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.

Coalition Seeks to Build “People-Powered Economy” in Seattle

Check out this great piece from the Public News Service

October 2, 2017

SEATTLE – Like many cities across the country, Seattle is finding great wealth often brings great wealth disparity.

The Emerald City has the fifth highest median income among large U.S. cities, is home to two tech giants in Amazon and Microsoft and is the nation’s fastest growing big city.

But some Seattleites see the downside of this growth as lower-income residents, particularly people of color, are being left behind.

Beto Yarce, executive director of the small business support group Ventures, is part of the People’s Economy Project. He says his mission is to help small businesses with a hand up instead of a handout.

“Creating a solution to alleviate poverty through economic empowerment,” he states. “So, what does that mean? It’s like creating business development training programs and really educate these communities on how do they budget better.

“How do they make better decisions about their money? How do they change their relationship with their money?”

The People’s Economy Project brings together small business developers with the goal of increasing minority owned businesses and providing assets for lower-income communities in Seattle, noting that small businesses act as neighborhood anchors.

The project takes its agenda on the road this fall to neighborhoods that have benefited least from the city’s rapid growth.

Rachel Maxwell, executive director, Community Sourced Capital, is also part of the People’s Economy Project. Her organization helps crowd source zero interest loans for local small businesses. She says the project came out of a concern that the economy isn’t serving all Seattle residents.

“All those folks were convened to consider what were the questions, and design some initiatives that they could present to the civic leaders in Seattle around how it might look, or what might be different, or new things that could happen that would develop a people-powered economy here,” she explains.

Maxwell notes that the project’s agenda can be implemented in any city. She credits the Northwest for being open to new approaches to protecting communities’ assets.

Eric Tegethoff, Public News Service – WA

A Love Story for John Berdes

John Berdes, the CEO of Craft3, lost his life to lung cancer and we are deeply bereaved. John was Our friend, partner, and mentor. We loved him. He was a brilliant visionary who worked his whole life to build just and equitable finance for communities.

We met John almost three years ago. He pinged CSC and said, matter-of-factly:

I would be interested in sitting down sometime and figuring out what possible synergies there are between us. We seem to share some core beliefs.

Who could resist? That was the beginning of a beautiful collaboration and friendship. A delightful aspect of working with John was how he wrote. In the follow-on to our first meeting, he sent this morsel embedded in a list of what he could offer to CSC:

3. I am personally available to provide depressing perspectives and irrefutable truths (and generally opine on your considerable options).

Yup. That was John. We learned that his depressing perspectives were pretty much right on, and his irrefutable truths, well, despite our best efforts, they turned out to be just that.

John wanted to accelerate our brand of healthy community capital and he put 500,000 of Craft3’s dollars to work on our platform. He recognized the power of community based finance and supported Squareholders by matching their Squares one to one. Craft3 matching capital has built larger loans for 40 small businesses in Oregon and Washington.

John wasn’t only generous, he was also tough. He challenged us every step of the way– to do more for small community businesses (especially those left out of the financial system), to do it responsibly, and to build our business in a way that was sustainable so we too would survive. Sometimes it was tough to hear his perspectives. And often that was just what we needed.

In his frank way, shortly before he died, John said:

I’m not here to read tributes, just stories of love and life.

And so, John, this is not a tribute, but a love story.

The community kind of impact investing

Ever since JP Morgan Chase started talking about Impact Investing as a “new” asset class in 2010, it’s been a topic of discussion amongst elite investors in the know.

Impact investing is described in Investopedia as an investment that “actively seeks to make a positive impact.” Today, many of us are invested in mutual funds and we’re taught to look for the most money we can make on our investments in the shortest period of time, regardless of what we’re actually investing in. The focus here is on dollar impact, not social impact.

I can remember way back when my grandfather talked to me about investing. He was born at the beginning of the 20th century and believed in investing in companies that did things he liked. He was an engineer and he relished having shares in 3M which was, at the time, probably the most innovative company going! I miss his excitement about the places he invested. And even though 3M may not fit in today’s standards of social or environmental impact investing, it sure was making an impact on innovation back then, and this was an impact that my grandfather admired and sought out with his investment.
Continue reading “The community kind of impact investing”

Give trust a chance

We live in an era of possibility. Everyday new leaders and companies are rewriting long-standing rules to create value and unlock promise. These new leaders realize that many times the very norms and rules meant to protect us from risk end up blocking us from true potential. If you have a credit score below a certain number, you cannot take out a loan. If you’ve had a criminal record, you can’t get certain jobs.

We live in an era of possibility. Everyday new leaders and companies are rewriting long-standing rules to create value and unlock promise. These new leaders realize that many times the very norms and rules meant to protect us from risk end up blocking us from true potential. If you have a credit score below a certain number, you cannot take out a loan. If you’ve had a criminal record, you can’t get certain jobs.

What if we could suspend those rules? What kinds of opportunities would emerge? A beautiful thing can happen when people rely on trust and connections. Infinite possibilities are allowed to emerge. At the community level, where personal connections, history, relationships, and human emotion flourishes, there is less need for so many rules.
Continue reading “Give trust a chance”

A community line of credit: when possibility meets potential

There’s something exciting going on with Community Sourced Capital. Two businesses which  found success getting a loan from their community are at it again. Last summer, the Adrift Hotel borrowed $18,450 to finance a solar hot water installation for their sustainable hotel in Long Beach, Washington. They took on the loan, executed the project, held a party for their Squareholders, and perhaps best of all, they paid back the loan on schedule.
Continue reading “A community line of credit: when possibility meets potential”

Local finance matters

When people put their money to work for a business they can visit in person, an opportunity to see the impact of money in your community is born. Money doesn’t have to be thousands of miles away in New York. It can be just down the road.

We just wrapped up a fantastic loan with The Food Shed, a local business bringing healthy and local food to their community in Kingston, Washington. But we’re thrilled that the campaign brought more than local food to their community. It also brought local finance.

In fact, more than 90% of their Squareholders live within 40 miles of the business. We think that’s a pretty cool statistic, and not just because it’s fun to look at a map of Squares and Squareholders!

Kitsap Food Shed from Kitsap Sun

When people put their money to work for a business they can visit in person, an opportunity to see the impact of your money in your community is born. Money doesn’t always have to be thousands of miles away in New York. It can be just down the road. (My apologies to anyone reading this in New York. I hope you know what I mean.)

So here comes the part about persistence. Even though study after study confirms that locally-owned businesses improve the quality of life for communities, the collective impact of those businesses is still bundled in a complex set of benefits that are sometimes hard to see. In fact, it took a financial crisis for many Americans to see just how much we had taken for granted all along.

The concept here is simple, and perhaps a little redundant: the value of local finance is in visualizing the connection between your money, the financial system, and the health of your community. There’s a dollar bill at one end of the system, a resilient economy at the other, and a whole lot of thriving small businesses in between.

The photo included in this post is of Pam Buitinvield, an owner of The Food Shed. The photo is from the Kitsap Sun’s article Homegrown Loan Helps Kingston Cafe to Grow featuring The Food Shed and Community Sourced Capital.

Breaking the binary paradigm

Our team has been learning from mentor and friend Carol Sanford over the past six months. If there’s one thing we can count on, it’s that she’ll say something to flip our world upside down, and then follow it up with concepts, nuanced language and intention that reveals the full potential of where we can go from that moment of feeling flipped upside down. Continue reading “Breaking the binary paradigm”

Six months in, and we’re just getting started

Just six short months ago, our little company Community Sourced Capital was born with the purpose of changing the way society thinks about finance. It’s a unique challenge to change how we think about finance, especially if most of us aren’t thinking about it in the first place. That is, unless finance is bad to us. Then we think about it all the time.

We believe finance can be good. It can be good to people and it can be good to businesses. Like when finance enables 113 people to fund a $12,000 loan for an organic cranberry farm. Examples like this demonstrate the potential for finance to embody the qualities that form our generally accepted definitions of “good” like “community” or “sharing” or “love”.

And here’s the “good” news: because money is a human invention, the purpose it carries is ours to invent as well.

Here at CSC, we’re six months into giving money a purpose in our local economies. This is where we’re at:

2 funded campaigns raised $15,000 in loans for community business

Lots more campaigns in the pipeline

6 incredible team members

150+ card-carrying Squareholders

750+ friends (seriously) helping us achieve our vision

We love doing what we do. We spend each day meeting with incredible business owners bringing remarkable products and services to their communities. We identify their financial goals, tell their story, and then help them find purposeful money to finance the next iteration of their business.

So far, we’re a small drop in an enormous bucket. But here’s the “good” news: that bucket—that pesky financial one our society rarely talks about in a positive way—happens to hold remarkable possibility for creating the world we want to live in. Everyone reading this article holds a handful of water from that bucket and all the potential in the world to do something amazing with it.

Cheers to another six months of funding the world we want to live in.

Harvesting Social Capital: a renewable resource

This week, we’re launching our third and most ambitious campaign to-date with A&R Solar, a Seattle-based renewable energy company. Having A&R approach us to help them raise money for their new office space is an honor. One of the highest compliments I’ve received in my young business career was from Dave Kozin (A&R Solar’s CFO), stating “we could probably find other ways of financing this project, but we want to do it with you guys. We think it will be more fun getting CSC and our community involved.”< It's this kind of intuitive and values-based decision making in business that I identify with, and it's where I see CSC having continued success in the future. Actually, there are a lot of parallels between the two companies. Both are small, owner-operated, bootstrapped service businesses. A&R is a registered B-Corp. CSC is a Social Purpose Corporation. Both are built with sustainability at the core of the business model. We’re creating new jobs in a radically different economy than we might have planned for a decade ago.

In prepping for A&R’s $20,000 Squareholder Campaign, we spent the afternoon shooting a campaign video in their new headquarters (it’s a bit empty in the picture above) with a few members of the team. It was way too much fun to be considered work.

And having fun matters. Every day, the way we carry ourselves in the world impacts relationships and connections to those around us–either growing them stronger, letting them fall apart, or missing opportunities to build new ones by blowing by at life’s busy pace and forgetting to look up and meet your neighbor. Social capital fosters reciprocity and the willingness to share resources–knowledge, connections, equipment or even money!

So, how do we put social capital to work? After all, social capital is a renewable resource if we are conscious in how we use it. Consider the companies CSC has had the honor of working with so far. Each harvests a renewable resource, generating new value without being extractive. Recycling sporting goods at Playback Sports, organic farming of a perennial berry with Starvation Alley Farms and now solar energy with A&R Solar.

CSC’s business model is intentionally designed in a similar way. We harvest social capital in the form of shared money. In returning the money to Squareholders, we don’t deplete their ability to share it again. We believe this is part of a larger movement as we transform how we collectively think about money. We’re grateful for the small business owners, the squareholders and all the people in our world who are making their decisions based on their deepest values. This is what will bring in a new economy!