How To Invest Local

There are a growing number of alternatives for individuals who want to invest locally. Some of these vehicles have been around for a long time—credit unions, community banks and community development loan funds, for example. Others, like investment crowdfunding, have been made possible by technology and recent changes to U.S. and state securities laws. The following is a deep dive into the continuum of local investment alternatives (in alphabetic order).


Are you a high net worth individual? Maybe you’ve started and sold a company, or you’ve retired from a successful professional career. Angel investors are wealthy (accredited) individuals that parlay their funds and their expertise into helping fledgling ventures. Angels often invest with a particular focus, such as food, technology or women-led firms. Unlike venture capitalists, which pool money from institutions and wealthy investors into investment funds, angels invest their own money. (read more)


The easiest thing you can do to put your savings to work locally is to bank with a local community bank or credit union. These smaller establishments are the last vestige of the old-fashioned relationship-based banking system—think George Bailey’s Building & Loan. Because their primary business is making loans to local families and firms, the money you deposit with these institutions is much more likely to support your local economy, rather than being fueling speculative bubbles or complex derivatives. (read more)


A Business Development Company (BDC) is a type of publicly traded company that makes investments in small and mid-sized businesses. In a way, a BDC is like a venture capital fund. But only institutions and very wealthy individuals can invest in VC funds. In contrast, BDCs are publicly traded on the stock market, so anyone, including unaccredited investors, can invest by buying shares of the BDC. They can also sell those shares if they need to, overcoming the problem of a lack of liquidity associated with private investments. And their investments are diversified, lessening exposure to any one company. (read more)


Ignore the ungainly name, because CDFIs are one of the best-kept secrets for local investing. CDFI is short for Community Development Finance Institution, a class of financial institution that caters to underserved and often low-income communities. CDFIs, which are certified by the Treasury Department, can be banks, credit unions, venture capital funds or loan funds. They typically focus on a specific geographic region, making them a good candidate for local investors. (read more)


We’re all familiar with Community-Supported Agriculture, or CSAs. You buy ‘shares’ or subscribe to a local farm’s CSA program early in the season, and then get a box of fresh-harvested veggies delivered to your door (or nearby pickup spot) every week or two. That pre-selling model helps farmers smooth out the peaks and valleys of a highly seasonable business, giving them cash in the lean early spring months that can tide them over until harvest time. CSA customers, in turn, get to share in the delicious local bounty that their dollars helped to support.

The CSA model has been so successful, it’s spread to other areas. You can now find community-supported breweries, bookstores, fisheries, bakeries and art. (read more)


Cooperatives are associations run for the mutual benefit of their member-owners. They were established in the late 18th and early 19th Centuries in the face of social and economic disruption brought about by the Industrial Revolution, as marginalized members of society—whether workers, farmers, consumers or producers—banded together to protect and promote their mutual interests. Today, they range from grocery stores to breweries to locally produced energy cooperatives. Coops generally provide two types of investment opportunity: membership and loans. (read more)


Crowdfunding is a new and evolving fundraising alternative that marries social media and finance. With crowdfunding, entrepreneurs reach out to the “crowd”—including their friends, customers, supporters and social network—for funding.The idea is that lots of smaller sums of money can take the place of one or two large investors or patrons. For investors, that means getting in on the ground floor of an enterprise you believe in. Crowdfunding comes in different flavors:

Rewards-based crowdfunding
Title II “Accredited Investor” Crowdfunding
Title III “Regulation Crowdfunding”
Regulation A+ “Mini-IPO”
Intrastate Crowdfunding

(read more)


A Direct Public Offering, or DPO. In a DPO, the company raising money sells shares directly to the public, bypassing the Wall Street intermediary (for that reason it’s sometimes called a It’s like a Do-It-Yourself IPO). So instead of the shares going to the Wall Street underwriter’s well-heeled clients, everyday investors, including the company’s customers, friends, fans and supporters, can get in at the ground floor, and reap the same kind of returns (or losses, it must be said) that are typically reserved for insiders. And, by cutting out the financial middleman, DPOs are accessible to companies that would not be able to afford a conventional IPO, which can cost $1 million and up. (read more)


A growing number of people—citizens like you—are forming investment groups to invest in local businesses. The groups tend fall into two types: Investment Clubs and LIONs. (read more)

NO-INTEREST LOANS: Midway Between Donating and Investing

Kiva popularized the idea of microfinance by allowing ordinary people to make loans to micro-entrepreneurs around the world—for example, to help a farmer in Sri Lanka buy more goats. Recognizing that there was also a great need closer to home, Kiva began offering its microloans in the U.S.  The individuals lending money receive their principal back, but earn no  interest—a key distinction that avoids triggering securities laws. (Once a profit is earned, the transaction is considered a security). (read more)


Peer-to-peer lending, or marketplace lending, is a new kind of crowdfinance, is shaking up the banking world. Think about how a bank makes money: they take in deposits and pay a miserly interest rate to depositors, then they lend the money out (through loans or credit cards) at much higher rates. P2P web sites do an end run around banks by allowing individuals to lend directly to other individuals (and sometimes businesses).  By cutting out the middleman, borrowers can get lower rates and investors can make higher returns. In fact, many people use P2P sites such as Lending Club and Prosper to refinance their expensive credit card debt. (read more)


Slow Money is a national nonprofit organization that works to finance local, sustainable food and agriculture—or, to “bring money back down to earth.” Much of the action takes place through local chapters, which create local funding solutions that work for their particular community. These often take the form of investment networks or clubs. There are around twenty local Slow Money networks, from New York City to North Carolina to Northern California. Collectively, Slow Money has catalyzed more than $38 million in investments in more than 350 small food enterprises, from farms and restaurants to organic food delivery services. (read more)