Local Investing Meeting Notes 6/28/10

[Judith Culver]

On Monday 6/28/10 a group gathered at Sustainable Connections to discuss local investment, including loans and equity shares.  Attendees included:

 

Derek Long (Sustainable Connections), Tim Crosby (Slow Money NW, Seattle), Amy McIlvaine (Bellingham financial advisor), Megan Watt (former banker and business consultant), Jennifer Shelton (Small Business Development Center), Transition Whatcom members Laura Sellens, David Culver, Judith Culver, Shirley Jacobson, Krista Hunter, and Karen Hamalainen, and TW guest Bruce Radke. 

 

Discussion started with Tim Crosby talking about various approaches of Slow Money NW.  Slow Money NW is connecting investors to food and farming businesses with an emphasis on creating methods that could be applied to any business.  He is traveling statewide and there is interest in communities of all sizes.

 

He spoke about the importance of creating opportunities for non-accredited investors.  By SEC definition these are generally investors with less than $1 million in assets or $200,000 in annual income and rules are different for accredited and non-accredited investors. There need to be opportunities for investors with $25, $250, $25,000 up to $250,000.

 

Possible strategies for local investment:

 

Revolving loan fund is being started at Slow Money.  This allows individuals to invest, loans to be made, and repayments and interest to grow the fund.  They are contracting loan management to banks and including those expenses in the cost of the loan.

 

CSA-type investment:  Individuals invest in a local business in exchange for product or services.  This can be extended to multiple years with gift cards that have annual starting dates.

 

Certificates of Deposit:  Private label CD’s (also called linked-deposit CD) are currently possible for banks.  It allows for an investment in cooperation with a lending group and provides promotion for the bank.  Shore Bank has done this for a Seattle group.

 

Offering Investment opportunities to individuals: Slow Money NW hosted an evening for 2 businesses to offer business presentations to a group.  A “due diligence committee” is formed by people who are interested.  Loan management is done by banks.  A bank could make part of the loan with the rest from the community.  Investors look for collateral, such as land or cattle.

 

Local Investing Opportunities Network (LION) in Port Townsend is a network (specifically not a financial institution) which has members and a process for submitting investment opportunities, such as business startup, business expansion, business line-of-credit, and real estate mortgages.  The details of the investment are worked out and agreed upon by the individual investors and borrowers. 

 

Multiple banks could join together to form a microloan fund, spreading the risk.

 

Investors could guarantee a bank loan and then do a second deal with the borrower for collateral, such as land, inventory, equipment, or accounts receivables.

 

Investors could buy land and lease it to the farmer/business owner. 

 

Kickstarter is a website started by an arts community to get ideas off the ground.  Projects can be posted requesting funding in exchange for a specified trade item.  Projects must be fully funded within one month.  There is no third-party verification, which is needed for funders to trust the process.

 

Missionmarkets.com provides a secondary market for private investment shares and has federal regulation, which provides trust. 

 

Investment Clubs: (Not mentioned at the meeting)  Members contribute money to the club fund, members perform due diligence and select investments, and money is invested by a vote of the members.

 

Questions:

What businesses really need to be elevated?  A community doesn’t want all the available local investment money to be used for the first few opportunities without determining where the community need is.

 

Which businesses are actively seeking financing?

 

Why are businesses turned down for loans and what can the community do to address/support specific situations (back up the banks)?

 

 

Other points:

-         Woody Tasch is the founder of Slow Money (nationwide).  His book is in the library.

-         Foundations can only give money to 501(3)(c) non-profits, not to businesses

-         Small Business Development Center can help businesses with technical assistance, such as business plans and accounting procedures.

-         Community Development Financial Institution (CDFI) makes loans to underserved borrowers. Shore Bank is one.  Their borrowing rates can be up to 10% because these loans are considered riskier.

-         Sustainable Agriculture and Food Systems Funders (sasfa.org) has a power point.

-         There is a move to align investments by foundations and educational institutions with their values instead of broad stock market investment.  This is called Program-Related Investment (PRI). 

[Heather K]

Slow Money NW sounds interesting! Thanks for posting notes Judith!

[Laura J Sellens]

Hi all,
I emailed Derek Long about the LION network or whatever SC might be working on with respect to local investing. Apparently I deleted his email--I was going to copy it here for you. Paraphrasing, then, he said he was "following" the LION project and indicated that he'd continued to be in contact with Slow Money NW since out meeting. He sent me a couple of notices on Slow Money Events, one coming up soon in Seattle, and one in Port Townsend, and he said something like "it seems we have interest from investors, now we just need to know what businesses have need. Do you have information about this?"

Therefore, I'd like to add our previously tabled idea of an investor/business survey to the agenda for next month. i have one typed up, I'll bring it for review and comments.

He did not say "Sure, I'd love to attend a meeting with a LION representative!" And he did not say, "I've got something in the works." But it sounds like he might have. To my mind, we should keep on with the LION idea and if SC chimes in eventually, so much the better. I also think the LION model will allow us to invest in other-than-food enterprises, and it might take some doing to allow that freedom with the Slow Money model. I will now turn to contacting the LION person that Judith turned me towards, and see what they say about a field trip to B'ham.

PS the event in Port Townsend is Cascade Harvest Coalition (with Slow Money NW) Food and Finance Summit, at Fort Worden, December 3. Entrance is $5. I can forward you the flyer if you like. Make sure I have your normal email address.

[Laura J Sellens]

I told Derek about our idea for an investor/investment survey and he said he'd be interested in the results if/when we get them.

I called James Frazier from the LION group today, got voicemail, asked if he was interested to come talk to us or if we could go talk to him. Will keep you posted.