Realities of modern lending remind us what we’re working on

A recent article from Inc. Magazine is reminding us what we’re working for: a better financial ecosystem for small business. The article describes the negative relationships between banks and some small business owners following the financial crisis.

When it comes to the future of small business in America, it’s easy to say that “small business is important to our economy” and leave it at that, but we should really take it a step further. We’ve learned from our economy over the last few years that strong, local economies will require networks of many strong, small businesses.

This is not to say that big business is bad or has no place in our future. It’s just to say that we’ve done a great job supporting big business for a while now, and it’s probably time to focus some more energy on our friends at the “small” end of the business spectrum.

Back to the article– author Burt Helm draws examples of successful small businesses being dumped by big banks because of their industry, major trends in big bank density across the banking landscape, and it asks what might change to fix the whole system.

My own understanding of systems suggest that this current dominant system probably won’t change anytime soon. It’s too big to move, too big to adapt, too big to… well, you get it.

Instead, we can focus on introducing new financial systems that make the entire ecosystem more sustainable. At Community Sourced Capital, we believe these systems will (and should) more heavily involve large groups of people (read: communities) in decision making, and ultimately, in an ongoing education about how our financial system works in the first place.

All this said, I think it’s important to specify when you might see exactly what we’re talking about at CSC . We’re designing and testing sustainable financial solutions, and that process requires lots of care and patience. The last thing we want to do is scale half-baked solutions that end up harming small businesses, or worse, the local economies we’re trying to strengthen.

If sustainable finance, design and collaboration piques your interest like it does ours, then I strongly encourage you to read through this article. Then, consider taking our short survey on small business lending in your own community.

The state of small business on the eve of the election

Small businesses are the heart of our communities and the life-blood of our economy. Few politicians would disagree with that.

Every day, small business owners roll up their sleeves and bring you and me some of our most basic services, often with a smile from a friendly face. They make our lives better by creating spaces where we can enjoy coffee with friends and by making delicious food when we’re too busy to make it ourselves. They create jobs. Small business owners are some of the hardest working and most creative Americans. Every politician agrees with this.

So how do we “vote” for small business? Both the Republican and Democratic Party platforms say we need to make the tax code friendlier to small business. USA Today recently published an article, Q&A: Looming Small Business Tax Hike Explained. It’s an ominous headline, but, in fact, all the looming tax hike has to do with is raising personal income taxes for people earning over $200,000 a year. This possible tax hike might affect as much as 3.5% of all small business owners, maybe—probably fewer. Most small business owners just don’t have that kind of income. That means, when they need to grow, they can’t afford to just cut a check.

I’m worried about what’s happened to access to capital for small business. Bank lending in the smallest sized loans, loans under $100,000, has plummeted. Overall lending is starting to improve for larger loans, but these “micro-loans”, the size most often needed by our neighborhood businesses, continue to decline precipitously. A recent Federal Reserve study says small businesses identify “access to capital” as the greatest impediment to creating new jobs. I want my neighborhood businesses to create jobs for my neighbors, and they need access to capital in order to do it!

So while the presidential candidates focus on tax codes, how can we, we the people, help our neighborhood businesses get what they need?

I don’t believe we need to wait around for banks or government to solve these problems for us. We can start by making appointments at the locally owned hair salon and frequenting the locally owned coffee shop (an easy task for Seattle). We can recommend neighborhood businesses to our friends and start to build local economies that are less likely to tank when Wall Street tanks. But that’s not the whole story.

We also need to ensure that small businesses have access to financial resources; they need the capital to start, run, grow, and improve their businesses. Banks simply aren’t lending to small businesses like they used to. Let’s put our money to work where it can do our neighborhoods some good!

Crowdfunding puts financial power in the hands of many people, but its application to small-business financing is still new. Kickstarter, the most well known crowdfunding website, recently helped a business on Bainbridge Island raise nearly $20,000 to help start their business, but Kickstarter was designed to help artists fund creative projects with donations. That’s why my company, Community Sourced Capital, was designed from the ground up to meet the needs of small business through crowdfunding. We’re so passionate about it that we decided to become one of the first Social Purpose Corporations in Washington State. That means our corporate charter includes a mandate to help small businesses and local economies thrive. You can count on us to live up to that mission!

This election year, we aren’t focused on the power of the politician. We’re focused on the power of the people. We should never forget that we the people are what elections are really about. We hold the power to collectively make decisions, and when we aren’t voting for politicians and policies, we can vote with our dollars by supporting small businesses with our purchases and our investments. We don’t need politicians to help us with this step. We can roll up our sleeves and put our money to work to fund the world we want to live in, today.

Re-imagining our relationship with money

Imagine this: 20 people sitting around in a circle talking about money. It wasn’t bankruptcy counseling. It wasn’t a fundraising meeting. It wasn’t even a investment club. It was just 20 people, sitting in a circle, talking about their personal relationship with money. Continue reading “Re-imagining our relationship with money”

Generative design and local living economies

Last week, Casey and I returned to our Alma Mater, the Bainbridge Graduate Institute, to talk about Community Sourced Capital with about 20 MBA Students studying Local Living Economies in a class taught by sustainable finance expert Stuart Cowan. Continue reading “Generative design and local living economies”

The CSC Team talks about their vision of Sustainable Finance

Last June the CSC Team mused on meaning and finance when on the ferry from Seattle to Bainbridge Island. Check out the video we shot on our phone and get to know us a little better.

The heart of money: what winning might look like

I had a dream last night where I was visiting with students in a college finance class. It was casual conversation about careers and post-graduation plans until I saw a prompt on the whiteboard. It was a chance to enter an essay contest. In 50 words or less, alumni had to answer the essay question, whereas undergrad students could take as much room as they like.

I should pause here to clarify that yes, I do in fact have dreams this vivid. So, here was the question I created in my dream:

If our entire financial system was competing in the Olympics, who would win the bronze?

I immediately started overhearing students discussing how AA versus AAA rated bonds are ranked. “Which one is better, again?” they asked each other. The girl at my table asked me to review what she wrote, but I had to write my response first. This is what I wrote:

As with most competitions, the winners and losers are determined by the judges. What Olympic competition are we talking about? Who are the judges? What are the metrics being used to evaluate the contestants? How might the rules of the game evolve over time to challenge future contestants?

I guess in my dream, I found it more valuable to throw questions back at the judges with which to score other essays, than for me to try and win the contest myself. Or maybe I just didn’t have the right answer ready. Either way, I’m sure I snuck my essay at the top of the pile so the judges of this competition might read my rebuttal before scoring the rest of the entries.

Think about the different Olympic competitions and what we expect from each one. Gymnastics: grace and perfection. Diving: form and execution. Running: speed and speed alone. The undisputed, most important element in each of these competitions: heart. The heart of the contestants is the determining factor in every competition. It has no official line on the rubric, but it absolutely shows up in every evaluated element.

What is the heart of the financial system you know? What is the heart of the financial system you want to know?

Go ahead and try this quick exercise. Write down the two or three variables you would consider while evaluating some financial system that your money is circulating through. It could be your checking account or your 401(k). How does heart show up in these financial systems? How might the lack or presence of heart in these systems affect the future of your finances?

Your money is in the middle of a worldwide competition, much like the Olympics. In which ways might instilling heart in this competition help guide contestants to a more likely and deserved victory?

And the best news: the rules of this race are still being determined. At the end of the day, we each get to decide what winning looks like.

 

Casey Dilloway is a co-founder of Community Sourced Capital. He took several finance classes in his undergraduate business education, but didn’t really fall in love with its potential until studying it for his Sustainable MBA at the Bainbridge Graduate Institute. You can follow Casey on twitter at @CaseyJD.

You can help CSC make finance local

We created a funding platform for everyday citizens to lend directly to strong local businesses that they know. We’re starting with small businesses because its no secret that they’re responsible for the bulk of jobs created in this country, and banks are not lending to small businesses like they used to.

At the same time, experts agree that small businesses are the keystone to resilient regional economies…economies that don’t crumble when a single manufacturer leaves town or when a national housing crisis triggers the loss of 9 million jobs. We can use our money to fund a stronger world than that. Community Sourced Capital gives you the power to fund the world you want to live in.

It all starts with a square.

 

  • Squares represent loans to businesses.
  • Squares are $100 and anyone can buy one.
  • Funding a $20,000 project means selling 200 squares.
WE can control the economic vitality of our country just by putting our money to work in the right way! After all, we all have money. At least a little bit.

Here’s how it works: CSC hosts a business, their story and their funding project on our website. Over time, the business builds rapport with their community through an ongoing marketing campaign to their community that identifies future lenders. Then we contact the business and say “Hey, guess what! You just had your 200th supporter sign on to lend you $100. Now you have access to $20,000 in community sourced capital. Ready to hit go?” The funding round ensues, money is transferred, and then the repayment begins. If you are a community member who wants to join the movement to localize finance, sign up for updates. If you have questions or comments please contact Rachel@communitysourcedcapital.com.

We’d love for you to join the crowd at the Fledge Demo Day on September 23rd at the Intiman Theater. We’ll be presenting with six other conscious companies.

Local business needs YOU! (and me)

Locally owned small businesses are the life blood of our communities. They constitute approximately one-half of the U.S. private economy in terms of output and jobs, and provide us with goods and services to meet our needs. Fortunately the “buy local” movement is gaining momentum. Cash mobs spend their money at local retailers and farmers markets are growing by leaps and bounds. However, this is only one side of the coin (pun intended) for small business capital needs.

Yep, we need to purchase local goods and services, but community businesses also need investment capital to grow and succeed. Small businesses receive almost no investment from traditional capital markets, such as mutual funds, pension funds, hedge funds, or venture funds. On top of this, bank lending is at an all time low for small businesses, leaving them with few options to meet their capital needs.

Fortunately these businesses have YOU and ME, which equals US!

WE all have our favorite local businesses, whether they be the corner coffee shop, farm-to-table restaurant, mom and pop hardware store where someone is always there to help you find just what you need. They’re the businesses that make our economy go ’round. With CSC we can now take our support for our beloved community businesses one step further and directly invest in their success, to fund the world WE want to live in.