Games Unlimited in Squirrel Hill, which sells board games, puzzles and strategy games of all kinds, was shut down for eight weeks during the pandemic.
“I was worried about having money to pay rent, utilities,” says owner Kylie Prymus. “No curbside (pickup), no online sales, nothing.”
Then he attended a Zoom meeting hosted by the Urban Redevelopment Authority of Pittsburgh (URA) about options for small businesses, and heard about the Pittsburgh Loyalty Bonds program offered by Honeycomb Credit. Loyalty Bonds are like gift cards, but they can’t be spent all at once — and they accrue value over time.
Prymus told his customers about it through his email list and on social media, and the response was huge.
“Our goal was $3,000, and I think we hit that in half an hour,” says Prymus. “We’re sitting at about $21,000. It’s been incredible. It’s taken a load of pressure off me — how am I going to get the capital to get new inventory and pay my overhead? Within the first day, we did $11,000. That alone is enough to help me sleep at night.”
Honeycomb Credit — a crowdfunding platform that lets small businesses borrow from customers and the local community — came up with the concept of Loyalty Bonds, a new way to connect with customers and give them more reasons to return for years to come. The URA is helping by paying the $100 setup fees for the first 100 Pittsburgh businesses, which will also receive $300 from the URA when they reach their funding goals.
“When COVID hit, we realized lots of businesses needed capital, but were nervous about taking on debt,” says George Cook, CEO of Honeycomb Credit. “They didn’t know what re-opening would look like — would it be 40% capacity, or at 80% capacity?”
Gift cards seemed like something that could help.
“We kept hearing in many different places that gift cards are a great way to put cash in the hands of businesses really quickly, to really ride out the storm. But right as businesses are gingerly starting to reopen — if all of the customers come into a shop with gift cards at once, it might put the businesses in a dangerous cash flow position.”
“Gift cards are a good, if imperfect solution. There’s got to be a better way.”
That became Loyalty Bonds.
“It’s basically a gift card sold at a discount that is distributed over time,” says Cook. “So if I buy a $100 loyalty bond in a local coffee shop — we’re working with Creative Coffee & Supply Downtown — I’ll get $130 in Loyalty Bonds. Those gift cards will be paid out every six months for two years. The idea is we can get cash in the hands of small businesses very quickly, while smoothing out their cash flows, and also creating ‘stickiness’ with some of their best customers.”
The Loyalty Bonds work like store credit for a small business, and enable customers to earn an extra 30% more than what they invested, over the course of two years.
Honeycomb Credit can plug into a business’ existing gift card system, if they have one already. If not, Honeycomb will deliver paper gift cards in the mail.
“The first one will go out six months after the campaign is over, and every six months for two years,” says Cook.
The minimum Loyalty Bond purchase is $50.
The goal for most businesses is $1000, though they can set higher goals if they want.
The URA is a big advocate for the Loyalty Bonds program which excites Cook. “The URA saw this as a great way to activate the community to help businesses get back on their feet.”
More than 20 campaigns for local businesses have been launched so far. Some of those include Brookline gaming/co-working space Looking For Group and Squirrel Hill’s eclectic design store Global Market Retail.
“This is an excellent opportunity to not only help our small businesses with immediate cash flow but for them to gain loyal customers in the long run,” says URA Executive Director Greg Flisram.
There are some requirements for Pittsburgh businesses that want to participate. They have to have been in existence for at least a year, have a strong (1000+) social media and/or email following, and be able to accept gift cards.
“It’s a very approachable, accessible way to help out small businesses,” says Cook. “We’re excited to see how many we can get on board through this URA program. We can do a lot of good.”