Small Businesses That Found Success with Alternative Finance

business owner receiving results of successful in crowdfunding campaignBy Aimee McAdams

With the growing popularity of crowdfunding and other alternative finance vehicles, more and more entrepreneurs are finding ways to make their business dreams a reality. Kickstarter, Indiegogo, and GoFundMe are just a few of the sites that help start-ups find the money they need to launch their companies. But alternative finance isn’t just for getting started. Once these entities get off the ground, they still require funding to help them grow and expand. Sometimes, new businesses know they are going to be profitable, but they just need a little push to get them over the initial trials that every new company faces. In the case of Kickstarter, many companies enjoy a successful campaign, but then find themselves in a bind when it comes time to deliver products to backers and new customers with large order requests. Here, we examine five companies that got that little push through non-traditional lending sources. Some used microlenders, and others relied on invoice factoring. But all of them found success without turning to the bank.

 

NEW BEGINNINGS

New Beginnings is a traumatic brain injury (TBI) rehabilitation center in Medford, NY. Founder Allyson Scerri opened the center after her father suffered at TBI in a motorcycle accident in 2007. The lack of adequate care in her area led her to start her own business, where TBI patients work on rehabilitation and recovery.

Scerri started her business with her own savings, as well as loans from family. Waiting for the proper permits and licensures meant that the center couldn’t take on clients in the beginning. For the first two years, the business was operating at a loss. When they finally became fully operational, they were in so much debt that banks wouldn’t provide any funding.

The initial expenditures of the business were about to pay off, though. Scerri was awarded several contracts as soon as her permits were in place, and since New Beginnings was the only center of its kind in the area, she knew there would be more to come. The only problem was how to cover the overhead until the contracts came due. Employees and debts needed to be paid, and the money just wasn’t there. Yet.

With the banks’ refusal of credit, Scerri had to seek out alternative options. She contacted a local invoice factoring firm, and based on her new contracts and growth model, she quickly received funding based on her future earnings. In less than two years, New Beginnings was self-funding all new projects and had completely paid off their debt to the finance company.

New Beginnings almost came to a quick end. But with a creative approach to financing, they were able to access capital and thrive. Today, the staff and client list continue to grow and thrive.

 

PEBBLE SMARTWATCH

The most successfully funded project ever, the Pebble Smartwatch, earned over $10 million on Kickstarter by the time its campaign closed. The company failed to obtain traditional funding when they were first starting out, so in April of 2012 they turned to crowdfunding to finance their innovative product. They met their $100,000 goal within two hours of opening their campaign, and the rest is crowdfunding history.

Not everything went as smoothly as the initial campaign, however. Soon after funding closed, Pebble announced that there would be delays in the first shipment of the watches, due to the overwhelming response on Kickstarter. While owner Eric Migicovsky planned to pre-sell 1,000 units, they took in orders for 85,000 of the e-paper watches which caused the delay.

The interruption was temporary though, and Pebble was able to meet their adjusted deadline and successfully fill all of their orders within a few months of the original date. When Best Buy put the Pebble Smartwatch on their shelves, they sold out within five days. Smartwatchgroup.com calls Pebble “a leading player in 2013’s Smartwatch industry.” The company continues to thrive with the recent release of the upgraded Pebble Steel and the Pebble Appstore for Android.

 

SOCK MONKEYS AGAINST CANCER

Jennifer Windrum started Sock Monkeys Against Cancer (SMAC) when her mother, Leslie Lehrman, was diagnosed with inoperable lung cancer in 2005. She used startsomegood.com, a nonprofit-focused crowdfunding site, to fund her project, and successfully met her $35,000 goal before funding closed, allowing her to  move into the production phase of her project.

SMAC operates on the one=two principle: when you buy one Sock Monkey, another is donated to a cancer patient. The adorable gifts offer comfort and support to those suffering or affected by cancer. The sock monkeys offer more than just a cuddly support; funds from their sales are donated to various cancer-fighting organizations.

The success of the SMAC organization is rooted firmly in its successful crowdfunding campaign. Without this alternative funding option, production of the cancer-fighting cuddlers wouldn’t have been possible, as a traditional bank loan was unlikely for such a venture.

Windrum considers SMAC a movement, claiming, “It’s time for a global SMAC!-Down. It’s time to unleash these crazy-haired, comfort-filled, cancer-crushing companions to help those with cancer around the world SMAC! it.” Find out more about SMAC here: http://www.smacancer.com

 

RIGHTEOUS SALAD DRESSING

With the new SEC crowdfunding regulations in the U.S., equity crowdfunding had become another option for small business funding. In England, this platform has been available for some time, and business owner Gem Misa took advantage, earning over $120,000 to grow her salad dressing business.

Misa did her homework, testing her product and ensuring that she had a market before seeking financing. Though she believed that her initial investors would be friends and family, she was surprised to find that her product testers were the ones to provide early funding, proof that she was working with a quality product.

The company’s successful Crowdcube funding campaign allowed them to expand their market and offer their product in the United States. The dressings are all-natural, preservative-free, gluten-free and vegetarian (or vegan). They are found throughout the UK, as well as in many natural foods stores in the United States.

With funding successfully secured, Righteous continues to grow and receives rave reviews from natural food and vegetarian enthusiasts.

 

COOLHAUS

When Coolhaus CEO Natasha Case lost her job, she decided to make a major change. She teamed up with real estate developer friend Freya Estreller and formed the new company, a gourmet ice cream truck. They started Coolhaus using their own credit cards, but were unable to find bank funding to move forward and grow their idea.

Enter microlender Opportunity Fund, which supplied the business with the funds they needed to expand their struggling start-up. In 2009 they purchased a non-operational mail truck to house their business, parking it in front of Estreller’s mother’s house until it could be repaired. Once they were up and running, the gourmet ice cream truck’s first stop was the Coachella music festival, where they instantly developed a cult following with their innovative flavors, which had an architectural theme. A couple of the hits? The “Frank Berry” (for Frank Gehry), a strawberry and snickerdoodle sandwich, and the “Mintamalism,” a mint-chip and chocolate cookie sandwich.

Case and Estreller faced challenges along the way, including flat tires, faulty engines, and broken freezers, but still managed to develop a strong following. Social media helped them grow Coolhaus by 700% in their first year. Now, Coolhaus has 11 mobile units, 2 store fronts, and their tasty ice cream sandwiches can be found pre-packaged in over 40 states.

Coolhaus had an excellent product. Their fresh take on flavors, coupled with their dedication to organic, high quality ingredients, allowed them to build a strong customer base in a short time. Without the help of alternative finance, this thriving business might not have ever gotten off the ground (or on the road, as it were). With  non-traditional funding, Coolhaus has become one sweet success story.

It’s clear from the accomplishments of these vastly different businesses that there is no one formula for success, but there are some commonalities between them. The owners of these companies were not easily dissuaded from reaching their goals, and they refused to let banks dictate whether they would make it or not. Each of them set out to find a new way, and each found an alternative to traditional funding that allowed them to grow and thrive in their endeavors. With all of the options in today’s financial world, there is no better time to ask: How will you make your dream come true?


P2Binvestor is a crowdfunding platform for working capital financing and a leader in crowdfunding receivables. P2Binvestor utilizes the power of technology and its crowd of accredited investors to simplify lending and provide working capital to growing businesses faster and at more affordable rates. The company offers three flexible products: A receivables-purchase product, an asset-backed line of credit, and a credit line secured by future revenue (designed for SaaS companies). P2Binvestor lends to companies in all 50 U.S. states in various industries including staffing, natural foods, manufacturing, technology, and more. P2Binvestor has been providing businesses’ receivables financing since December 2012. For more information, like us on Facebook and follow us on Twitter @P2Binvestor.

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