Steven J. Bisbee never set out to be a lender to small businesses per se, but his recently launched website could be a lender's distant cousin.

The site combines aspects of localized microlending and social media, connecting consumers with entrepreneurs to help the businesses raise small amounts of working capital. The difference between Cogster and peer-to-peer lending sites like is that instead of getting an equity stake in the company, the consumers receive gift certificates for goods and services as the return on their investment.

The idea draws on many influences, including Prosper and microlender Kiva, as well as services such as Groupon, a website that promotes localized daily deals. But Bisbee, who most recently was a vice president at the builder S&A Homes Inc., made it clear that Cogster, of State College, Pa., is not a lender.

"This is a prepayment of goods and services," he said. "Our goal was always how do we inject capital into mom and pop, legally, without being a bank and without going through the legality of it being a security. … We never had the goal of placing a debt burden on the company. We wanted the capital to be associated with customer flow."

Since the site launched in June, nearly 80 businesses and close to 1,000 consumers have registered. A total of $22,975 has been raised for member businesses so far. The service is only available in a handful of towns in northwest Pennsylvania surrounding Pennsylvania State University. But Bisbee hopes to take the service national as soon as possible and is looking for "strategic partnerships" to help him do that.

Cogster works like this: Businesses and consumers sign up to become members of the site for free. Businesses set a financial goal they'd like to reach by a certain date and consumers choose which businesses they'd like to support. Consumers can contribute to a business' campaign with as little as $10. There are different contribution options, each earning "dividend certificates" over time.

Most businesses offer the "Double Money" option in which a consumer instantly receives a gift certificate to the business he or she contributed to in the amount of the contribution that must be redeemed within 30 days. The consumer will receive another certificate worth 50% of the contribution 30 days later, and 30 days after that another certificate worth 50% will be issued. Both of those certificates must be redeemed within 30 days of receipt as well.

It's a concept that analysts said has potential to take off. "There's definitely some interesting elements there," said Edward R. Woods, a principal at Mindful Insights LLC, a financial services advisory firm in Portland, Ore. "I think one would consider a message like this irrespective if they can get lending at a good rate because of the notion of connecting with consumers, brand awareness … just the whole notion of being in the social game."

Small-business lending has declined during the crisis as banks rein in their lending standards. But at the same time, demand for traditional commercial loans has been tepid as businesses buckle down and avoid taking on more debt. The Federal Reserve Board's July survey of senior loan officers found that lending standards on commercial and industrial loans to small firms eased for the first time since 2006. Demand for C&I loans from businesses of all sizes was still weak.

In the model, the business raising money isn't taking on debt, and the benefits are more than monetary, Bisbee said.

Business owners in early focus groups Bisbee organized "told me they loved the idea that the up-front money wasn't a typical loan with an interest rate in which repaying the cash had no correlation to future customer visits," he said. "They said they liked that the Cogster payback on the up-front capital would occur only via repeat customer visits, something they all were struggling to achieve."

Cogster's member businesses could eventually save money on advertising, Bisbee said. "This is almost marketing in reverse," he said. "Instead of paying for a radio ad and hoping people come in the door, this is raising money day one and only paying against it if customers continue to come back over time."

Cogster, which perhaps not surprisingly was funded by seed money from friends and family, is run for a profit; Bisbee keeps 10% of the money raised.

He said he believes the service could help businesses if and when they seek traditional financing from a bank. They'll be able to demonstrate they've built not only a capital cushion, but also a steady following of customers, he said. "We are helping offset the risk that local bankers have traditionally bared over time with small businesses and we're authenticating or legitimizing the value of these local mom-and-pop businesses," Bisbee said.

Analysts were skeptical of this idea. "I don't think [bankers ask] 'How many followers do you have on Facebook?' " said Mark Schwanhausser, a senior analyst at Javelin Strategy and Research in Pleasanton, Calif. "I can't imagine this is going to be a telling factor to a lender. It is a measure of community support. But isn't it more basic to say 'We've brought in more revenues than we've spent in the last couple of months. Here's our cash flow. Here's our business plan.' I think that's what a banker will look at more closely."

Elaine Meder-Wilgus, the owner of Webster's Bookstore Cafe in State College has become a sort of poster child for the Cogster site — an emblem of what it's capable of helping businesses achieve.

Meder-Wilgus' sales began to drop off in the fall of 2008. An increase in postage costs further squeezed her cash flow. She began to fall behind on the store's rent payments.

At the beginning of this year, Meder-Wilgus started the process of refinancing her loans with a local community bank, but at the end of June, the refi hadn't been finalized. On July 1, she got a 30-day eviction notice.

The public outcry over the store's possible demise "was instantaneous," Meder-Wilgus said. In a matter of days, she had signatures from 3,600 community members pledging their support, and raised several thousand dollars through the Cogster site. On July 15, Meder-Wilgus set a goal to raise $40,000 by the beginning of September. She is a little more than half way there.

Meder-Wilgus said her bank, which she declined to identify, took notice of the community's support. "They said 'We see the community outpouring and we'll get the refinancing done.' "

Meder-Wilgus was forced to move out of the store's downtown location at the end of July, but the support she's received through Cogster will help her to reopen in a new location, she said, something that once seemed unthinkable. "The Cogster money certainly contributed," she said.