The ugly, the bad and the good of lower income consumer lending

Robert Choy is a lender-for-good. He runs Ngā Tangata Microfinance (Ngā Tangata), providing small, fair interest-free loans to those on lower incomes, helping them break the shackles of loan sharks and payday lenders or purchase productive assets. We’ve got a common hero – Muhammad Yunus – and he also shares a common hero with my mam – Clint Eastwood! Robert shares his experience with us.

Ngā Tangata Microfinance’s Robert Choy

 

Clint Eastwood’s classic 60’s movie portrays a bounty hunter, a mercenary and a bandit, depicted in the film’s now famous title “The Good, the Bad and the Ugly”. Could the enduring name of this epic Spaghetti Western resemble the credit environment we experience in Aotearoa today?

Visiting New Zealand recently, Nobel Laureate Professor Muhammad Yunus, considered the father of social business and microcredit, has said that “credit is a human right that should be treated as such” and “if we are looking for one single action which will enable the poor to overcome their poverty, I would focus on credit”.

Whether we agree with Professor Yunus or not, we’d surely promote a safe and fair credit environment within a responsible and educated society as crucial. Shameful to say, the current consumer lending environment in Aotearoa can best be described as ugly if you are on a low income, with limited financial choices before you, should you need to avail your rights to affordable credit.

Regardless of income level, crises or emergencies inevitably occur: the car will break down and we can’t get to work, the fridge will stop working, or children become ill and need to see a doctor. Once financial reserves and the generosity of family and friends are exhausted, and without access to mainstream credit sources, such situations force those on low incomes to take the only other available option: easy-access, high cost loan sharks, payday lenders or mobile traders.

Third tier finance companies provide loans with interest rates ranging from 20-40%, but the default interest rate can be up to 10% above that, with numerous extra penalty charges also added. Payday lenders provide only short term lending ideally, but at an outrageous cost, often charging at least 1.2% per day (or 438% annually). While truck vendors or mobile traders often charge no interest on purchases, their prices are inflated up to three times the norm, and administration and fees will ensure they reap more than 100% profit on every transaction. Unlike many parts of the world, in New Zealand there is no legal limit on interest rates or on the total cost of credit. Both these protections are critical to address the ugly environment of predatory lending facing our poorest citizens.

The resultant poverty trap is that of unmanageable debt, which is especially bad and tragic in its consequences for those on low incomes. High interest debt compounded by excessive charges rapidly becomes unmanageable, with unsustainable repayments causing stress amongst family members, limiting funds needed to purchase food and other essentials, and diminishing any remaining assets the family may have. It also negatively affects the wellbeing of the wider community, darkens the public perception of debt and contradicts the norms of social justice that we in New Zealand hold dear.

However, amongst the bad and ugly, there is good news! Ethical lenders such as ourselves at Ngā Tangata (with capital from Kiwibank and in partnership with local budgeting services to support clients with financial capability) are redressing the villainy of debt, creating an enabling tool to lift people out of poverty. Paying off their high interest debt and replacing it with a loan to NTM can at times release $20, $50, $70 or even more back into the family budget each week, providing money for essential food or necessities previously forsaken.  A fundamental aspect of our kaupapa is to facilitate clients successfully paying off their loans and being supported in the long term towards financial independence.

More good to report is that the Commerce Commission is taking increasing legal action against predatory lenders since the amendments to the Credit Contracts and Consumer Finance Act and the introduction of the Responsible Lending Code in 2015. In 2016 the Commission obtained fines against six mobile truck traders in excess of $500,000 and recently an online loan company was recently required to refund  $1.4 million in unreasonable fees to borrowers.

Our current lack of consumer protection against the ugliness of usury, predatory lending and the unmanageable debt it spawns, undermines the economy, and creates financial stress and hardship. Clearly these are bad outcomes for those already on a low income. While organisations like Ngā Tangata and other responsible lenders are endeavouring to make a difference, surely the greatest good in the interests of all, would be a financial system that is sound, ethical and socially responsible.

Access to credit – a fundamental human right. Powerful.

Saffron of Afghanistan

Meet the spice that could spark a social enterprise.

In recent years, saffron has been introduced as a healthy alternative to opium in Afghanistan, and its processing has created jobs for women in the country. Afghanistan-born Tariq Habibyar wants to capitalise on this, and create a factory that will process saffron and sell it, fair trade – thus providing jobs for local women and the disadvantaged in Afghanistan. But to get there, he needs your help – and so we had a chat to him about why you should be pledging.

Why do you think this campaign is important?

  • This is an opportunity to seed fund a project that commits to expand, pay forward, and make an impact in the lives of many who deserve to live better lives.
  • Personally, this project is close to my heart and seeing this successful will give me a sense of satisfaction and I hope it will do the same to my customers as it is intended to do so.
  • It will introduce a positive image of Afghanistan to every home of my new home New Zealand.

What motivated you to reach out to your crowd?

I love the ‘give and receive’ relationship with fellow human beings. I try to undertake any project that connects me to people for a social cause and adds value. The fact that a friend, colleague, or an individual I don’t know invest their time, energy, and money to communicate with me through this, means a world to me. It makes me happy to see we care about each other and about good causes.

What do you have planned for the rest of your campaign?

I will try to complete the ‘booklet’ for recipes as soon as I can to share with my crowd.

Anything you’d like to shout out to your crowd?

Thanks a lot for your contribution to this project. I’d be grateful if you shared this link with your friends and families.

To support Tariq’s project, check out his campaign page now.

Help us crowdsource a list of social enterprises in NZ

We’re making a list. We’re checking it more than twice (on an ongoing and a controlled-by the-crowd basis in fact). The impact we’re aiming for? Visibility for all of the kiwi social enterprises improving New Zealand and the world. And you can add to it here: pldg.me/thesocentlist

Why?

When the Social Enterprise World Forum comes to Christchurch in September, it’ll mark a major milestone for the social enterprise movement here in New Zealand. We think it’s awesome for the industry, but it’s got us thinking. Relying on a big one off global event like that to create massive (but temporary) exposure for Kiwi-grown organisations who care isn’t enough. We need to do more. Social enterprise is about many small steps from many people to collectively solve our big challenges. It’s not just about one-off events, but about every day actions.

Spreading the impact of social enterprises in New Zealand begins with visibility. Those of us that want a better future for New Zealand have the power to support others that dream of a better future – our social entrepreneurs. If we know about the socially-driven alternatives, we can choose to support them. What’s the most important way we can support? By buying their products and using their services. And then, by sharing their stories.

This isn’t the first time that someone has tried to gather a list, and we know it won’t be the last. Past efforts have fallen flat because arguments crop up over what a social enterprise is or because the sole owner of the list runs out of steam. So for the greater good of getting shit done, we’re crowdsourcing a list from folk that know best – people in the space. And, we’re doing it through Google Spreadsheets so anyone can add, edit, and improve the list. We’re also casting the net wide in terms of definition:

any organisation with a focus on positive social or environmental impact, that has a revenue stream that aims to sustain their work.

They might already see themselves as a social enterprise, or they might not. Here’s some of the social enterprises that we know and love:

  • Thought-Wired are a technology company that aims to give a voice to the voiceless. Dmitry and his team have developed nousTM – software that enables people with severe disabilities to communicate by using their brainpower!

  • Make Give Live bring together communities through local knitting groups to create beanies and connect through that shared effort. For every beanie that Make Give Live sells, they give a beanie to a homeless or elderly person in need of warmth.

  • Pomegranate Kitchen are a not-for-profit who provide group catering and individual lunch delivery in Wellington. They provide work, training and a sense of belonging to all of their cooks who come from refugee backgrounds.

  • Ethique prevent plastic packaging from going to landfill and polluting our environment, by making solid beauty bars made from biodegradable ingredients wrapped in compostable packaging.

We believe social enterprise isn’t about succeeding at the expense of others. There’s a spirit of collaboration and collective movement. It’s not about a few powerful controllers or poster children. It’s about shared success. If we solve the problems we see, we all win. So, please help us crowdsource a list of all of the social enterprises in Aotearoa, so that we all can be a part of a better, more socially and environmentally focussed, future.

Check out the list here. Add the names of the social enterprises you want to shine a light on and have a glance through at those that you can start actively supporting. And shoulder tap people in the know for more names or ideas. Kia ora!

The motivations are many

Andrew Schwartz is a law professor from Colorado who’s travelled across the Pacific to research the evolution of equity crowdfunding in New Zealand, and take home some learnings to help progress equity crowdfunding back in the US. We’ve had some great conversations over the last six months.

Equity crowdfunding originated in my homeland, the United States, with the introduction of the JOBS Act in 2013. But, New Zealand quickly jumped out in front, launching its market two years ahead of the US (not to mention three years ahead of Australia). For this reason, I took a leave from my ‘day job’ as a law professor at the University of Colorado and spent six months at the University of Auckland as a Fulbright Scholar so that I could study your mature equity crowdfunding market. One issue I have analysed is the extent to which equity crowdfunding is used by social enterprises – meaning those who seek to achieve non-financial goals as well as an economic return.

A few years ago, I published an article in which I claimed that crowdfunding investors are at least partially motivated by non-financial factors, including political expression, environmental protection and community-building. For instance, supporters of organic farming could invest in an organic farm, or local residents could invest in a café whose presence would enhance their community. Whether these investments pay off financially is not necessarily essential; the point of the investment, at least in part, is to support a cause or a company that one believes in.

At that time, equity crowdfunding in the United States had not yet begun, so my article was purely theoretical. Once I came to New Zealand, however, I was able to test my hypothesis and examine whether this actually happens in practice. If pledgers really care about things other than financial returns, I would expect that a large percentage of successful crowdfunding campaigns are for social enterprises. And this is exactly what I have found.

Based on the data I collected, it appears that social enterprises have taken advantage of the new opportunity presented by equity crowdfunding, and that crowdfunding investors have an affinity for these sorts of businesses. According to my data, approximately one-third of New Zealand equity crowdfunding campaigns, and one-third of successful campaigns, pertain to social enterprises. One example is Ooooby, a technology company whose mission is to put small-scale sustainable farming at the heart of our food system, which raised nearly $300,000 from over 150 investors through their equity campaign. And this one-third does not even include ‘local’ companies without a specific social mission, including ParrotDog Brewery, a craft brewer that can fairly be described as a ‘hometown hero’ in Wellington, which raised $2 million from more than 800 investors in their equity campaign.

These are extraordinary findings, and they were confirmed by interviews I conducted with entrepreneurs, platform operators, lawyers, academics, government officials and others involved in equity crowdfunding. Numerous interviewees agreed that crowdfunding investors have multiple motivations when they invest in a company—and the desire to generate a financial return is just one of them. They agreed that equity crowdfunding investors select whom to support based on social views, emotional motivations, altruism, and to support their community, as well as to hopefully make some money.

In short, the facts on the ground here in New Zealand are consistent with my hypothesis that crowdfunding investors really do have a variety of reasons for participating in this new form of equity market. An important takeaway from these findings is that those who seek to support social and local enterprises should encourage participation in equity crowdfunding.

Have you thought about what motivates you?

International Inspiration & Home Truths: Coffee

Our series “International Inspiration and Home Truths” shares some of the crowdlending stories we’ve heard from far and wide, brings that inspiration back to Aotearoa, and hears from the enthusiasts who’ve helped us to imagine what crowdlending could look like for a range of Kiwi organisations. This week we’re waking up and smelling the coffee (roasteries and cafes)!

(Disclaimer: I don’t drink coffee because I’m allergic to caffeine. Or so my mam told me when I was eight. It’s only recently that I realised that it could well be a masterminded social experiment that she created to test my obedience. So as I always listen to Mammy I must admit that, as I write this blog, I am not powered by any beautiful blended beans.)

Coffee is more than a commodity. It has become a craft. An art-form to appreciate, to indulge in and to share with others. Coffee brings people together. Heck, workers in sectors like tech would fall over if it wasn’t for their daily dose of black gold.

Can communities of conscious-coffee-consumers play an important role, by supporting their favourite roasteries and local cafes beyond just drinking the good stuff that they’re creating? They can indeed… by funding the growth of the brands and the communities of which they’re a part.

For coffee creators and cafes countrywide, crowdlending can be an opportunity to not just fund new ideas and expansion plans, but to rally the community and give them that sense of ownership over their space and encourage loyalty through that deeper sense of belonging. And the financial reward that comes from their loan stays within their community.

What’s happened around the globe?

Three very different campaigns, from three different companies, raising money for three different things through crowdlending.

First up, The Art of Coffee in Dublin borrowed €7,200 to buy a top-of-the-range sandwich machine for their newly opened third cafe. Along the way they discovered a crowd of new customers who filled the cafe in the months that followed.

Then there was Seattle’s organic cafe and bakery Chaco Canyon, who last year raised $45,000USD to soothe the growing pains of operating three locations with 80 staff and speed up their environmental sustainability drive. Co-owner Chris Maykut showed his gratitude to their crowd, “Chaco has always existed to support the community, and in turn you have supported us with incredible enthusiasm and generosity through the years.”

Grind & Co Espresso Bars are a funky bunch (they’ve got a cafe-cum-recording studio in the heart of London!). In 2015 they offered an 8%, 4-year loan to their crowd and raised £1.3million. With the money they raised they opened a fifth store and brought their bean roasting in-house.

What could happen closer to home?

Imagine, a local cafe bringing in their own mini-roaster so that the coffee they create is made from the freshest of beans. Imagine the collective voice of their crowd of lenders helping to expand their local favourite cafe and pull in more of the community to share the quality experience.

Imagine, a truly sustainable Kiwi roastery growing their impact on the whole of their fair chain by borrowing from their crowd. Imagine the interest earned on their loan not just rewarding their community of lenders, but part of the reward benefiting their bean growers too.

Have you got the sweet aroma of coffee crowdlending in your nostrils? Let’s chat!

International Inspiration & Home Truths: Sports clubs

Our series “International Inspiration and Home Truths” shares some of the crowdlending stories we’ve heard from far and wide, brings that inspiration back to Aotearoa and hears from the enthusiasts who’ve helped us to imagine what crowdlending could look like for a range of kiwi organisations. The next type of organisation spilling over the top of our box of inspiration is sports clubs.

Sport is an essential part of many of our lives. A good chunk of us build our identities around the sports we play, watch and follow. Whether it’s rugby or racing, surfing or squash, there’s a little bit of us that belongs to that sport. Our team are no different: for Tan it’s tennis, for Kelsey it’s football, for Barry it’s futsal and for Anna…well, is cheese a sport?

At the core of our sporting-lives is a community of people that get the same buzz that we do ourselves – club members that get such joy out of being involved with and having a sense of ownership over our clubs. Sports clubs are constantly building crowds of members, players, fans and followers.

So have sports teams borrowed from their crowds before? Indeed they have. German football club Hertha Berlin F.C. broke crowdlending records a year ago when they raised €1million in ten minutes from their fans and members. As part of their “Hetha 4.0” strategy, they wanted to refresh their online identity and become the most innovative and inclusive club in Germany.

It’s not just big professional outfits that crowdlending can work for. Fin McCool Surf School on the shores of Donegal in Ireland borrowed €20,000 from their crowd to refurbish their clubhouse last March.

What could happen closer to home?

Imagine, a kiwi surf lifesaving club borrowing interest-free from their members to refurbish their wind battered clubhouse. Rallying their crowd to improve their common home whilst rewarding them by paying them back over time.

The enthusiast who’s inspired us

Geoff Lewis got us thinking about crowdlending for sports clubs when he and Anna crossed paths last year. He’s a proud member and President of Thorndon Tennis and Squash Club in Wellington.

Who are you, and what do you do?

We are the Thorndon Tennis and Squash Club.  As a tennis club, we were established in 1879 making us, we believe, the oldest tennis club in New Zealand.  Even Wimbledon started only a few years before the Thorndon Club! Our vision is to be a thriving, dynamic tennis and squash club in the heart of Wellington. To help achieve our vision, we are striving to upgrade our facilities, some of which are showing their age!  One important project is to upgrade our two existing lawn tennis courts into modern, high-quality playing surfaces for all-year-round use.

What do you think about crowdlending?

Upgrading our lawn tennis courts requires a substantial capital spend. We are hoping to fund this partly with grants from gaming trusts and partly with additional income from a larger member base and from using one existing court as a mid-week parking facility. To bridge the timing gap between the capital spend not covered by grants and future income, we think crowdfunding via loans from our members and supporters is the way to go.  Our lenders will earn interest on their funds, feel good about helping the club, and feel secure about getting their money back over time.

What are your concerns about crowdlending in New Zealand?

Crowdlending in New Zealand is still relatively unknown. At the same time, more stringent financial regulations in New Zealand require a professional approach to raising funds.  We think for a modest-sized sports club such as ourselves, it makes sense to use a crowdlending platform like PledgeMe to ensure that all the legal and technical boxes are ticked.

What excites you about it?

If crowdlending helps Thorndon Club to build two brilliant new tennis courts, and upgrade other facilities such as our four squash courts, it will be a very exciting achievement for us and for the inner-city community of Wellington who I’m sure make great use of them.

A little bit curious about how crowdlending can work for your local club? Chat to us!

How does crowdlending compare to borrowing from a bank?

When it comes to borrowing money for your business or organisation, you’ve got a good handful of options. There’s a bank loan, there’s other peer-to-peer lending platforms and there’s crowdlending with PledgeMe.Lend. Steer clear of high-interest payday lenders or other disguised loan sharks – their high interest rates and hidden terms can end up putting you under severe pressure. And if you’re raising significant amounts of money, don’t use your overdraft facility or credit cards, because the high interest rates attached to them are meant to only be used to fill short term funding gaps.

One big question we get is: how does crowdlending compare with a bank loan and the other peer-to-peer lenders in New Zealand? How do they measure up when it comes to cost, time and benefits beyond the money. Figuring out what’s most important to your organisation will help you make the right call for you. Here’s our take on four important factors: cost, time, your chances of getting a loan and the benefits beyond money that you might want to see.

Cost

The costs of borrowing money come in a few different shapes. There’s the interest rate that you pay to your lenders. There’s the arrangement fees for putting the loan in place. And for crowdlending and peer-to-peer platforms, there’s campaign success fees and preparation fees to consider.

Let’s take a look at a 5 year unsecured loan of $200,000 (that you’re gradually paying back over time, as well as paying the interest) through PledgeMe.Lend, from a bank and through another peer-to-peer lending platform

PledgeMe.Lend

Total cost of $57,100

  • Interest rate of 8%
  • Interest cost over 5 years: $44,600
  • CrowdfundingU fee: $1,500 (½ of the $3,000 fee if you get it covered by capability vouchers)
  • Success fee (of 5.5%): $11,000

Bank loan

Total cost of $69,400

  • Interest rate of 12%
  • Interest cost over 5 years: $68,900
  • Arrangement fee: $500

Other P2P Lending (LendingCrowd)

Total cost of $76,550

  • Interest rate of 13%
  • Interest cost over 5 years: $75,100
  • Platform fee: $1,450

One other thing to consider is the timing of the different costs. The cost of CrowdfundingU will be upfront, as will the bank arrangement fee. The crowdlending success fee and the platform fee happen once your campaign is successfully funded, and they can be budgeted into the amount that you raise. The interest cost will be spread over the life of the loan.

Time

One other thing to consider is the timing of the different costs. The cost of CrowdfundingU will be upfront, as will the bank arrangement fee. The crowdlending success fee and the platform fee happen once your campaign is successfully funded, and they can be budgeted into the amount that you raise. The interest cost will be spread over the life of the loan.

What’s a reasonable expectation of having the money in your hands to go do the thing you want to do. From application to money in your account (if they give you the thumbs up) a bank will typically take two to six weeks to process your loan – they’ll carry out a business assessment and a household income assessment to help make their decision.

Other peer-to-peer platforms have quick self-assessment applications and (if you get through) you can have you loan campaign up live in a day or so.

For PledgeMe.Lend, our approach is more human-focused and takes longer. You can see if you’re ready to borrow in the space of five minutes by taking our self-assessment CRED. We’ll then chat to hear your story, see what you have planned and give you some hints to get your crowdfunding ball rolling. We’ll work with you one-on-one for six weeks to prepare your offer documents, map out your crowd and draw up your plan of how you are going to get your crowd aware, informed and excited. A typical lending campaign will roll for four weeks and we take up to two weeks to get the money processed and into your account. So all in, to run an effective crowdlending campaign, you’re looking at three months from start to finish.

Your chances of raising the loan

Banks can be quite selective – if you don’t own your own house and are willing to put it up as security, then your chances of getting a loan are pretty slim. Putting up your personal assets to secure your business’ loan is a big obstacle. And realistically, if you really want to borrow from your bank, you’ll have no choice over the matter.

Your chances with crowdlending depend more on the crowd that you’ve cultivated around you, how involved they feel and how well you can communicate with them. We help you to nut all of this out through CrowdfundingU. Showing that you can repay your loan by passing our CRED is the other hurdle for you to fly over.

Benefits beyond money

Ask yourself, what are the things that you want to get out of raising money beyond the money itself? Through PledgeMe.Lend the cost of borrowing may be lower, but the real power of crowdlending through us are the benefits that money can’t measure.

Do you want to have the final say over the terms of your loan? Is that element of control and choice important to you and your crowd? Do you want the return from your loan to line the pockets of an institution or people you don’t really know, or do you want the benefit to go to those you do? Do you feel uneasy using your own home to get the loan you need, closely tying your personal life to the risk of your organisation not being successful?

Does empowering your community to be the key part of your journey appeal to you? Is that sense of togetherness and belonging something that you want to create? Do you want to build your brand awareness and improve your organisation’s public profile? Do you want to show how innovative and inclusive a collective you are? Or do you want to find a sustainable way of raising money that you can come back to, to fund your exciting future plans?

 

Each company and organisation will have different priorities when it comes to these four factors. Take the time to reflect on what’s important for you, and with a clear mind, you’ll make the right choice.

International Inspiration & Home Truths: Craft Beer

Our series “International Inspiration & Home Truths” shares some of the crowdlending stories we’ve heard from across the globe, and brings that inspiration back to Aotearoa. You’ll find out what’s happening overseas, but also hear from some of the enthusiasts who’ve helped us to imagine what crowdlending could look like for a range of kiwi organisations. The second area we’re diving into is craft beer (one of our favourite things).

The UK is dominating the craft beer crowdfunding market

BrewDog are arguably leading the way internationally on the crowdfunding front. They’ve done four rounds of Equity for Punks, and have raised over £26million ($49million NZD) from 50,000 investors for their Scotland-started craft beer company.

It all started with two men and a dog. Their first pitch video in 2009 shows much younger, less hip versions of the founders James Watt and Martin Dickie. They stand earnestly in front of their brewery kit sharing their big plans for their beer.


Equity for Punks from BrewDog on Vimeo.

They took a huge leap, from starting in 2007 to becoming a publicly listed company in 2009. Their first round closed in February 2010 and saw the punk founders raise over £642,000 from 1,350 investors. Their early supporters not only got shares in the company, but also beer discounts and an invite to the annual general meeting, which you could literally call a piss up in a brewery. Though, now it’s a piss up over 10 different bars. Here’s a video recap of their latest AGM:


#PUNKAGM17 Recap from BrewDog on Vimeo.

Not ones to shy away from bold statements, in 2015 during their Equity for Punks IV round the founders took to a helicopter and dropped taxidermied “fat cats” onto the city of London. Over the following 12 months they raised over £19m from their crowd, making it one of the largest crowdfunding campaigns in history.


Equity for Punks IV – Death to the Fat Cats from BrewDog on Vimeo.

But, their latest move into the crowdlending space is arguably their most exciting move yet.

“This is funding for the 21st century”

Their BrewDog Bonds II were launched late 2016, and they raised their maximum goal of $10million from 2,699 investors in less than 30 days.


The BrewDog Bond from BrewDog on Vimeo.

Their mini bond offered their investors a 7.5% interest rate over four years, as well as beer discounts. The bonds were focussed on accelerating growth, both in the UK and in America where they are currently building a new factory in Ohio.

Today, Brew Dogs have held the title of the fast growing food and beverage company in the UK the last four years, and have been profitable since 2008. They have revenue exceeding $70million, over 800 “passionate people” working for them and 50 brew bars all over the globe.

Recently, BrewDog’s sold 23% of their company to TSG Consumer Partners for £213m, which gives their investors from their first round in 2010 a 2,800% return (though, they are capped at selling 40 shares in this round of shareholder buy backs).

And the UK influence has sailed across the sea to Ireland

You don’t have to be a monumental punk-backed beer behemoth to borrow from your crowd. Local independent brewery from County Wicklow (where Barry’s clan are from!), O Brother Brewing, borrowed a modest €20,000 from their crowd to expand their brewery and create an experiential tour for the passers-by.

One of the three-brother strong team, Padhraig O’Neill reflected on their experience “The idea of peer-to-peer lending really appealed to us. Promoting our business and the hassle-free process was great, it is the future of business finance.

Closer to home

While these have been intriguing developments in the Northern Hemisphere, we’ve been really excited about what it could mean for craft beer companies closer to home. Because craft beer and crowdfunding seem to be a match made in a beer-fuelled heaven.

We’ve seen two swift and well supported campaigns through PledgeMe for Wellington-based craft brewers. First up with Yeastie Boys, who raised their half a million goal in half an hour in 2015, followed by the Matts at ParrotDog raising their goal of $2million in two days the following year.

So we’ve asked some of our smart friends (and alumni) to tell us what they think. What could crowdlending mean for the beer makers in (or from) Aotearoa?

Who are you, and what do you do?

I’m Stu McKinlay, accidental entrepreneur, Benevolent Dictator and co-founder of Yeastie Boys. I make people happy with delicious beer in pretty designs.

What do you think about crowdlending?

My initial thoughts around crowdlending is that it’s fantastic to see the modern market adapt to the opportunities that present themselves from us being so connected. To me funding and lending through the crowd is simply an extension of the way many people used to fund businesses and projects, via their friends, but the process can be sped up now thanks to technology.

Could something like the BrewDog bonds happen in New Zealand?

It will happen in New Zealand! I have no doubts.

What are your concerns about crowdlending in New Zealand?

The concerns I have about crowdlending are pretty much the same as crowdfunding… simply that people are educated around what the risks and rewards are.

What excites you about it?

I’m always excited by things that create more opportunities for competition… crowdlending, like crowdfunding before it, gives so many more people the opportunity to build their business in a way that would not have been available to them a few years ago. With people who would have never known that the business even existed, let alone been looking for capital. It builds a community around business growth rather than having a bunch of banks doing everything.

 

Inspired? Curious? Want more than a sip? Chat to us!

Back to basics: How do you get started with a crowdlending campaign?

Lending can seem pretty scary, so we’ve decided to go back to the basics in this series and explain everything you need to know. We started with a brief history of lending and how lending works. Second up: how do you get started with a campaign?

What do you need to get started?

The first thing you need to check is your structure: are you set up as an organisation? Crowdlending the way we do it is only for those folk that have set up some form of organisation – be it a company, a school, a charitable trust, a co-op, a club.

The second thing you need to check is: will you be able to repay your loan? We’ll ask for some basic financial information in our CRED to check this, but you should be honest with yourself first. If you borrow money, will you be able to repay it? We don’t want to let you get into a situation where you definitely can’t repay your crowd.

Finally, you need to know what the money would be used for? How is it helping your organisation? The pitch to your crowd will need to be clear. Which means you need to be clear with yourself.

 

How does the CRED work?

Your journey begins with our Campaign Readiness Evaluation for Debt (aka the CRED). To get an insight into your organisation and your ability to repay the loan, we’re gonna ask you some questions. If you have your organisation’s financial statements at the ready, it will only take a few moments…five minute long moments to be precise!

The CRED works by pulling out a handful of financial measurements from your statements – the most important ones being how solvent your organisation is (have you funded yourself through equity and profits or through debt?) and the liquidity of the company (how effectively you manage your short-term cash flow). And your combined score from all of the measurements is compared to our ready / not ready threshold.

 

Steps to take

If you can tick the three boxes above, and understand how the CRED works, you should head along to PledgeMe.Lend and create a request. Here’s how you do that:

  1. First up you’ll be asked to complete your CRED as outlined above: https://www.pledgeme.co.nz/loans/cred
  2. Next you’ll be asked to fill out your basic lending request. Don’t worry, none of this information is set in stone!
  3. After that, we’ll be in touch to set up CrowdfundingU. If you’re a smaller campaign (under $100,000) we’ll just run you through a two to three session programme. If you’re looking to raise more, we’ll help you through the complete CrowdfundingU programme to make sure you’re ready to go out to your crowd in a big way.
  4. CrowdfundingU covers everything you need to do from creating your documentation, understanding how not to be false or misleading, learning how to create a comms plan, through to what you should include in your pitch video.
  5. Once all your content is created, we’ll do one final check on your page, your leadership team, and your plans. Then we’ll hit go!
  6. Before your campaign is live, you’ll need to have a plan around communication. Some comms will come naturally out of celebrating milestones, and some will be pre-planned (weekly updates, pitches to media, etc).
  7. Hopefully, you meet your goal by your deadline!
  8. PledgeMe checks all of your lenders (to make sure they are who they say they are) and sets up the loan contract between you and your new lenders.
  9. We’ll be in touch regularly, especially to remind you when your loan repayments are happening, and can help with any questions as you go.

How do you figure out your repayment terms?

Really, this is up to you. You can set the interest rate at something you think (or better yet, know) will be of interest to your crowd and is also affordable for you. We can help you figure out what the right balance for you and your crowd might be.

You can choose to repay your loan over one year, two years…anything up to five years. And you can choose to make repayments every month, four times a year, twice a year or once a year. You can also choose whether or not you want to secure your loan with specific assets that your organisation owns

What does it mean if you can’t run a campaign?

It doesn’t mean you’ll never be able to run a campaign! It just means right now it’s not right for you. You could look at running a project or an equity campaign, or just wait until your revenue and equity has increased (or your costs and liabilities have decreased) to a point where repayment looks possible.

Don’t take it to heart, we still think you’re pretty rad. Promise.

Got questions?

Hit us up in the comments below. We’d love to hear what you like, what confuses you, what else you need in this crowdlending journey. If you’d prefer to chat to one of us direct, send us a line on lend@pledgeme.co.nz

Being a director. It’s personal.

Our board member, Mel Templeton, reveals her story and the motivation behind her desire to help guide businesses with purpose and support founders who’ve got it all on the line.

How did you end up doing what you are doing now? Did you plan it, study for it, go after it, or did it just turn out that way?

I never planned my career.  I did well in my first industry (hospitality), ending up with my own business at 25, and two by 28. A few years later I needed a change, so I sold up and followed a keen interest I had in computers and marketing.

That was back in 2000. Again unplanned, I ended up in product marketing and then brand marketing in online banking. I happened to be good at most things I tried, and was whisked overseas by the global bank which was exciting and full of new adventure and challenges. Six year later, I found myself in the upper echelons of executive corporate management.

That was when it hit me. This wasn’t what I wanted to do. I couldn’t find enough value in what I was doing, never mind whether I was enjoying it.  

So for the first time ever, I started to think about what I wanted to actually do with my working days.

I got some good advice, a mentor, did some courses and finally settled on my personal purpose – to help people, businesses and communities thrive.  Being a company director seemed a natural fit between my skillsets and my purpose.  So I planned how to get there. And here I am!

I am currently on three commercial boards and one advisory committee, all in very different industries, and each with their own challenges and growing pains. For me, the pleasure is in being able to help in some way and I’ve tended to gravitate towards companies with a strong values base and real purpose to their existence, especially those that resonate with my own values.  

For me, being a company director is a personal choice. I choose to do this because I enjoy being able to offer an idea, support an initiative, help build something with other like-minded people, and work selflessly to help build success for a business. That includes success for the founder, who has often got everything riding on the success of their business. It makes me feel like I am contributing something worthwhile to the world, rather than just doing something because I can.

This drive in me to “help” is a personal thing and I’ve been fortunate to find a way to combine that inner drive, with rewarding work as a director.  Where will your inner drive take you?

 

Mel Templeton has been on the board of PledgeMe since April 2016, helping to guide and beef up the financial skill of the PledgeMe team.