Investing in the Local Economy
The authors of this blog post - Louisa Schibli and Janice Shade - are co-founders of Milk Money L3C, a Vermont low-profit limited liability company that supports local investment, entrepreneurship, and small business through its local investment platform, educational and networking resources, and services for investors and entrepreneurs.
How Individuals Can Build Business to Support Community Prosperity
Imagine that you are a small business owner with a growing business. At some point, you might need outside funding to add new equipment, to open a new location, or to build your team of trusted employees. Your first thought is probably to seek traditional sources such as a credit union or bank for a loan, but you’ve also heard about alternative financing resources. In your research, you discover a way for your friends, customers, and other community members to provide the money you need – a way that also strengthens the local economy.
The scenario described above is possible in Vermont today. Due to revisions to Vermont securities regulations, referred to as the Vermont Small Business Offering (VSBO), Vermont businesses can raise up to $2 million in capital by selling securities in their company to in-state investors. The revisions make it easier for non-accredited Vermonters to invest up to $10,000 in a single business, and allow some high net-worth individuals to purchase unlimited equity.
What is the difference between non-accredited and accredited investors? Accredited investors have a net worth of at least one million dollars, excluding the value of their home, or have an income of at least $200,000 each year for at least two years. Non-accredited investors don’t meet the requirements to be an accredited investor; essentially, all Vermonters are non-accredited. Prior to VSBO, Vermonters (non-accredited investors) could not invest in their neighbors. With VSBO, they can.
A Win/Win Scenario for Business and Community
Now consider how the money your business makes could circulate into the community: Using the capital you have received from a local investor, you are able to hire and pay more employees; one of your employees contracts a Vermont builder to construct a new home; the builder uses the income to purchase new equipment and take on a new employee to run it; the contractor’s new employee can now afford ballet lessons for his daughter. As you can see, one small investment can lead to a string of investments that build local wealth and enable the entire community to prosper.
According to Amy Cortese, who is best known for her book Locavesting: The Revolution in Local Investing and How to Profit from It, communities thrive when their members invest in small local businesses rather than in larger corporations. Her point is that “ownership matters” because businesses with local owners are stakeholders in the community. They provide jobs, products, and services to the local community and often spend their money within the community.
The American Independent Business Alliance notes that “on average, 48 percent of each purchase at local independent businesses was recirculated locally, compared to less than 14 percent of purchases at chain stores.” They refer to this as the “multiplier effect” of local business, which occurs as a result of three main actions: businesses spending locally in order to operate their business, businesses spending locally with other businesses, and consumers spending locally.
To increase the circulation of money within your community, you can get more creative with local investing. You might design your portfolio so that all of your investments support local companies, place your money in your locally owned credit union or other financial institution, donate to local charities, purchase items that are made or grown locally, donate to a local business through a crowdfunding platform like Kickstarter, or create other opportunities within your region to promote local spending.
Whichever path you take, investing locally will also be more likely to increase your joy. The local investments you make are likely to bring you closer to other members of your community. You may also be more likely to invest in companies, products, and services that make a positive social or environmental impact. Being closer in geography to the businesses you support enables you greater insight into their values and ethics, which may help you determine how your money will be best spent.
Are you interested in investing locally? Check out Milk Money, where local investors and entrepreneurs help each other prosper.
NOTE: Our content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on our Website and wish to rely upon, whether for the purpose of making an investment decision or otherwise.
About Louisa Schibli & Janice Shade
Louisa Schibli and Janice Shade are co-founders of Milk Money L3C, a Vermont low-profit limited liability company that supports local investment, entrepreneurship, and small business through its local investment platform, educational and networking resources, and services for investors and entrepreneurs.