When Noe Valley Bakery wanted to open a second location, they didn’t ask a bank or angel investors for financing. Instead, they turned to their customers—a loyal bunch who had grown with the company during the twenty years at their original location. The owners asked those customers to start a prepaid tab at their new West Portal shop, allowing the bakery to raise start-up costs, while also ensuring a steady flow of traffic to the new location. The unusual proposition worked. The bakery raised over $10,000, and opened the West Portal location at the end of March.
The bakery’s successful opening, in a time when many Bay Area restaurants are struggling with money issues, was the result of San Francisco’s Credibles, a company that provides a way for customers to financially support their favorite food businesses. Customers prepay a business—starting a tab with their local butcher shop, coffee shop, or dairy farm—which they draw from on subsequent visits. Instead of pulling out their wallets, Credibles customers get purchases subtracted from their tab.
It’s a simple model, but it can make a big difference to small food businesses, who love it because it helps remove the economic uncertainty that comes in the food world. It’s particularly helpful for farmers, who have to put money upfront for a season’s crops, uncertain if they’ll make it back at farmers markets months later. For retail businesses it’s an easy way to raise money for big expenses, like another location or a new roasting machine, while gaining a group of confirmed customers: the company says that customers who prepay return to the business one-and-a-half to two times more often than they previously did.
For customers, Credibles offers a simple way to invest in the success of a local business without having to change their daily routine. Many businesses offer an incentive for a larger prepayment: If you prepay $400 at Berkeley’s Local Butcher Shop, you’ll get $440 in credit. It’s also convenient. Businesses simply note that a person is paying with their Credibles account, so customers can still make purchases if they’ve forgot their wallet. It’s like being a VIP at your neighborhood’s organic fruit farm.
Credibles was started in San Francisco in 2014 by founder Arno Hesse. Hesse, who describes himself as a “bank executive in recovery,” is part of the “slow money” movement, which provides sustainable financing for local food ventures. He was with some fellow investors at a chicken ranch in Vacaville that they had provided with a group loan. Don’t worry about the loan’s interest, Hesse told the farmer. Just pay it in eggs. The farmer thought for a moment. Could she pay the entire loan back in eggs? she asked.