Bank replacement platform Honeycomb has emerged as a top FINRA-regulated funding portal in regard to the number of Reg CF filings hitting the Securities and Exchange Commission.
While this is not a deep dive into funding activity for the industry, HoneyComb has entered the mix as a top three platform for firms raising money under Reg CF. In the past, Reg CF has been mainly dominated by Wefunder and StartEngine, but HoneyComb has been gaining traction in this segment of investment crowdfunding.
The Reg CF (Regulation Crowdfunding) securities exemption allows a company to raise up to $5 million online from both accredited and non-accredited investors. Honeycomb focuses on debt funding for smaller firms. According to the platform’s website, over 80% of loans listed on the platform are successfully funded by investors. In a challenging credit environment, where traditional banks are pumping the brakes due to the stumbling economic environment, Honeycomb may be just what a smaller firm is looking for. A loan funded mainly by individuals, with no slow-moving credit committee and gobs of documents to sign, may be an easier path to gain access to growth capital.
To quote a recent “impact report” published by Honeycomb:
“Since the Great Recession, it has become harder for creditworthy small businesses to receive funding. In fact, SBA loan originations have decreased by 47% between 2007 and 2021. By giving everyday people the chance to lend directly to businesses, we are helping bridge the small business lending gap. There are early signs that community-funded loans may perform better than comparable SBA loans. A portfolio of all Honeycomb loans has a charge-off rate of 2.85% compared to the 18.47% charge-rate of SBA 7(a) loans with comparable terms and loan sizes.”
If you are a small business and you do not want to give away ownership (equity) in your firm, a debt offering may be a good option to fund your business.
Current loans being funded include businesses like Bomvida Farms in Bosque, New Mexico, Leaves of Leisure in New York City, and the Green Room Social Club in Placerville, CA. Bomvida Farms sells local farm products to consumers and is opening more stores in the Albuquerque area. Leaves of Leisure is a luxury herbal tea company offering a curated collection of low-caffeine and herbal teas, and the Green Room Social Club is a live music venue launched mid-pandemic. Each company is seeking less than $200,000.
Honeycomb was founded by a former banker, George Cook, who is providing access to capital to small businesses that may have been turned away by a local bank. Many of the firms raising money online are women or minority-owned – too frequently underserved by traditional forms of capital.
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