LAKEVIEW — Coffee roaster and cafe Bow Truss wants fans and customers to loan it $300,000 for an expansion, but this is no charity ploy.
The less than 2-year-old shop at 2934 N. Broadway plans to pay back the loans — with interest — in monthly installments to donators through Chicago startup LendSquare.
In other words, the public becomes the bank.
"We're growing," said owner Phil Tadros. "We want people to grow with us. If we can make somebody money on helping us grow, we feel good about that."
Bow Truss already opened a River North location, 406 N. Wells St., with a $30,000 loan crowd-funded through LendSquare.
But the company's coffee, which now also is sold in several local restaurants and Whole Foods locations, has outgrown its Lakeview equipment and needs 10 times that amount of money to increase production rates.
The $300,000 will help pay for construction of a new facility and a roaster that will at least triple production capacity. It could also be used to open a cafe in Roscoe Village.
It may seem like a lot for individuals to invest, but just a week into the campaign, Bow Truss has raised nearly 70 percent of that money.
"It's blowing my mind," Tadros said. "It's pretty amazing."
Tadros already is looking for production facilities in the West Loop, Pilsen, Ravenswood and Roscoe Village.
In addition to getting paid back over 36 months, people get perks with different levels of investment, much as they do via the popular crowdsourcing site Kickstarter.
With a $1,000 loan, a lender gets five one-pound bags of coffee. With an $100,000 loan, which someone actually did, the lender gets to own a part of the coffee company.
Lenders can choose their own interest rate for the loan, and the average interest rate that all the lenders choose becomes the one Bow Truss uses, according to LendSquare. So far, the average has been about 12 percent, Tadros said.
So why not get a loan from a regular bank?
Tadros said it's a myth that banks actually shell out for small businesses to grow. Bow Truss may have had some $1.5 million in sales in a year, but banks are still averse to loaning to mom-and-pop businesses, he said.
Plus, banks don't understand Bow Truss the way customers do.
"The general public, they’ve watched us," Tadros said. "They’ve been part of the whole growth of it. It’s a different world."
Of course, there's a risk to Bow Truss fans who want to lend money. If the business doesn't repay the loan, LendSquare sends it to a collection agency, and lenders could lose out on some of the investment.
"You should think of your loan as an investment in your neighborhood and your community, not just a financial investment," the site says.
Regardless, Tadros said he was confident that Bow Truss would be able to pay back its fan lenders.
The coffee company already has wholesale accounts in Detroit and Los Angeles, and Tadros is aiming to take it even more national. It's sold at Columbia College and DePaul University and is served in a Brendan Sodikoff restaurant.
"With our growth, we're already a profitable company," Tadros said. "We feel more than capable of pulling it off."