Bridging the Funding Gap for Crowdfunding Borrowers Who Fall Short of Their Ambitious Goals

What happens to local businesses seeking funding on crowdfunding sites when they can’t reach their lofty goal? That’s the problem a new program from crowdfunding platform Honeycomb Credit and DreamSpring, an Albuquerque-based community development financial institution (CDFI), aims to solve. Through this partnership, DreamSpring provides loans to businesses that have not raised the maximum amount they were aiming for.

The partnership also helps DreamSpring, which focuses on underserved small businesses that typically cannot obtain funding from traditional 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 bank in rural Appalachia, and small business owner Ken Martin. Formed in 2017, it offers individuals a way to invest in community businesses with a minimum of $100.

A win for everyone

Francisco Lopez, chief operating officer and chief innovation officer of DreamSpring, met Cook and Topiltzin Gomez, chief of staff of Honeycomb, at a fintech and financial services conference in Las Vegas last year and spoke quickly realized that the two organizations were very sympathetic.

Additionally, when a business runs a Honeycomb campaign, it sets a minimum goal and a maximum goal. Lopez learned that some Honeycomb clients had failed to meet their primary crowdfunding goals. This presented a perfect opportunity for DreamSpring to step in and lend companies that had reached their minimum goal the amount they still needed to reach the maximum.

It was a plan likely to benefit DreamSpring, which could develop new customers already approved by the platform, as well as Honeycomb, which would be able to provide a solution for users in need of bridging this funding gap. And, of course, crowdfunding customers could get the maximum funding they seek.

After that, DreamSpring assigned a loan officer to work with Honeycomb customers and also developed an application process. According to Lopez, they were able to create a highly streamlined system because they can leverage the work that Honeycomb has already done. “We rely on Honeycomb’s due diligence,” says Lopez.

So far they have made about six loans for a total of $400,000. Loans between $30,000 and $40,000 are larger than the typical DreamSpring loan of $15,000.

An expansion plan

DreamSpring was founded as Accion New Mexico 28 years ago, one of four members of the Accion network, serving five southwestern states. In 2019, they decided to go out on their own, with plans to expand.

Traditionally, the organization relied on loan officers who met people in the community. “It was a very tactile model,” says Lopez. But expanding meant adopting an online model and forming partnerships with fintech companies, linking up with online marketplaces such as LendingTree and Lendio, to name just one example. They also launched their own digital marketing campaign on Facebook and other places to reach potential borrowers and donors.

Now DreamSpring has a presence 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 areas DreamSpring serves, typically virtually. Clients can apply online and connect with a loan officer or go through the entire process virtually.

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