MainVest, the Salem-based investment marketplace for local businesses to connect with investors in their community, has launched what it calls "the Main Street Initiative"—$2,000, zero-interest cash loans to small businesses affected by coronavirus-related closures.
The program made its debut on Tuesday. In the first 24 hours, MainVest's team spoke to 24 different businesses, CEO Nick Mathews said in an interview with BostInno on Wednesday.
"We're a platform that allows for businesses to run investment campaigns and take investments in local communities, and we've got a feeling that that's going to be important now more than ever," Mathews said. "This loan can be provided within 72 hours to alleviate short-term cash flow needs, and we get businesses set up with a vehicle to take all of that community support that people are talking about and put it directly into the business by letting people invest in its long-term sustainability."
Repayment terms are flexible: They are tied to revenue rather than monthly lump payments, MainVest noted in a blog post about the initiative. MainVest is financing the loans itself.
Restaurants and bars have been hit especially hard by measures designed to contain the spread of the novel coronavirus, with the state limiting them to takeout and delivery only until April 6 at the earliest. (The number of patients with COVID-19, the respiratory disease caused by the virus, now stands at 256 in Massachusetts.) But those measures have taken a toll on any business that relies on foot traffic for its revenue: hair salons, yoga studios, doggy day care centers, Mathews said. Of note, Massachusetts residents filed 20,000 unemployment claims Monday—more than during the entire month of February.
Gov. Charlie Baker on Monday launched a $10 million fund that will offer loans to small businesses affected by the fallout of the coronavirus. The fund would offer eligible small businesses up to $75,000 with no payments for the first six months. But as Mathews and others point out, government loans can take time.
Some people have begun buying gift cards to local businesses they frequent and encouraging their neighbors to do the same. Mathews said that's "kind of the only way" people can do business right now, and its in line with MainVest's mission. The primary goal of the platform, which launched in October 2018 and raised $3 million in seed funding last June, is to easily allow investors to put money into businesses in their own neighborhoods.
"Creating a vehicle so that people can invest in these businesses—not like, super-high-rates-of-return investments, but being able to invest and know that as the business grows, you're going to get your money back a little bit, and you'll give these businesses that crucial access to capital that they need to weather the storm," Mathews said. "That's where our heads are at right now."
At the same time, MainVest has seen a precipitous drop in fundraising activity on its platform.
Mathews said that fundraising on MainVest dropped acutely around the same time the stock market did. It began to suddenly slow on Thursday, March 5 and had ground to a halt by Tuesday, March 10; meanwhile, the Dow Jones Industrial Average saw its largest point drop in history on Monday, March 9. (History was made again twice later that week with record-setting drops on March 12 and 16.)
"Now that there's a ton of volatility over the last few weeks, and people are realizing that it's really not a safe time to be investing in the market, they're looking for alternative ways to diversify their investments," Mathews said. "There's something really special about being able to diversify into a business that you can actually go to, that you can service, and you'll be actually helping them succeed."
