Financing fiesta

Community Sourced Capital is poised to become a household name within entrepreneurial hubs like Asheville. At least that’s what Carol Peppe-Hewitt, founder of Slow Money NC and CSC’s North Carolina local connector, is hoping. The community lending guru is hard at work promoting CSC’s latest campaign by Asheville’s own 5th Sun Specialties.

Asheville residents who enjoy a gluten-free fiesta every now and then have probably already munched on 5th Sun’s line of organic, non-GMO tortilla chips and dips. The family-operated business launched in Asheville in 2012, and success in local, independent food stores soon led to distribution in large grocery chains, including Whole Foods and Ingles. Now 5th Sun is aiming to clear its next business hurdle using the CSC platform.

“We are hoping to use the funds we raise to increase inventory, which will enable us to expand our store base and distribution range,” says Michael Henzel, co-owner of 5th Sun. “This will help grow the company and provide ability to hire additional staff, which creates more growth.”

According to Hewitt, CSC is the perfect fit for 5th Sun. “Crowdfunding has been very successful at helping nonprofits and artists and musicians raise money,” she says of popular resources Kickstarter and Indiegogo, “but for many businesses, a community loan just makes more sense.”

This phenomenon became apparent to the 5th Sun team during its recent Indiegogo campaign. The owners, hesitant to actively solicit contributors, fell decidedly short of their goal on their Sept. 14 deadline. But the business is already well on its way to receiving its minimum $8,000 goal by Sept. 28 through CSC’s crowdsourcing platform. Why the sudden boost?

One of the defining characteristics of CSC is that contributors get their money back. Campaigning companies, which usually require smaller loans than traditional lending institutions will make, are screened for their ability to generate revenue (among other criteria) before getting accepted for the CSC platform. Once a company reaches its fundraising goal, payments on the loans commence within a month — hence the need for verifying a reliable revenue stream.

There are no interest payments on CSC loans, or at least, lenders don’t receive them in the traditional sense. “Instead, you can walk into businesses that you know you have supported,” says Hewitt, who says the opportunity “adds meaning to your portfolio.”

“Most of these loans are going to take one to three years to pay back, and CSC has only been at this for about a year,” she continues. Already, CSC’s website lists 32 campaigns nationwide, two of which are actively seeking funding and seven of which have fully repaid the loans. The company accepts campaigns spanning many industries and boasts $434,000 in loans from 2,750 “squareholders” — people who purchase one or more of a campaign’s $50 incremental loans, called squares.

Henzel says working with Hewitt and the CSC staff has been great, since the whole team is “very professional and resourceful.” Plus, according to the entrepreneur, CSC’s platform has provided a wider audience for the campaign, and the staff provided a lot of support in putting the campaign together.

“It’s a real paradigm shift for people,” says Hewitt, describing a general hesitance for people to move their investments away from traditional financial institutions. “It’s amazing how people have given up control of their money. There’s been some serious brainwashing that convinces people that they’re not smart enough to handle their own money,” she says.

Hewitt adds that community loans actually perform very well in terms of payback because they leverage the power of “relationship lending.” Companies that borrow money through CSC can see a list of squareholders and are thus likely to personally know several of the individuals providing the loan.

The 5th Sun campaign represents the first North Carolina-based project, but Hewitt sees CSC taking off in Western North Carolina because the region is “an extremely entrepreneurial community.”

So it’s not a donation because you get it back; but it’s not an investment, either, because there isn’t any interest. Hewitt knows the road to educating North Carolina citizens will be a long one, but she hopes community members will become intrigued as they come to understand the concept and how it could improve their lives directly.

“We’re just hoping that this will be kind of addictive. It has been for me,” she admits. “This isn’t about making money. This is about supporting businesses in our community we care about.”