Online lenders offer aid to businesses harmed by coronavirus outbreak

Register now

Call it a business-to-business rescue plan.

As Congress debates a massive coronavirus stimulus package, several private-sector efforts are under way to help firms laid low by the crisis.

Online small business lender Kabbage has launched a website that lets people buy gift certificates from small businesses that can be redeemed after the pandemic subsides. Struggling businesses get the money now.

Companies can register for free, and revenue generated by gift-certificate sales will be deposited in participants' accounts as soon as the next business day, said Kabbage co-founder and CEO Rob Frohwein.

“We thought it was potentially a perfect bridge,” Frohwein said. “If there is a local small business that you love, they need your patronage now more than ever.”

Kabbage’s new campaign comes two days after a restaurant group unveiled a similar effort to sell what it calling dining bonds. Like Kabbage’s formula, restaurants get money up front. Purchasers can use their bonds to purchase meals once the crisis ends.

"We're experiencing something we have never had to deal with before," Jennifer Petrocelli, executive director of The Preston House & Hotel in Riverhead, N.Y., a participating restaurant, said in a Monday press release.

"We want to remain optimistic, so this initiative shows solidarity within our restaurant community and hopefully reassures guests that if they aren't able to visit us at this point in time, we'll be here for them when things settle down," Petrocelli added.

Read more: Complete coverage of the coronavirus impact

Honeycomb Credit, a crowdfunding platform in Pittsburgh, has started facilitating loans to small businesses that need working capital during the pandemic. The loans include a 45-day payment free period and will be interest-only for six months. Capital can typically be deployed in as little as 30 days.

Frohwein said he conceived the idea for Kabbage's gift card campaign over the weekend.

“It was important that we got this done quickly,” Frohwein said.

“If it took us six weeks or two months to develop, a lot of small businesses would suffer a lot of harm," he added. “I tasked the team and I said, '`Guys, we’d like to figure out how to launch this some time next week.' I’m just absolutely astonished by the reaction I got from the team, which was, '`Let’s jump on this and get this done.’"

While Kabbage offers a more traditional short-term loan, Frohwein said conventional credit may not be the best vehicle for hard-pressed small businesses.

“We’re in a great big valley right now, and our capital is not always the best use for that type of situation, although it certainly helps in lots of different ways,” Frohwein said.

The restaurant industry was already facing major changes due to the growing use of delivery apps. The coronavirus crisis has added unprecedented pressure that has left many establishments reeling.

“We’ve never been hit like this before,” Ricky Klein, co-owner of Groennfell Meadery in St. Albans, Vermont, said during Tuesday conference call organized by the Main Street Alliance. “My mead hall is shut down, and every restaurant that carries our product is shut down, too.”

For reprint and licensing requests for this article, click here.
Coronavirus Small business Kabbage
MORE FROM AMERICAN BANKER