On Tuesday (Feb. 18), podcasting newsletter Hot Pod reported that Patreon — the popular creator membership platform — had launched a program to provide cash advances to users in need of financing for their projects. According to the post, these advances would be offered in exchange for a cut of future earnings, with an emphasis on projects that have already developed healthy followings on the platform and seem primed to continue growing.
While that move sounds like a positive one for the creator community on paper, the news quickly garnered backlash (as well as some positive feedback) from creators who came out to criticize the program — dubbed Patreon Capital — as a predatory “payday loan”-style scheme.
Conte kicked off the AMA by noting that the Patreon Capital program is in “super early development” and that it has so far paid out loan money to only “a few” creators. He later laid out the reasoning behind the program in greater detail by referencing a post he published on Thursday on Patreon’s Discord messaging platform. In that post, Conte wrote that the Patreon Capital concept derived from personal experience: As a working, self-employed musician 10 years ago, he said, he was forced to wrangle for a home loan — all because he wasn’t able to provide the bank with formal pay stubs that reflected his earnings.
“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,’” Conte’s post continued, adding, “Like anything we do, the most important thing is that we apply our culture of creator centrism, creator focus, and creator priority to the thinking and execution of the program. It’s all in the details — and I promise you that we will be thoughtful, careful, and creator first in how we build and approach it.”
For his part, Cabrera agreed with a Reddit user who suggested Patreon Capital was similar to Paypal’s working capital program — albeit with lower fees to start — and noted that Patreon was also studying other programs including Shopify Capital and Square Capital.
Below are a few other key takeaways from today’s AMA.
These aren’t loans.
Cabrera hit back at the suggestion that Patreon Capital is a loan program, instead noting that the money “will be structured as an advance on a creator’s Patreon income in exchange for a fixed fee.” He also dismissed any comparison to payday loans, stating that no interest accrues and that fees don’t increase on Patreon advances no matter how long it takes for creators to repay them.
Cabrera added that no outside collateral is ever demanded and there is no legal recourse for Patreon to recoup their investment. “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,” he wrote.
Fees are determined by how much a creator is willing to withhold from their Patreon income upfront.
“Repayment rate: The proportion of a creator’s net Patreon income that the creator would like withheld from their Patreon income,” wrote Cabrera. “The higher the repayment rate, the lower the fee.”
Conte added that fees will generally be lower than what creators would be charged by comparable services thanks to the immense amount of data the platform retains on its users. “We are in a position to give creators a much better deal than they might get anywhere else, because we have such a solid understanding and history of their earnings through Patreon,” he wrote. “That gives us a ton of confidence in their trajectory.”
Advances could be up to four times a creator’s Patreon income.
“The program is just getting started, but I expect that we’ll generally offer anywhere from 0-4x a creator’s monthly earnings,” said Cabrera.
Patreon will not take an ownership stake in exchange for the advances.
“Note that Patreon does not own any part of a creator’s company or their content,” said Cabrera. “Creators retain full ownership rights of their content.”
The company may be offering one-time donations to creators later this year.
Though he remained cryptic, Conte wrote that Patreon is looking to introduce “a first version of something like” donations later in the year. “It’s not exactly a ‘one-time payment’ but it [sic] think it might solve that same problem — and then of course, with regard to future iterations, we’ve heard this feature request a lot, so it’s definitely on our list.”
They will consider opening up the Patreon Capital program much wider in the future.
“Over time, we might open the program so that there’s no application at all; you can simply obtain an advance on your Patreon income, for whatever purpose you like, as long as you like the terms,” Cabrera wrote.
You can read the full AMA here.