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In January 2010, Ben Slayton and his wife, Erin Cinelli, tapped personal savings and borrowed money from their parents to buy a butcher shop in Wales, Maine. After using more of their own funds and a small loan from the state to pay for improvements, including a $20,000 energy-efficient freezer and a $28,000 poultry-processing space in the back of the shop, they struck out when they applied for bank credit to get additional equipment.
Last spring the couple, who employ four workers and are projecting $400,000 in 2011 revenue, stumbled onto No Small Potatoes, an investment club comprised of 18 individuals in Maine who each contribute $5,000 to a pool that supports local, sustainable agriculture. After vetting the application and visiting the shop, the group loaned them $5,000 at 5 percent interest, with a three-year repayment schedule. Slayton, 36, says the investment helped him land further credit from other sources. “That loan from No Small Potatoes told us that people in our community think we’re a smart outfit and they were willing to put their money behind us. It was the first time that someone told [us] we were doing good work.”
No Small Potatoes is part of a national push to support small business and invest in local communities. In the past year, the group’s parent, Slow Money, has started 11 state chapters, tapping into a desire to help struggling local food businesses in the wake of the financial crisis and credit crunch, says Woody Tasch, the organization’s 60-year-old founder and author of Inquiries into the Nature of Slow Money: Investing as if Food, Farms, and Fertility Mattered.
“After being on the road a lot and talking to thousands of people, I’m absolutely sure there are 1 million or 2 million Americans who want to take a little of their money and invest it locally,” says Tasch. “This money is not going to come from Washington or Wall Street—it’s going to come from us.” Last year’s Slow Money national gathering, which drew a mix of 600 aging hippies and younger locavores from 34 states and a handful of foreign countries to a tent in Vermont, resulted in $4 million being invested in the farmers who were invited to present, he says. The third annual meetup is scheduled for next week in San Francisco.
Crowdfunding websites such as Kickstarter and groups like the Business Alliance for Local Living Economies are helping to educate the public about private-investor financing, and the Securities & Exchange Commission is relaxing some of the legal restrictions that have prevented most individuals from investing in small, private businesses, says Amy Cortese, a journalist who researched Slow Money for her new book, Locavesting: The Revolution in Local Investing and How to Profit From It (John Wiley & Sons). Even state economic development agencies are starting to rethink the idea of spending funds to lure major manufacturers or big-box stores into communities, given how frequently those employers pull up stakes, Cortese says.
Angelina Koulizakis-Battiste, 49, hired three people after she got a $6,000 loan from Slow Money North Carolina, one year ago. The money enabled her to make required improvements to a 1,100-square-foot space she leased adjacent to her Pittsboro, N.C., food stand that sells locally grown food with a Greek twist.
The lease became available last summer, when her revenues had dropped off due to the economic downturn and typical summer doldrums, Koulizakis-Battiste says. “My husband and I put all our savings into this business, but even though we own property and pay all our bills, the bank would not extend our line of credit because we don’t take salaries and so we don’t have reportable income,” she explains.
The loan, at 3 percent interest with a monthly payment of $170 for three years, enabled her to add seating at 23 tables and expand her catering business. As a result, revenues have increased by 40 percent, she says; her projected 2011 revenue is $180,000. “When we get in the position again to invest ourselves, my husband and I will support this type of project,” Koulizakis-Battiste says. “When you put your money in an IRA, it’s like it’s invisible. Here, if you invest in us, you can actually come by and see your money at work.”