Helping local businesses with Loyalty Bonds
The economic toll from the COVID-19 pandemic not only includes record unemployment, but the stark reality that many small businesses may not survive. The Loyalty Bond program that several local businesses are participating in gives customers an opportunity to lend financial support to favorite establishments that are struggling.
It may be the lifeline that keeps small businesses afloat during this time of uncertainty.
The Loyalty Bond program is relatively simple: Customers buy the bonds, which are similar to traditional gift cards, although they carry an investment bonus of sorts. They are credited with 1.3 times the value of the bond; a $100 investment brings $130 in gift cards.
The key to the program is that it provides immediate cash to the business, but the reimbursement to investors is spread out over time. Customers get their gift cards in four equal installments every six months over the course of two years. Unlike traditional gift cards that could be used anytime, the bonds are issued over 24 months to reduce cash-flow problems for the establishment.
Businesses offering the Loyalty
Bond program have to establish a minimum fundraising goal of $3,000 and the minimum bond purchase for an investor is $50. The transactions are handled by HoneyComb Credit, an Oakland-based crowdfunding lender.
In recent weeks, more than 30 Pittsburgh-area small businesses have started Loyalty Bond fundraising campaigns. Most are retailers, but there are also restaurants, hair salons and clothing stores, all of which have been hit hard by the shutdowns caused by the pandemic.
HoneyComb CEO George Cook said the Loyalty Bond program brings in much-needed cash for the business, while ensuring that customers will keep coming back for the next couple of years. “Businesses win with money to help them weather the storm, and contributors win with a great bargain at their favorite small business,” he told the Pittsburgh Post-Gazette.
The Loyalty Bond program is the type of innovative thinking that will be in great demand as small businesses try to rebuild their client base amid the restrictions and limitations of COVID-19 pandemic. Such programs deserve the support of the local community.