When Bee Met Evan and “Loyalty Capital”

Posted: June 14, 2015 by Jerry Malsh in Money, Startup

jerry-malsh-2015Meet Bee Roll, entrepreneur, founder and owner of Beezy’s Café, a small, growing and community-oriented business in Ypsilanti, Michigan.

Now meet Evan Malter, entrepreneur, founder and CEO of ZipCap, an innovative San Diego-based lender of low-interest loans to small, growing and community-oriented business owners that are financed by the customers who choose to patronize those businesses.

This emphasis on local businesses is reflected in the fact that ZipCap is actually the abbreviated version of the company’s more formal name, Zip Code Capital, Inc.

Bee and Evan met when she wanted to expand Beezy’s by offering more products and services to her customers and her community yet couldn’t secure a loan from traditional banks because she didn’t have sufficient collateral. Evan’s business model, based on the concept of what he calls “loyalty capital,” seemed to be an ideal fit for both of them.

ZipCap’s process starts when a retailer creates an “Inner Circle” of customers who commit to support his or her business by spending a specific amount of money within a specific amount of time. The retailer is then able to borrow against a portion of the total amount of pledges (or collateral) received. Eligibility for the loan requires the retailer to have been in business for at least two years in the same location and have at least 100 Inner Circle members.

ZipCap receives a monthly fee of either $99 or 2.5% of the Inner Circle’s transactions, whichever is the lesser amount.

Once each of Bee Roll’s 130 Inner Circle members pledged to spend $475 a year, Beezy’s qualified for a $10,000 loan at an annual percentage rate of 3.99% with a 1-year repayment schedule.

In March of 2015, ZipCap became Beezy’s first banker while Beezy’s became ZipCap’s first borrower … a mutually historic moment!

With her loyalty capital loan, Bee can begin to implement her five year plan of upgrading her register system for online ordering capabilities, introduce refrigerated cases for grab & go items, remodel her kitchen for brunch & dinner growth and expand her selection of Michigan-made food and gift items.

How loyal have Beezy’s Inner Circle members been so far? In the first few months since the loan took effect, one of the 130 members has dropped out, 117 are keeping pace with their commitment, 12 are not and nine have already achieved their goal and renewed for another year at $475.

How many more independently owned, community-oriented businesses have opted-in to ZipCap’s loyalty capital lending model? As of late May, ten Michigan businesses and several in California and Illinois were in various phases of securing Inner Circle members to become eligible for a loyalty capital loan.

Could Bee have continued to succeed without the benefit of a ZipCap loan? Yes. After all, she opened Beezy’s in 2008, in the midst of the Great Recession and in the midst of hard- hit Michigan. She has made it on her own since then.

The ZipCap loan just makes it a little easier for her to focus on maintaining and enhancing the services she can provide to her customers and her community.

There’s something refreshingly simple and old-fashioned about blending the concept of community with the concept of loyalty capital that’s somewhat reminiscent of barn raising in 18th and 19th century rural America.

A community isn’t really a community unless everyone has some skin in the game … whether it’s financial, in-kind contributions, volunteering or just offering moral support for the benefit of everyone else.

The vibrancy of a community is based on the value and the connectedness of its members.

That’s what this is really all about … the promise of a community with a sustainable future.

When Bee and Evan met, they both took another step toward making that happen.

Loyalty capital is a valuable asset to a business and a priceless one to the community it serves.jerry-malsh-2015

  1. Pat Shiplett says:

    I agree with this column. The concept is so simple. It calls to mind how immigrant families and farm communities in the past would pool resources. Would be fun to try the food at Beezy’s.

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