Customers crowding to fund with Linked Finance

By hban.org
Tuesday, 8th July 2014
Filed under: Year2014

Rather than going back to the banks, a Cork-based wine company has secured a loan of €30,000 from its customers’ pockets.

Curious Wines turned to crowd-funding company Linked Finance to secure the funds, in what is the most successful loan bid ever hosted on the site.

Curious Wines managing director, Michael Kane attributed the success of the loan application to their engagement of both existing and potential customers.

“By some distance it’s the most successful loan process [Linked Finance] have put up and the reason is that we managed to engage both our existing customers and also non-customers that bought into what we’re trying to do,” he said.

The crowd-funding platform works by giving individuals an opportunity to bid ‘micro loans’ at rates that suit them.

Once the principal amount is achieved, lower rate lenders drive out the more expensive bids ensuring the borrower gets the most competitive rates.

Curious Wines, owned by Mr Kane and his wife, and co-run with his brother Matthew, outpaced the normal rate of loan fulfilment achieving 75% of their €30,000 target in just a week, as opposed to an average of 20-30% fulfilment.

The early take up meant higher bidders were outbid early in the process and the 36-month loan was secured at an average rate of 6.22% — the lowest ever achieved on Linked Finance.

“That’s really, really exciting because you’re properly harnessing your customers as vested stakeholders in your business,” said Mr Kane.

The family wine business is expanding with the opening of a new 6,000sq ft unit just off the Dublin to Cork M7 motorway near Naas, Co Kildare.

Linked Finance chief marketing officer, Marc Rafferty said that it represented the most enthusiastic response the site has ever seen.

“We’ve never seen such an enthusiastic response to a loan on our platform… Curious Wines has embraced Linked Finance as a way to raise finance to expand their Irish business in the ultimate fashion. “Not only are they receiving the finance they need to grow, they’re turning their current customers into lenders and advocates for their business and they’ve also publicised their wine business to the thousands of lenders supporting Irish SMEs on Linked Finance,” he said.

The alternative to traditional financing options provided by crowd-funding sites is one of the many advantages to the process, according to Mr Kane. The banks are willing, in his opinion, to lend to smaller businesses but not always as quick to back their continued growth.

“There’s a glass ceiling in terms of how far they’ll go, they put you in handcuffs. For example, there’s a key issue around unsecured borrowing. At the end of the day, [the banks are] lending [at] commercial rates with commercial risk and there’s a commercial margin factored in for all that but there’s nothing they will do beyond a certain level unsecured.

“One of the things I was asked for, in terms of security, for further lending was cash on deposit which is just completely ludicrous; they’re effectively looking for cash on deposit to secure a loan that I’m looking for because I need cash — they’re just very constraining and very tight.”

While bank financing supported the investment in the new Naas facility, the quick access to cash available through crowd-funding allows businesses to achieve better economies of scale which is crucial to small and medium enterprises like his.

“The single biggest complaint of businesses our size is cashflow and getting more cash to grow the business. The banks just keep you on such a short leash it can be so frustrating and ultimately really stifling and prohibitive to the business.

“Linked Finance, for me, is just the answer to that — its such a simple process. We’ve already referred two people.”

To read the original article which was published 27th June 2014 by Peter O’Dwyer of The Irish Examiner visit www.irishexaminer.com

To learn more about Linked Finance you can visit their website www.linkedfinance.com