Investment crowdfunding may get all the attention these days, but there are other ways of support businesses you love—without all the red tape. One of those is Credibles, an app that lets you pre-pay at your favorite restaurant or food purveyor (like Love & Hummus, shown in photo above), and earn edible credits. Think of it as a house tab at your favorite local hang. Founded three years ago, Credibles is going strong, with a growing national presence. We talked with cofounder Arno Hesse, a former banker who is an active leader in Slow Money Northern California, about the future of pre-payments and “community underwriting.”
What’s the idea behind Credibles and how did it get started?
A few years ago, a group of Slow Money investors made a loan to a chicken farm in California. The farmer asked if she could pay back the loan in chicken and eggs. She realized that the economics of repaying in products are better than using cash. And, hey, everybody eats! It was a great idea, but there was really no reliable way to account for such as-you-go credits. That’s why Credibles was born.
Credibles introduces the idea of “edible credits.” Customers can open a tab with their favorite food makers and prepay for their purchases. With the Credibles app, both sides can track how they “eat the credits,” figuratively and literally speaking. The customer doesn’t need a wallet or card—they can just say “put it on my account.”
What are the benefits and what kinds of businesses is Credibles best for?
The business gets cash upfront, so they can pay for upgrades or purchase supplies. For larger pre-pay amounts, let’s say $200 or $500 or more, most businesses choose to return the love with some extra credits or goodies for the customer. So for customers, not only is it convenient, but your $300 pre-pay may get you $330 worth of goods, a modern version of the baker’s dozen!
The beauty of Credibles is that it’s open to all community members, not just the well to do.
Edible credits work best for food businesses that need to cultivate substantial business from regular customers—so, bakeries, farmers, groceries, coffee shops, butchers, or fish mongers.
I’m curious about the less tangible benefits… what have you seen in terms of deepening relationships or other ways that customer or businesses have benefited?
Oh yes, customers tell us and the businesses what they get out of having a tab. Most of all, people like to belong. Period. Customers want to be more connected to a business that they already love. We hear feedback like, “It’s nice to feel like I’m recognized and even greeted by name by some of the lovely employees/owners I see so many times a week.” Or, “I feel like I’m being a good neighbor by using Credibles.”
The bonus or extra credits is usually a secondary motivation. Over time, people also come to enjoy the convenience of not having to bring their wallet every time they want a cup of coffee at their local shop.
Wouldn’t the regulars make their purchases anyway, even without pre-pay and perks?
That’s what we thought initially. However, when we looked into customers’ purchasing patterns, we noticed that their visits went up to 1.5 to 2 times compared to before they had a prepaid tab. People have choices about where they eat or buy food. They just feel more drawn to the businesses where they have a special connection—and a house tab with their name on it.
We’ve noticed that businesses come to Credibles because they need capital, and they stay for the extra customer loyalty.
Speaking of customer loyalty, it is starting to be viewed as an asset that can unlock other funding. Are you seeing that?
Yes, we have seen some pleasant surprises. For example, after a local restaurant secured about $30,000 in prepayment from neighbors, they got approved for a loan for $200,000 by a small business lender. The same lender had previously turned them down, because a restaurant seemed to be too risky.
It’s difficult for professional underwriters to understand the market potential within neighborhoods, let alone food producers or agriculture. They typically don’t live or shop there. But the community does—they have a good sense of who is good and who will struggle. This wisdom of the crowd is what we call “community underwriting.” When traditional lenders see solid proof of market acceptance—not just ‘likes’ or stars—they can rate the risk more favorably.
How has Credibles grown?
By word of mouth. We now have hundreds of local food makers who have been using Credibles, with thousands of supporting customers. Some businesses are happy with a cash buffer of $20,000. Some have around $100,000 or $300,000. Since Credibles’ prepaid tabs are not limited campaigns [the way crowdfunding offerings are], we’re not just counting the businesses, we’re also tracking if customers come back for more helpings after they “ate” their credits. And most do.
How do you view do you see Credibles’ distinct role and value in the crowdfunding/community capital marketplace?
Most crowdfunding campaigns have strict deadlines. Understandably, a lot of frenzy goes into generating buzz before those deadlines. If you’ve backed such campaigns, like I have, you may have noticed that most campaigns and platforms are notoriously bad at fulfilling the promised perks. The money is in—now what?
Like crowdfunding, Credibles also helps bring in funding. But we really shine in dealing with the edible perks after the money is in. The balance of credits can be redeemed in multiple purchases, in varying amounts, for whatever purchases you make you that day. The Credibles apps make it super easy to track and process your tab.
And that’s the reason most customers come back for a “refill.” We have families that are already on their fifth or sixth refill of a $1,000 tab at grocery stores, without all the campaign marketing needed for one-off campaigns.
My personal vision is for people to move their money from bank savings accounts and “deposit” it at businesses they like and frequent, instead of just hoping the bank will lend our money to the right places.
In fact, we have several stores and farms that came to Credibles after they ran a campaign on another platform. They transferred the outstanding perks over because they are easy to manage here. Plus, they want to engage with the energized community again and again.
We want a model to strengthen local economies as a way of (neighborhood) life, not just a temporary campaign. On the local level, it’s about relationships, not just transactions.
What about the new crowdfunding platforms that facilitate securities?
I think even every business should be able to offer pre-pay loans or dividends in their products or services, at least in part. “Hello lenders, we can pay you 6% interest in cash, or 10% in bread—your choice.” The special benefits of being a community shareholder!
What’s next for Credibles, and what’s your long term vision for it?
As businesses realize that they have the power to issue credits for their own goods, they actually have been coming up with new creative uses. Some examples:
• A restaurant pays the plumber and the florist with meal credits. More flowers in the dining room!
• School kids come to the deli and get their lunch on their parents’ account. No cash needed.
• A co-op gives extra credits for fruit and vegetables to SNAP recipients in a food desert, sponsored by a grant.
My personal vision is for people to move their money from bank savings accounts and “deposit” it at businesses they like and frequent (instead of just hoping the bank will lend our money to the right places). It could be Credibles or some other form of tab with credits. Then, we eat and use services at local businesses, without ever taking out a wallet or card. Like we own the place—because we kind of do. It’s a mutual commitment of communities and their businesses to feed each other.
Longer term, Credibles will be integrated in cash registers and electronic wallets. The beauty of Credibles is that it’s open to all community members, not just the well to do. If you eat, you’re an investor!