An Innovative Fix for Small Businesses and Startups Seeking Low Cost Capital Using Social Networks

Buddyinterest makes it simple, safe and transparent to seek and discover low cost capital from friends and family using social networks and facebook

Ron Anderson quit his job as a fashion designer with a high street fashion house to start his own clothing brand, R&A. 6 months before quitting his job, little did he know the challenges in securing loans for his new company. He went to every bank in Pittsburgh for a small loan of $25000 and was rejected. Banks have a very straight forward process and are very choosy in giving out loans. Luckily for him his friend who works for a bank referred him to Buddyinterest, billed as the world's first social financial network.

Ron registered his new company, and created a Facebook, Twitter, Pinterest, Tumblr account to promote his business. Within a week of joining the various social media platforms, he got about 3000 likes for his creative cuts and colour blends displayed on his site. This gave him the confidence to borrow the initial funds for his business from his friends and family, using Buddyinterest.

For Ron, stumbling onto the Buddyinterest website was like finding the Holy Grail: "The whole campaign was simple, private, fast, and transparent; the best part is I got to choose the interest rates for my loans," says the entrepreneur, who created a campaign, notified his network, and got $30,000 for his new label in less than a month. He had 250 investors, some of them investing as low as $100. He was able to reach out to so many people instantly and also receive their support besides spreading the word about his fashion label to their networks. He was particularly impressed with the website, which features a sliding scale that shows exactly what the interest rate, term, and monthly payments are for different loan amounts.
"People all over the world borrow money from friends and family in an unstructured manner which leads to future complications. Buddyinterest solves this problem by providing a totally free platform to raise funds in a safe and transparent way from people who are already socially connected," says Johnson Charles, Product Strategy Head at Buddyinterest.

The difficulty of developing an automated process to keep all transactions well recorded and transparent has kept companies from making such options available online. "We are very good at taking complicated lending and investing processes and making them easy and transparent with technology. We want to keep lending between friends and family simple, safe and transparent. We are also going to roll out social campaigns in the next quarter, so that people working for social causes can take advantage of this free platform.", says Johnson.

Bright ideas, small businesses, and start-ups are vital to the overall health of our economy. However, securing business financing has become an increasingly challenging task. Banks that once eagerly lent to small businesses have significantly reduced the number of loans being issued and decreased the dollar amount of these loans, besides charging high interest rates to discourage start-ups and small businesses from approaching them. Ron was lucky, he discovered Buddyinterest before his plans of starting a new business were squashed.

What Ron realised was that financial institutions did not see the value in his business quite the same way as friends and family. "The benefits of borrowing from your networks are substantial. They are often more willing to lend money without you having an established track record. The interest rate is often better, too. If you do choose to secure business financing through family or friends, it's vitally important to clearly structure the deal with your lender. Putting into writing whether funds are a loan, a gift, or an investment is a good idea. The terms of the agreement should be spelled out, too. This can be well structured by using an online platform such as Buddyinterest that helps you discover loans at low interest rates within your trusted network," says Ms. Jacob, Communications and Marketing Head at Buddyinterest.

If Buddyinterest catches on, it has the potential to become the go-to platform, for small business owners looking for low cost capital.

Categories: Small Business

Tags: credit, low cost loans for small busines, small business

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