Patreon irks users with new loan program Patreon Captial

Patreon might be the most fuzzy, feel-good creator platform out there. But whenever it tries to change things up in a way that might put more money in its pockets, its loyal but vocal users have something to say.

On Tuesday, Hot Pod first reported (and other outlets confirmed) that Patreon had quietly offered a new service to some creators called Patreon Capital. Essentially, it offered loans in the realm of $75,000, with the expectation that the creators would pay it back plus interest from their future earnings. In one example, the future Patreon earnings of a Patreon-funded podcast by the same creator network was taken as collateral.Some saw it as a savvy business move and useful service to creators looking to grow and invest in their businesses.

However, others within the creator community spoke out on Twitter on what they saw as the equivalent of a payday loan scheme, or a predatory way to take a larger cut of creator earnings. They attribute what they see as greed to Patreon's Venture Capital backers (Patreon raised a $60 million Series D funding round in July 2019 led by a Connecticut VC firm).

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Patreon has felt the wrath of creator backlash before. When it attempted to change its fee structure in late 2017, community anger was swift and fierce. In response, Patreon ended up reversing the changes.

On Friday, Patreon Co-Founder Jack Conte weighed in on the matter. He announced that he would be doing an AMA on Twitter to address questions about Patreon Capital.

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We still don't know what percentage Patreon plans to take in its micro-loans, or where the impetus for the program came from. We'll update this story after the AMA.

UPDATE: Feb. 21, 2020, 1:43 p.m. PST

Jack Conte began his Reddit AMA a little after 1:30 p.m. PT. You can see and participate in the conversation here.

Highlights and updates on Patreon Capital to follow.

UPDATE: Feb. 21, 2020, 2:14 p.m. PST

Conte opened the AMA by sharing his personal impetus for Patreon Capital. He said he had a difficult time getting a loan to buy a bank because, as a musician making money from digital sales on iTunes, he did not have traditional pay stubs. In addition to the frustration of that experience, he also said: "the whole thing just made me feel like I wasn’t even a legitimate member of society."

"Since that experience I’ve dreamed about a world where creators are valued and respected as legitimate members of the workforce, with the same privileges, benefits, and access as anyone who is 'employed.' This is another step toward that world," Conte wrote.

Even if the vision is there, the terms of the program itself is still in very early stages: "In terms of the fees and cost associated with it, we actually don’t know yet," Conte said.

But Patreon's VP of Finance, Carlos Cabrera, did shed more light on how the finances would function, and how they differ from a "payday loan," a point of concern in the community.

Cabrera said that Patreon Capital is less akin to a loan than a "payday advance." That's because it won't accrue interest over time, and there's no other collateral taken in the case that a creator can't pay the advance back.

Instead, creators will pay a concrete fee for the advance, and then pay back the money through taking a percentage out of their future creator earnings. Crucially, there won't be penalties over time if a creator fails to make enough money to eventually pay back the loan.

"If the creator never earns enough to repay the amount, then Patreon bears the loss and the creator can simply walk away from the deal," Cabrera wrote.

Despite Conte's example of assisting the home buying process, Cabrera clarified that, "For now, we’ll generally start by working with creators who need extra cash to build their creative businesses," rather than loans for other expenses.

The AMA was also filled with cuddly shows of love for Jack and Patreon from the community ("Do you remember me? I'm Barry's fishing friend from FL!") one user wrote.

All in all, Patreon Capital's accidental unveiling was very Patreon: good-hearted and inclusive, if a bit bumpy.