Three ways to invest in local businesses this holiday season
Updated: Aug 10
Disclaimer: This blog post references an opinion and is for information purposes only. It is not intended to be investment advice.
To say 2020 has been a rocky year for small businesses is quite an understatement. This holiday season, you can of course make a difference by shopping at small businesses, but did you know you can do even more? You can invest in small businesses alongside your community.
Why should I invest in local businesses?
While a strong holiday season is important for small businesses, their long-term success is determined by the amount of money they have in the bank. Money in the bank lets businesses weather a bad season, shift their business model, or take advantage of new growth opportunities in a shifting market. This is why the Paycheck Protection Program (PPP) and Emergency Injury Disaster Loan (EIDL) programs launched early in the pandemic were so critical. These programs gave some businesses a lifeline.
Unfortunately, these federal programs appear to have gone mostly to bigger businesses with already strong bank relationships. Main Street businesses, particularly minority and women-owned businesses were disproportionately left out. Here are three ways you can make local businesses a part of your portfolio and bring Main Street back.
1. Zero-interest business microloans on Kiva
Kiva is a nonprofit organization that allows people to lend money via the internet to entrepreneurs around the world. In the US, their loan crowdfunding platform helps Main Street entrepreneurs access zero-interest loans up to $15,000.
Kiva is not a donation platform, if you lend to an entrepreneur they agree to pay back your loan. According to Emily Keebler, Kiva Pittsburgh Program Director, "With Kiva, you won't receive interest on your investment, but your money is helping a financially excluded entrepreneur get an affordable loan during a difficult time for small businesses."
You can start lending on Kiva for as little as $25. With hundreds of loan opportunities, Kiva is a wonderful way to make your money have a recurring impact, anywhere in the world.
2. Interest-bearing small business loans on Honeycomb
Honeycomb Credit is a loan crowdfunding platform that lets you lend to small businesses and be repaid principal and interest over the term of the loan. Businesses that are raising funds on Honeycomb are typically raising between $15,000 and $250,000. These businesses pass a due diligence process so they are vetted before being featured on the site and they are usually seeking capital to grow their business.
On Honeycomb it’s not just about the money, as George Cook, Honeycomb CEO explains, “One thing we’ve seen on Honeycomb is that investors really love to be able to see their investments at work. Unlike investing on the stock market, when you invest in a local coffee shop, brewery, or restaurant, you can see the impact your investment is having to help an entrepreneur realize their dreams and make the community a better place.”
If you’re looking to fuel an entrepreneur’s dreams, consider starting a free Honeycomb investments account. The minimum Honeycomb investment is $100.
3. CNotes that fund CDFI loans
CNote is deploying capital to small businesses in a more hands-off approach. They are a platform where the dollars you invest are then deployed to Community Development Financial Institutions (CDFIs). These CDFIs are lenders that lend to underserved small businesses and also provide technical support to business owners. When you lend on CNote, you are helping CDFIs have more capital to lend and are promised a steady 2.75% return on investment.
According to Yuliya Tarasava, Co-Founder and COO of CNote, “Recent PPP lending data confirms that the structural gaps in our economy continue to persist. CDFIs are experts at deploying capital into underserved communities around the country and addressing the inequality in access to lending and other financial resources.”
You can help the helpers by starting a CNote investment account with as little as $5.
It takes a community
For many of us, personally capitalizing a local restaurant or brewery by ourselves is unrealistic. However, that doesn’t mean that our investment dollars can’t play a role in building a resilient, diverse Main Street. Together, in small amounts, intentional investments can help make an entrepreneur’s dream just a little more feasible. This Small Business Saturday, let’s prove that small things do add up!
Learn more about creating a free Honeycomb investments account just in time for Small Business Saturday here.