin paying off the “square-holders” afterwards. They have a maximum of three full years to pay back the full sum, although no guarantees are given. The company advises square-holders not to give more than they can afford to lose. However, so far 98% of loans have been paid back fully.
Crowdfunding is a fast-growing market that raised $16 billion last year globally. Massolution, a study organization on crowd funding established this statistic. It forecasts that that figure will rise to $34 billion in 2015.
We are living in a wonderful time where people can experiment in crowdfunding for reasons ranging from pure commercial interests to philanthropy. The idea of CSC was born in Pinchot University by four classmates studying MBA. The idea emphasized social justice and sustainability. It was at the time of the great recession when the idea was brought up. The business aimed to help in the creation of healthy local economies. With the state of Washington joining the bandwagon that supports community-based crowdfunding and crowdsourcing, the future of this alternative capital sourcing method looks bright.
Tu, J. I. (2015). Seattle crowdfunding firm, state to help small businesses get loans. Seattle Times.