Dive Brief:

• CircleUp has added a new program that offers loans of $25,000 to $600,000 to smaller CPG companies, according to TechCrunch.

• The platform has partnered with Community Investment Management to provide an initial $20 million to get the loan program started. It has already issued about 50 loans and expects to offer about 200 over the course of the year.

• CircleUp uses a proprietary algorithm called Helio to analyze the industry and make recommendations to investors. The algorithm has already helped 243 companies raise more than $365 million in financing. The new loans program will use data from Helio to extend lines of credit to companies that need smaller amounts of capital to fund their growing business.

Dive Insight:

CircleUp is the only crowdfunding website in the U.S. focused exclusively on consumer packaged goods companies, and it is well-placed to help food and beverage companies find investors to take them to the next level. About half of the companies listed on the platform are food and drink companies. However, for smaller firms, the proposition for many investors is still too uncertain, so loans can help provide a bridging mechanism — allowing them to grow and become more attractive to investment down the line.

CircleUp’s investor platform is aimed at firms that already have about $2 million to $10 million in revenue with domestic distribution — those that are ready to scale up for national distribution. But companies at an earlier stage of their development tend to be unattractive to banks, and may need help to fund future purchase orders, increase inventory or to bridge the gap while waiting for outstanding payments.

For CIM, the platform fits well with its stated mission: the investment manager specifically focuses on the economic development and social impact that backing small and medium-sized enterprises can bring. As repayments come in, the partnership aims to recycle the loans and expects to provide about $100 million in total from the initial credit line.​

It will be interesting to see if other early-stage investor groups adopt similar programs that target small emerging brands. CircleUp founder and CEO Ryan Caldbeck recently said that reduced distribution costs and start-up friendly retailers have made it easier for small CPG brands to get off the ground, further growing consumer demand for authentic, small-batch products. This could also spur legacy brands to up their innovation game, and will likely result in even more food industry M&A as big companies buy upstart competitors.