If you eat, you're an investor.

by slowmoney.

This post was published first in the Slow Money newsletter, January 2013

By Arno Hesse

How often do we hear “We need Slow Money, fast”? Investing money in small food businesses can be a lengthy process, in many cases open to accredited investors only. The new crowdfunding service Credibles, homegrown in the Slow Money family, makes it easy to fund local food businesses by paying for your food ahead of time, in exchange for edible credits.

If you eat your are an investorHere’s how Credibles works: Food enterprises issue store credits for money received in advance. Customers and fans prepay the business on the Credibles website. In exchange, they receive a balance of Credibles — or edible credits — that they “eat up” over time. One Credible equals $1.

When customers make purchases, a simple transaction on a smartphone or tablet subtracts the purchase amount from their Credibles balance. In the same way bars keep a “tab” for their regulars, Credibles maintains a “prepaid tab” for local food purchases. Both the customer and the business have access to the remaining balance and track how the credits are being eaten over time. This eliminates the problem of lost gift cards and replaces the need for pen and paper for store record keeping.

To make Credibles financially appealing, participating businesses offer an extra bonus for paying early. For example, a yogurt producer gives a customer 10 percent extra when he pays $200 or more up front. That means he receives 220 Credibles.


Strengthening community with Credibles

Credibles offers users flexibility that not all prepay funding models can. The ascent of CSAs has shown the effectiveness of creating a stronger relationship between eaters and producers. However, many customers find that the CSA schedule doesn’t fit into their life’s schedule.

Crowdfunding sites like Indiegogo or Kickstarter have demonstrated the potential of sourcing funds from the community. These sites are better suited for donations (T-shirts or other symbolic rewards) or for financing prototypes, whereas Credibles supports using store credits flexibly over time.

In the future, the new service will expand user options by linking prepaid businesses within the Slow Money community. That means customers will be able to use their edible credits at other participating businesses and Credibles will take care of the backoffice accounting.

Why pay for sustainable food in advance?

The Credibles model provides cash flow up front for a business’ operating needs. Most food businesses require a cash infusion before they have product to sell. The chicken farmer has to pay for the chicklets and their feed many months in advance before they start producing any revenues in the form of meat or eggs. The fruit orchard needs to seed and grow the plants well in advance before the first fruits can be sold. The baker needs to pay for a new oven. Healthy food needs time — and money — to grow.

Many business owners seek to cover this revenue delay with loans or a line of credit from a bank. In addition to the higher rates for business loans, most banks are reluctant or unwilling to lend to small businesses. How can the underwriters know if the farmer turns out great-tasting carrots? How can they assess whether the community will support the expansion of the new restaurant? Indeed, these are difficult to figure out from a distance. However, the customers know how the food tastes. The community knows which eateries they cherish. Where banks hesitate to underwrite small food business, with Credibles, the community can do its own underwriting.

Why early participants like Credibles

Early pilots demonstrate that Credibles is an effective funding tool. Community members like that Credibles lowers the barrier for funding a food business. No big checks and complicated legal structures. If you eat, you can be an investor. As for the businesses, they can pay back the loan’s principal and interest with their products — something they grow or cook themselves. Does money get any slower than this?

Several Slow Money leaders and angel investors contributed to the seed funding for the Credibles platform. The service is rolled out and promoted in close collaboration with Slow Money chapters. Credibles pledged to donate 1 percent of the crowdfunding amounts to the Slow Money organization.

After early pilots, Credibles has opened program, preparing for a national launch at Slow Money’s national gathering in April. If your business seeks funding, or if you are a fan of a food business you would like to fund for edible credits, let us know at Credibles.org.

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