Necessity is the mother of invention. Lately, small businesses in Europe have had trouble getting loans, and that has spawned a cottage industry of crowdfunding sites, peer-to-peer lenders, and other newfangled sources of finance.
Chilango, a chain of Mexican fast-food joints in London, is the latest to raise money via one of these alternative platforms. It launched a “burrito bond” on the funding site Crowdcube yesterday, aiming to raise at least £500,000 ($842,000), or up to a maximum of £3 million. The four-year bond will pay an interest rate of 8%, with the proceeds going towards expanding the chain’s footprint from seven restaurants to 10. More than £350,000 has been raised thus far, with bond buyers enticed by a whizzy video that explains the issue’s merits:
But this is no ordinary bond. Every investor also gets a voucher for two free burritos, and the first 100 buyers are invited to an “exclusive bondholder party.” (There will be tequila, the company says.) And if you stump up for £10,000 or more, the company will give you a free burrito every week for the lifetime of the bond.
This is a rather expensive upfront investment to satisfy a burrito fix—the most expensive a la carte burrito, even with extra meat and guacamole, is just under £11—but for investors already committed to lending to the company, it is a nice little perk.
We have previously covered companies raising money in similar ways, including Naked Wines, which last year issued a three-year bond that paid out 7% interest in cash or the equivalent of 10% in wine vouchers. In fact, these sorts of issues are becoming rather commonplace in the UK—brewers, chocolatiers, and travel agents have all offered bonds and shares directly to the public, tying in gift certificates, tours, discounts, and a range other benefits for investors.
Not everyone is keen on these bonds, and some have argued that the risks outweigh the rewards. After all, banks may be shying away from these early-stage companies for a reason. In Chilango’s case, its bond prospectus claims that it could have taken out a traditional loan, but “we really like the idea of letting our guests and fans help shape our future and participate in our success.”
Whatever the merits of the bond, it’s safe to say that the markets would be a much happier place if more investments were offered with tequila and burritos on the side.