Entrepreneur shows that Zero-interest platforms can work

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May 26, 2015 1:34 PM

Since CSC was launched in 2013, about 3,700 people have loaned more than $800,000 to U.S. restaurants, breweries, boutique hotels, farms, retailers and manufacturers.

Rachel Maxwell is listed on Entrepreneur magazine's 100 entrepreneurs list

Rachel Maxwell’s path to financing entrepreneurs wasn’t a clear one. Before receiving her MBA in 2012, she was employed in international climate policy while running an analytics and market research firm with her husband.

But her background in data-crunching and interest in sustainable energy soon led her to pursue sustainable business financing solutions for local communities.

“What I figured out was that we really needed a distributed economic system, much like we needed a distributed energy grid,” says Maxwell, who is Seattle based.

After spending a year researching, the result was Community Sourced Capital, a zero-interest crowdfunding platform for community-based ventures. To make sure that future directors, advisors and investors would honor the mission, CSC became a certified B Corporation and a registered Social Purpose Corporation, a Washington state business designation.

“Everybody said to us, ‘No one will do this,’” Maxwell, who serves as CEO, says. But she is proving every one of them wrong. “Most of the [lenders] do know and live within a few miles of the businesses they support. What we found is that people will make zero-interest loans if they’re connected to the business or the community that is being improved by the loan.”

Since CSC was launched in 2013, about 3,700 people have loaned more than $800,000 to U.S. restaurants, breweries, boutique hotels, farms, retailers and manufacturers. The average campaign varies from $15,000 to $20,000, with most lenders contributing $100.

“Ninety percent of the campaigns that run on our site successfully reach their funding goal, which is about 50 percent more than the industry average,” Maxwell says.

Borrowers pay $250 to run a four-week campaign seeking $5,000 to $50,000 on the site. Lenders contribute to campaigns in increments of $50, or “squares.” If a business gets funded, CSC charges the borrower $50 per month throughout the three-year repayment period. There’s no interest involved.

Instead, borrowers pay CSC a percentage of their revenue that flexes with their earnings. CSC in turn then passes those payments on to lenders (or “squareholders”).

Its a system that just works and Maxwell is hoping to keep it that way.

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