What is Local Investing?

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For years, top financial advisers on Wall Street urged Americans to invest their hard earned money in huge corporations promising returns to guarantee a relaxing retirement. But what about Main Street? What exactly is local investing? And will it provide profitable returns?

Local investing occurs when residents of a community with capital invest that capital in local projects or small businesses. Small businesses are the backbone of this country. As of 2011, 27.5 million companies classified as small businesses by the Small Business Administration. These companies contribute half the national private sector GDP and “are responsible for more than two out of every three jobs created” according to author Amy Cortese.

Investing in these small businesses and their local projects can occur in a myriad of ways including loans, preferred stock, and royalties. The main barrier with local investing, however, is who can invest. Right now, it is difficult for the everyday American to invest in the business that operates less than a mile from his house. Due to SEC securities laws, investment is limited to friends and family, accredited investors, and few other exemptions.  Hopefully this will change soon and allow the public to support their local communities.

Thanks to human ingenuity, however, committed individuals have found a way to invest locally while obeying the law. There are investment strategies for almost any small business enterprise and any type of investor. Some strategies include crowdsourcing like Kiva Zip and co-ops which include the outdoor store REI.

Investing in your local community is rewarding both through monetary returns and building the community in which you choose to live. Supporting your local community can give you profitable returns but also that investment stays in the community as opposed to buying stock in corporations who operate overseas to save money. If you want to learn more about investing locally, check out the Investment Toolkit on our website at HERE.

Additional Reading:

Locavesting: The Revolution of Local Investing and How to Profit from it by Amy Cortese