Building An Economy That Works For All

This month I attended two fabulous conferences: First, the COCAP Revolution: Building the WE Economy conference in vibrant Oakland and then the BALLE Leadership Summit in beautiful Monterey.  These conferences were my first opportunities to meet other folks who do local economy work outside of our corner of the Pacific Northwest. I met amazing

The view from the balcony during a break at the BALLE leadership conference.

changemakers from Mobile, the Mississippi Delta, Chattanooga, Philadelphia, New York City, San Francisco, Michigan, and Phoenix, just to name a few.

Through my role at Community Sourced Capital I have heard firsthand the challenges of running a small business: the barriers to accessing capital, the predatory lenders, unaffordable commercial space, as well as its great joys: meaningful work, cultural preservation, and vibrant local economies.

Gathering together with other folks from around the country was a wonderful opportunity to share what I’ve learned from our work, especially what I have learned from our Squareholders. Lending a small amount to a local business in one’s community has given individuals a new way to support a business they love. For most of us, the only way to support a business we love is through being a customer. But by buying a Square in a CSC campaign, we have a new way to support what we love. Local lending builds relationships, trust, and connection in local communities.

The lending community we have created together resonated with everyone I spoke to! I left the conferences determined to grow what we do here in the PNW and energized by the work that is being done all around our country.

Together, we’re building an economy that works for all. 

Want to learn more about these inspiring folks? Check out the Boston Ujima project, which is creating an equitable local investing fund for underserved communities in Boston. Mutual Aid Networks is building  a network of

Lama Tsomo (R) chatting in front of the beautiful live note-taking at Cocap

cooperatives to cultivate meaningful work and connection,  recently upped their loan limit to $25k. Rising Tide Capital supported local underserved entrepreneurs to create 154 jobs in Jersey City. And check out NextCity, Laura Flanders, and Yes! Magazine for covering this work and others all year round.

Efficiency is the Opposite of Resiliency

Our financial system has been moving to become more and more efficient – money moves instantly via the internet and apps, and small business loans can show up in a bank account tomorrow. Online lenders are making it quick and easy to access capital. Loans are available in minutes – either with a click of an app or point of sale software like Square Cash. OnDeck capital loans are built right into Quickbooks.

To a small business owner, access to capital is a challenge, so this move to easy access to capital feels like it should be a welcome one. But what is the catch?

We’ve seen the impact that too-easy access to capital can have on a financial system. Most are familiar with the easy access mortgages that led to the 2008 financial crisis, but fewer see what’s happening to our small businesses. These quick and easy loans come with a hefty price tag, offering APR’s in the triple digits. Often, these types of loans are what’s called “Merchant Cash Advance” loans, which are repaid daily as a portion of sales. It looks easy to just pay a little bit of the loan back every day based on a percentage of your sales. With this type of repayment schedule, it’s really hard to know the amount of interest that you are paying on a loan. In one example studied by the Woodstock Institute,a provider gave an advance of nearly $24,000 to a business, charged $1,100 in origination fees, and collected its payments by deducting $499 a day from the business’ sales for 76 days. In total, the borrower paid nearly $37,500 — an effective interest rate of about 346%.” Next time you are faced with one of these overnight loans, you can calculate your own APR here. We hope you never have to.

Every week CSC speaks to someone burdened with high-interest debt from online lenders that was too easy to take on, but nearly impossible to break free from.

As the high cost of online lenders’ shutters small businesses, the real cost to this efficiency is the resiliency of our local businesses, which in turn, threatens our local communities. Small businesses are the lifeblood of our economy, creating not only jobs, but storied histories, preserving character and culture, and creating points of connection for people in our neighborhoods.

Finance should serve small businesses to help them grow and thrive- strengthening our communities. Capital should encourage resiliency. This takes time and relationships. But it’s exactly what we are working towards. Connecting small business owners with shared local capital from the people who know and love them is a step in the right direction for building strong local economies.

CSC loans do not happen overnight, but with community, love, and sharing, our small businesses can thrive.