What is Loan Stacking?
20th November 2018
Amicus Finance PLC enter Administration
5th January 2019

Customer Bonds: a rise in popularity to raise finance?

A customer bond represents a debt obligation. It’s a new, innovative way to raise money, from your customers. You borrow money from them for a short period of time, paying interest during the loans’ length.

What is it? How does it work?

Businesses issue non-transferrable bonds, for customers’ and other parties’ interest, to invest a fixed sum of money into. Interest is then paid to everyone investing in the bond (by money or a valuable product on offer).

Who can borrow?

Typically, established firms with an established customer base, as well as sufficient performance, use these. This is crucial as without loyal customers who believe in the brand and want to invest in it, sufficient funding cannot be received. Being a start-up or a small business with little customer knowledge pressurizes your ability to use this method, as you would fail to have the customers who believe enough to invest in the brand.

Many enterprises are turning to this method now as they see greater difficulties applying for bank loans today.

Hotel Chocolat, Brewdog and King of Shaves are all examples of high-profile businesses who have succeeded from this finance source.


  • Keep the bond price cheap and the loan period short. Ensure the period is suitable enough for you to repay the borrowed money, but not too long that investors are concerned on how long they will have to wait for a return on their investment and so fail to invest. With regards to the price, this should be reasonably fair, so customers feel they are getting a good deal.
  •  Clearly state the reasons for the finance and how investing can benefit the customer. Manipulation needs to be avoided, customers need transparency.
  • Keep customers engaged and committed. In doing this, more investors can be attracted, as current investors look to invest more. An example of this can be supplying additional perks, on top of the interest. Mexican restaurant chain, Chilango demonstrate this by issuing free vouchers to investors (those buying their ‘’Burrito Bonds’’) as well as their 8% interest.
  •  Only purse this type of finance if you can afford paying it back. If you fail to do so, effects on the companies’ brand will be greatly damaging. Assessing your company finances is essential for this. You may even talk advice from professionals first.