Making locally based financing an option for our business community.
We are lucky to have a lot of banking talent in our community, and a good variety of banks: national banks, regional banks, local banks, credit unions. I work with many commercial lenders in the region, and they all have a vested interest in seeing the continued success of our local small business community. However, there is a space that the banks cannot fill, and that is where we as a community have an opportunity to contribute to the success of our local businesses.
This is not a newly discovered space – people from a variety of backgrounds are working on this. Perhaps most notably is Michael Shuman, who has visited Keene and regularly writes and speaks about the topic.
There are several reasons that a solid, potentially profitable business may not want or be able to use a bank to finance their business, especially if they are a relatively recent start-up. As a community, this is a problem that impacts all of us because those businesses may be unable to expand (read: hire people, pay additional taxes, contribute to local charities) without additional capital. Hold that thought for a moment.
I also suspect that many of you are like me in that you wish there was somewhere you could invest your money (other than Wall Street) that would earn a respectable rate of return, and that might directly benefit our local economy. Hold that thought as well.
Bringing these thoughts back together, it is apparent to me that there ought to be a clear pathway for businesses with solid potential to seek investments from community members. Such a process – in my mind – shouldn’t be drastically different from seeking a loan from a bank, and thus should include a business plan, financial history and projections, etc. And risk should equal reward – a long-established business with steady growth should return a lower percentage than a riskier start-up embarking in a new industry.
Right now, this type of investment exists in pieces, but requires connections and the right timing. As such – according to conversations I have on a regular basis – our community is interested in creating a process similar to that described above, which also invites participation from all socioeconomic strata. That is, you should be able to invest $500 or $500,000.
Interested? As an outcome of this blog post, I invite any readers who are interested in such a structure to reach out via the comments section of this blog, to the Hannah Grimes Center, or to me directly, email@example.com, to express that interest. We hope to put an event together to brainstorm what this might look like in our community, and we’ll need your involvement!
I look forward to hearing from interested folks!