Interest in local investing growing nationwide
When Ed Robeau heard his local general store, Quimper Mercantile, had started selling stock, he decided to move some of his investments from Wall Street to Main Street.
"It's a business just like any other business. The fact that it's local, you get to know the people better. You get to observe the operation," he said.
Robeau is not alone. A growing number of small businesses are holding direct public offerings to sell equity stakes to everyday investors in their communities.
"They're often offering investment opportunities where the minimum investment might be as low as a hundred dollars or a thousand dollars," explained Jenny Kassan, CEO of Cutting Edge Capitol, a company that helps businesses hold public offerings and raise the capital they need in their own communities. "We're seeing more and more people looking for alternatives to investing in Wall Street. Something that doesn't just provide a financial return but also actually benefits their own community in ways that they can actually see and experience."
And Kassan says current lending conditions make seeking out local investors an attractive option for small businesses.
"Right now it's really hard to get bank loans and then if you go to professional investors, often they'll ask for terms like they may want control of your company and they also often want a really high rate of return," she explained.
Through their direct public offering, the general store Robeau bought stock in raised nearly $700,000 and now boasts over one thousand shareholders.
"I had people come up to me actually and say, 'Well this is more of a gift isn't it?' And I had to tell them, "No you're actually buying stock in the company and there is potential to get a dividend, there may be an increase in value in stock someday,'" said Mary Gay, Quimper Mercantile's Chief Financial Officer.
Financial advisor and author Laurie Itkin says she can understand the appeal of local investing.
"It just feels good," she said. "However you have to ask yourself, 'What is your objective for investing the money?'"
Itkin says people need to keep in mind the risks. The rate of return is often low and you may not be able to liquidate your investment if you need quick cash. And if the company goes out of business, she says you may have no recourse and get no money back on your investment.
As for Robeau, he says he truly believes that he will get a monetary return on his investment someday. But in the meantime, he says he's gotten something even better.
"You're supporting your community. You're helping provide employment for people. It makes me feel very proud," he said.
Another popular way for new businesses to raise capital is "crowdfunding" on sites like Kickstarter and IndieGogo, which are not investments but donations. Learn more about Jacksonville's One Spark 2015.
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