Honeycomb Credit closes $1.75M seed round to expand capital model nationwide

Pittsburgh-based Honeycomb Credit, a first-of-its-kind loan crowdfunding platform, will expand its community-based small business financing model nationwide after raising $1.75 million in seed funding.

The company has connected small business owners with more than $3.5 million in expansion loans crowdfunded from thousands of people who want to support local businesses. This model of community-sourced loans, operating under Regulation Crowdfunding, is an alternative to small businesses finding financing and has gained traction during the COVID-19 pandemic.

“While local businesses were working on the fly to adapt their business models to the pandemic, the modest funding they needed simply wasn’t available through traditional lending sources as banks and online lenders pulled back,” said CEO George Cook, a sixth-generation community banker who worked in credit analytics before co-founding Honeycomb. “We give these businesses a way to connect with community members who care deeply about the survival of their local businesses and want to ensure it through their investments.”

The company’s latest funding round was anchored by the American Family Insurance Institute for Corporate and Social Impact, a venture capital firm under the umbrella of the American Family Insurance group. The investment is an example of a major financial services organization acknowledging that Regulation Crowdfunding is a viable, scalable way to get capital into the hands of small businesses.

“At the Institute, we look to support the very best entrepreneurs across the country who are building scalable, sustainable businesses in a long-term effort to close equity gaps in America,” said Rob Kornblum, Fund Portfolio Manager at the American Family Insurance Institute. “Honeycomb is creating real change in these communities by providing growth capital to under-banked small business owners, especially underserved entrepreneurs who have historically experienced barriers accessing traditional capital.”

Honeycomb lets communities come together to loan businesses money. Operating under Regulation Crowdfunding, the company’s platform lets people invest as little as $100 and receive quarterly repayments. In turn, the company said, more than 80 percent of those businesses have reached their crowdfunding goals.

“Letting people vote with their wallets is a really powerful, affordable way to get the knowledge of the community back into these underwriting decisions,” Cook said. “It also creates circular economies that build community wealth. Instead of paying a banker on Wall Street, businesses are paying back their neighbors and fans.”