Chile a Fondo plans to offer 0% interest loans to SMEs via G100 project

Contxto – Startup survival in Chile is on the line due to property damages and sales decline from recent political unrest. This reality spurred Nicolás Shea, founder and commercial engineer of the crowdfunding platform Cumplo, to launch the Chile a Fondo. In the end, SMEs will have access to 0 percent interest rate loans.

Announced on October 24, with the help and financing from 100 entrepreneurs known as the G100, this peer-to-peer project aims to finance startups and small businesses that have been affected by ongoing protests in Chile.

Together, they hope to raise CLP$10 million (US$13.5 million) within the first month to assist Chilean businesses affected by recent events.

Realizing the challenges SMEs face to make ends meet, Chile a Fondo also aims to gather CLP$100 million (approximately US$135 million) in six months. Loans will range from US$1,300 to US$13,500 to companies hit hardest by the demonstrations.

However, what makes it such a groundbreaking project are the 0 percent interest rate loans.

“SMEs are very fragile,” said Shea, who runs Cumplo, one of the largest collaborative trading networks for SMEs and investors in Latin America based in Chile. “It can’t take a month, not even a week to make ends meet.”

For now, funds will aid borrowers in sustaining businesses’ day-to-day operations. In other words, making payroll and covering overhead costs.

Mentor and trust-based crowdfunding

This initiative knows that startup founders and businesses take short term loans seriously.

“We prefer to make loans to entrepreneurs because we believe that, psychologically, when you have a short term obligation, you’ll be much more rigorous,” said Shea. “This will help you organize, so you won’t ask for more than what you really need.” 

As a result, receiving a loan from Chile a Fondo will revolve around two factors. As illustrated above, the first is trusting borrowers to pay their dues. The second stems from what appears to be the initiative’s mentorship program. 

Moving along, this crowdfunding initiative will also mobilize a group of mentors to recruit startups in need of a loan. Similar to what Aflore does with its “Consejeros,” these individuals will refer businesses to Chile a Fondo to provide funds. Meanwhile, mentors will serve to counsel startups so they can get back on their feet.

Sources report that if the project proves successful, it will continue beyond the Chilean marches. At the moment, though, there is still no end date in sight.

-ML