The Burrito Bond is the first on the crowdfunding site’s new mini-bond platform, and will offer investors 8 per cent per annum return over four years.
Chilango co-founders Eric Partaker and Dan Houghton hope to raise £1m by targeting the chain’s customer base and Crowdcube’s 73,000 registered members.
Partaker explained: “Our Burrito Bond is the perfect way for us to engage with our loyal following as well as Crowdcube’s investor base and accelerate our expansion plans with additional growth capital. As big fans of Mexican food we love everything that is vibrant, fresh and fun and Crowdcube is all of these. Its mini-bond platform is a breath of fresh air amongst the complexity and expense of existing solutions.”
Other perks for investors include two free burrito vouchers to all those that invest, a VIP bondholder party to the first 100 to purchase a Burrito Bond, and free food for the duration of the bond for those who invest £10,000 or more.
Luke Lang, co-founder of Crowdcube, added: “Just as we revolutionised equity investment, we are now turning the mini-bond market on its head by taking away the complexity and costs for businesses who want to raise growth capital and cut out the banks, at the same time as presenting a unique way to engage with their customers, encouraging loyalty from existing customers and attracting new people to their brand. For customers and investors, the opportunity to invest in companies they already know, and want to support, as well as receive a regular financial return on their investment is appealing.”
Alternative finance providers and crowdfunding platforms are becoming increasingly popular options for small businesses, which struggle more and more to get financing from banks.
Mini or retail bonds are unlisted bonds issued by companies directly to their customers and the general public. It is estimated that the value of the mini-bond industry will rise to £8bn by 2017 from just under £90m in 2012, as businesses big and small turn to that option to avoid the complexity of traditional financing.
Though investing in unsecured, non-convertible and non-transferrable mini-bonds involves risks, they have proved popular amongst hospitality businesses’ loyal customers.
In July 2012, casual dining brand Leon launched a similar bond scheme giving investors a return of 10 per cent for £1,500 and 15 per cent for £5,000 or more. Repayment was to be made in Leon pounds after three years, redeemable in any of the chain’s restaurants, and the founders said the response was “overwhelming”.
For more on the funding options available to hospitality businesses, check out our finance feature.