Editor’s Note: How do you strengthen the local economy through small business and community investment? How would a fund dedicated to supporting small businesses and local jobs work? The authors Greg Wendt, senior wealth advisor from “StakeHolders Capital” and Ron Schultz author of a new book, “Creating Good Work” discuss their ideas on how to bring good capital home by creating a “local living economy fund.”
Bringing Good Capital Home: A “Living” Economy Fund
By Greg Wendt And Ron Schultz
Getting funding into the hands of local businesses that are doing good work is a real challenge in this climate. However, instead of relying on traditional bank loans, alternative funding sources could be created for locally-owned businesses.
One new model could leverage network thinking and connectivity to create scale. It would be transparent so it could deliver the desired social, economic, financial impacts for its stakeholders. It would also be a true “neighbor to neighbor” investment experience, allowing local investors an opportunity to achieve a “living return” while at the same time supporting the locally owned businesses and enterprises in their community, and for that matter, communities all over the country.
Living Economy Fund Model
One model we are developing based on this thinking is what we’re calling a “Living Economy Fund,” which would be open to all investors. It would provide support to locally-owned, mission-driven businesses nationwide, while at the same time offering the necessary liquidity, transparency and security to retail investors so they could achieve a living return. Currently, such investments are only available to accredited investors.
A key element would be an eligibility requirement so that it could be offered through retail investment platforms with a low to moderate investment minimum, commensurate with mutual fund minimums and experience. Additionally, the investments would need to be structured so that yields would be high enough to offer a growth of investment for savings, while at the same time offering an affordable borrowing cost to local businesses.
A core component of such a fund’s management and purpose would be embedded within linked networks of businesses (for loan sourcing and review) and an online community to connect businesses with their investors, much like Kiva or Prosper.com. Communities such as Green America, BALLE, and Slow Money, all have aspirations to create such an experience.
A fund like this can then be simultaneously offered in different contexts as a “white label” experience, and also offered on a national basis to fiduciaries nationwide. Thus, community organizations can brand the fund for their constituents, while investors can enjoy the benefits of national diversification.
In addition to its direct benefits, the creation of funds based on a “Living Economy Fund” model would enable others within the financial services and impact investing community to leverage and utilize the business model created to further harness the estimated $120 billion in demand for impact-oriented community investing.
As is stated throughout Creating Good Work, we have to be willing to apply the notion of deliberate disruptive design to any situation that is not delivering the impact required. This is true whether we are trying to end childhood hunger, creating more collaborative solutions to climate-based influences, or building a health local economy.
More of the same simply won’t carry the day. It’s time to build something new.
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