According to Rising Tide CEO Alfa Demmellash, the new platform will alleviate the daunting process of finding the "right match" between an entrepreneur and a microlender, which is causing potential first-time borrowers to throw in the towel on their hunt for financing.
"Every lender has their own criteria and their own idea of what they're looking for in a business, so the challenge is every time you walk into a lender's office, you do one process, and then if you walk into another lender's office, you're starting that process all over again from scratch," Demmellash said. "That's a huge discouragement for entrepreneurs, as many of them give up after one try."
To keep startups on the path to obtain necessary capital, Demmallash said her staff will look over their business plans and financial statements prior to posting them on Rising Tide Exchange 2.0 and act as an intermediary between entrepreneurs and microlenders throughout the process.
"By managing this platform, we'll know when they're rejected by a lender, so before they give up, we can learn more about the process they went through and guide them through ways to be successful next time," Demmallash said. "We want to give them a soft 'No' and then say, 'Here are some other lenders that may be a better match for you.'"
Helen Steblecki, the New Jersey director of Citi Community Development, said the company invested $150,000 to bring the idea to life because "it's an innovative way to create another level of value-added service for Rising Tide's clients, which we believe are the lifeblood to creating jobs, and we're committed to making sure those people have access to what they need to succeed."
"Startups usually don't get financing directly, because those businesses are seen as more at-risk because they're brand new," Steblecki said. "But the great thing about this is it's a win-win situation, because education and assistance in loans for the entrepreneurs is built into this model, which makes the entrepreneurs well prepared and the (community development financial institutions) willing to work with them."
Citi originally invested $20,000 on Feb. 25, 2011, to launch the first Rising Tide Exchange, which currently features 24 entrepreneurs who are looking to market their established small businesses. But Demmellash said many of those companies are eligible to move onto Rising Tide Exchange 2.0 because they are currently seeking growth capital.
Moira Brett, CEO of Jersey City-based Buttercup Cosmetics LLC, hopes moving her profile from Rising Tide's current online platform to the microlending exchange will allow her to continue to expand her all-natural shaving cream line, GreenShave.
"I'm in the process of getting my product manufactured by a U.S. batch manufacturer to keep up with demand, and manufacturing is an extremely costly process," Brett said in an e-mail. "Getting access to microloans is the only way my business will be able to afford to grow ... so I hope that this program will help me to get some necessary microloan funding."