I just loaned $3,000 to a small business in my western Colorado town of Paonia, and I'm looking forward to getting the first installment on the 6 percent interest. I haven't decided, though, if I want it in the form of a box of fresh-picked veggies or as a gourmet dinner. In six years, provided this farm-based bed and breakfast/local-foods restaurant continues to thrive, I'll get back the capital I invested. If the Fresh & Wyld Farmhouse Inn goes under, it'll probably be sold to pay back investors.
I might lose my money, but it's a small enough amount that I won't be faced with cat-food dinners in retirement. And I, along with 39 other people (almost all locals), get the satisfaction of helping our community keep a great business that in turn helps support the nearby organic farmers who supply it, and that also lures foodie tourists who spend money at local wineries, art galleries and gas stations. Plus, Fresh & Wyld's terrific eatery will stay open, a big deal in a burg that boasts a total of three decent restaurants.
This kind of community-fueled investment is becoming more and more common in Western towns, as local food operations find it increasingly difficult to get traditional bank loans. Facing a balloon payment of nearly $500,000 on her owner-carried mortgage, the best interest rate that owner Dava Parr could get was 7.5 percent on an adjustable-rate loan. The hefty monthly payments, around $4,000, would have sunk her fledgling operation.
"We kept going back to this article about grassroots community funding in Yes! Magazine," says Parr, "and we decided to go that way, since we had so many loyal customers."
Parr hired a law firm to draft the loan paperwork. State securities rules meant that she couldn't advertise for investors, so last fall she sent emails to 1,400 customers, friends and family members, and held a couple of fund-raising parties.
Then the inn's owner agreed to carry part of the loan, substantially reducing the amount Parr needed to raise. Parr eventually asked for a minimum investment of $2,500, with the goal of raising $270,000, and gave people the choice of 6 percent interest in goods and services, or 3 percent in cash.
"I was really frightened," she says. "We kept contacting rich people and getting turned down." But within a few weeks, money started trickling in. "I'd go out to the mailbox and there would be three checks. The next day four."
Nearly everyone who invested was someone Parr had met in person. "You have to be a business that the community really loves," she says. With just three months to raise the money, she and partner Chris Carrier worked hard over the winter to endear themselves even more to customers; they started a winter community-supported agriculture program and farmer's market, and offered takeout meals.
But a week before the balloon payment came due in late April, Parr found they were still $10,000 short, even if they maxed out their credit cards and put up all their operating capital. They sent out a final plea - and within an hour, pledges for $30,000 rolled in. By closing day, they'd gotten $70,000, which gave them a comfortable cushion for the summer's operations. Now, Parr can stop fundraising and focus on what she and her staff love most about operating Fresh & Wyld: "digging up new dirt and keeping people fed."
Parr's grassroots effort shares the goals of the "Slow Money" movement, which encourages people to back local enterprises such as cheesemakers, vegetable growers, meat and egg producers. Founded by former venture capitalist Woody Tasch, Slow Money's goal is to rebuild sustainable systems to grow and distribute food. So far, 2,000 members have contributed anywhere from $25 to $85,000 to the Slow Money Alliance, which then brokers loans: $40,000 to a California producer of pasture-raised chickens; $40,000 to New Mexico's Santa Fe Alliance, which helps link area farmers with restaurants; more than $300,000 to four small food enterprises in Washington state.
By investing in a local food business, notes Carrier, "You know what your money's doing. It's not going out into cyberspace and being used for purposes you might not agree with." Parr adds that now that all these local lenders have a stake in her success, they'll be even more motivated to come eat her meals, take her classes and buy her produce.
"Micro-lending works really well for communities that want to hold onto a deserving business," she says. "My banker never ate here."
Jodi Peterson is a contributor to Writers on the Range, a service of High Country News (hcn.org). She is the magazine's managing editor in Paonia, Colorado.
Note: the opinions expressed in this column are those of the writer and do not necessarily reflect those of High Country News, its board or staff. If you'd like to share an opinion piece of your own, please write Betsy Marston at firstname.lastname@example.org.