‘Tis The Season to ‘Shop Small’ and ‘Buy Local.’ What About Investing That Way?

Shelby Ahern | November 25, 2015


In the next few days, a wave of shopping ‘holidays’ hits one after another—Black Friday, Small Business Saturday, Cyber Monday, all in preparation for, well, the holidays. But a more conscious consumerism seems to be emerging. Last month, outdoor sports retailer REI vowed to close all of its 143 stores on Black Friday, prompting other retailers to follow suit. And mass merchandise chains like H&M, GameStop and Staples said they would not open on Thanksgiving, giving employees the day to be with family.

Moreover, when people do choose to shop, they’re increasingly choosing to shop local. A study conduced last year by the National Retail Federation founded that one in four holiday shoppers planned to “shop small.”

buy-local1Holiday sales at local businesses last year increased by an average 4.8%, compared to an almost 1% decline in overall retail sales, according to the U.S. Department of Commerce. And year round, independent retailers continue to make gains as the economy improves and the “buy local” movement gains momentum. In fact, a 2015 Independent Business survey found that businesses located in cities with an active Local First campaign saw an average increase in revenue of 9.3% in 2014, versus 4.9% for those without one.

The “Buy Local” movement has gone mainstream. Is the “Invest Local” movement next? Will investors begin to invest the way they increasingly shop?

From ‘Buy Local’ to ‘Invest Local’

A combination of factors— including major new changes to securities laws, technology, and a growing desire among people to invest outside of Wall Street—is creating brand new opportunities for local investing. And for capital-starved local businesses, that is good news.

As the 2015 indie business survey made clear, obtaining growth financing is still difficult: 30% of businesses who sought credit in the previous two years could not get it. Michael Shuman, the author of Local Dollars, Local Sense and other books, suggests that there’s a $15 trillion gap in small business financing that could be filled by moving investments from publicly traded companies.

Source: Institute for Local Self Reliance

The local investment field is evolving rapidly. But three currently available and accessible options are 1) Community Development Financial Institutions (CDFI’s) 2) equity, debt, and revenue-share crowdfunding, and 3) local investment networks.

Community Development Financial Institutions

CDFIs, which include loan funds, credit unions, banks, and business impact investing funds, collectively hold $77.6 billion in assets. CDFIs generally invest in local businesses, individuals, affordable housing developments and other community-based organizations in a targeted region. Financing is often coupled with technical assistance for entrepreneurs or financial counseling for new homeowners, which mitigates risk. In fact, member loan funds of the Treasury Department’s CDFI Fund reported a loan loss rate of 1.0 percent—lower than mainstream commercial banks.

For more about CDFIs and other local investing options, see our Investor Guide

The Vermont Community Loan Fund, for example, offers investments at fixed rates and terms, similar to a CD.  The Calvert Foundation has made investing in CDFIs easy for everyday investors by creating Community Investment Notes that can be bought through conventional brokerages such as Schwab as well as directly through Building on that, it recently launched “Ours to Own,” a local investing initiative that is active in Denver and the Twin Cities to start, and has a national offering that targets investment areas such as women’s empowerment and education. (Full disclosure: The Calvert Foundation is one of my clients.)

Tortilleria La Perla in Minneapolis is an Ours To Own borrower
Tortilleria La Perla in Minneapolis is an Ours To Own borrower

Investors may invest in Ours To Own through the foundation’s online platform at a minimum of just $20. From June 2014 to June of 2015, individuals invested $3.4 million in the program, with average investments ranging from $135 and $749.


In addition to community development initiatives, securities-based crowdfunding is beginning to offer another option for local investors. More than half of U.S. states have either passed or have legislation pending that allows investment crowdfunding within their borders. Because the laws are new, they have been slow to take off. But they offer the promise of new opportunities for local businesses and investors alike.

Starting in May of 2016, investment-style crowdfunding will become legal on a nationwide basis when the Regulation Crowdfunding rules, part of the landmark JOBS Act legislation passed in 2012, go into effect.

Local Investing Groups

Finally, local investment networks or clubs are another option. Typically focused on a smaller geographies like cities or towns, they are somewhat limited in availability, but are known for creating offline systems for local business and investor vetting. Slow Money, which has facilitated the start of 37 local investing networks across the country since 2008, is a model that has proven replicable and effective.  Over $40 million has been invested in local food ecosystems by Slow Money investors.

Local investing is growing, albeit slowly. From institutionally managed funds such as CDFIs to private offerings, investors have more options than ever. The options come with a steep learning curve, however, that requires education and grassroots organizing to stimulate adoption. But that was true also for the Buy Local movement.

As you shop small this holiday season (and beyond), consider local investing as another form of creating and earning value for you and your community.

Shelby Ahern is a marketing consultant for social enterprises.


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