An answer to TINA investment?

[Bubba1235]

TINA (There is no alternative) is the big word for investors at the moment meaning there is no real alternative outside of stocks that are performing well enough to worth putting money into. Ok, for the most part I agree but something interesting is happening locally.

A group of folks with money to invest are looking at starting up an investment co-op specifically to promote small local businesses as they are having an almost impossible time of borrowing from traditional sources. (Small banks are at a huge disadvantage because money costs them more so they aren't lending to small companies.) Anyhow that's the basics of it and I really do like the idea of promoting small and local business but,,, I get nervous about anything done by committee and I question the business expertise of those looking to invest. I also have some concerns over nepotism. "My brother's boy would be a great investment" sort of thing. Given how small the community is and how much it’s inter-related that one bothers me more than anything because there will be failures and I fear pulling the plug on them will be like pulling teeth.

Bottom line, I’m torn between a desire to see a reasonable return AND help the local community vs. all the ways it can go wrong. Would love to hear everyone’s thoughts on it and if you would go in on something like this.

 

[rbh]

Re: An answer to TINA investment?

Check out this program.

Business Loans - Programs & Services - Community Futures Shuswap

 

[ezmobee]

Re: An answer to TINA investment?

I invest heavily in goods and services I have well diversified portfolio.

 

[rbh]

Re: An answer to TINA investment?

When I first started out I took advantage of the program, although I did not take a loan out just the education/course available was great.
As well if you where eligable for unemployment insurance, signing up for the course made you eligable for a full years worth of benefits that would suplement the income derived from your venture.

 

[JB]

Re: An answer to TINA investment?

I have made some very unconventional investments. I have loaned money to people who had no credit or lousy credit. I gave a mortgage to a couple to buy their first house (broke even on that but earned some devoted friends). Made a fair ROI on another mortgage to a single Mom and lost a bunch on another.

I set a broke handyman up in business, financed a car for my housekeeper and provided a siren for our local VFD.

Each of these investments in people has made me a richer man than X% ROI on some stock ever could have.

Don't invest in TINA to make money, invest to make your community prosper.

 

[coastalrichard]

Re: An answer to TINA investment?

Make it on Wall Street...then bring it to Main Street:applause:

 

[rbh]

Re: An answer to TINA investment?

You hit upon a point near and dear to my heart. Getting a loan via this co-op (if we do it) would require a well reviewed business plan and that alone is often enough to get a business back on track or even to walk away from a poorly planned expansion or even going into business.

With your experienace, is this something you would put your money into?

Thats a good question!
I think it took me about a week to put together a business plan that met their standards/expectations and then there was the must attend course.
If at the end of the course if you or the instructors where not confident in what you could accomplish or your goals where set to high, you had to make a case why it would work, if you could not justifiy your needs, I am betting the start up loan would have been hard to get.
I started up with a van, ladders and hand tools. As I expanded I bought equipment as required if I could afford it.


Go through the community futures web site, what do they say??

 

[Tim Frank]

Re: An answer to TINA investment?

Interesting, wish they had some information on how well it's worked (ROI) and how many failures they have had to deal with. I think I'll fire off an email and see how much information they are willing to give.

You'll find that this is a Federal Government program and the Co-op is simply the face of that.
I do not think that it is quite what you are speaking of in the OP, and the concerns that you indicated are unlikely to be any different in this format.

Think the SBA south of the border, and if you are familiar with them, is that really what you mean to emulate?

 

[rbh]

Re: An answer to TINA investment?

Anyone can loan anyone money, its the guarantee thats is the question.

Small business loans you have to admit is a crap shoot for an "unproven" business, if they have proven themselves and have a plan for expansion/upgrade the risk should be lower to the lender.
But people are people and have grandiose dreams that are some times not feasable, this is why the loans person/people should be able to ascertain the risk of the loan based apoun the request.


But on the same page smaller start up capital should be available to start up business. (if they invest $5000, you will match them???)

 

[rbh]

Re: An answer to TINA investment?

OH, to add, will your group be assisting in the building of the business through courses or mentoring?

 

[rbh]

Re: An answer to TINA investment?

Even screw ups have good ideas and with a little coaching turn out good, sometimes.
(push in the right direction with person working with them goes along way)

Does that make me an optimist??

 

[coastalrichard]

Re: An answer to TINA investment?

Again those are all details yet to be hammered out. Kind of a tough thing and most investements will come down to a judgement call based on the person as much as anything. It's a small community and if a young person, say a recent graduate wanted to go into business, has a reasonable plan and is known as a hard worker that keeps their word, I'd say he / she may not need much of their own capital. If on the other hand it's the local screw off, I doubt he'd get a penny under any condition no matter what his plan was or how much he'd be willing to invest.

Bubba, I understand and appreciate your desire to help those in your community. I applaud you, sir. I also note AT LEAST 2 very flagrant violations of federal lending and discrimination laws in this statement alone. Do you have an attorney on board with the group to help you establish appropriate participation criteria for the Co-op?

 

[Tim Frank]

Re: An answer to TINA investment?

Maybe if I give an example: Local mom and pop (antique store) is operating out of an older building downtown and doing "ok". They would love to put up a new building along the interstate (and the local exit) to increase traffic. They talked with both local banks and they even agreed it was a good idea and their fiancial statements were in line but, "We aren't making those types of loans right now".

Those are the sorts of issues we see happening and want to address. Another issue, again concerning the interstate is there is very limited water, sewer, natural gas in the area. Town can come up with part of the money needed, can get some federal funding (not certain of that now with the cuts) but it still comes up short. They need private investment to make it happen. Another one, the local internet provider needs a better tower and it's going to cost around $20K that he doesn't have available. But if he did, he could double his coverage area.

In almost all of the cases I've looked at being kicked around it isn't just helping a single individual or their small company it's also a way to build needed infastructure to expand and even attract other businesses.

OK, I didn't get the scope of the OP, thanks for the clarification.
Once you add a significant infrastructure component, the complexity increases substantially and probably requires various levels of government participation as well.
The link that RBH connected you with may not be at all inappropriate as a model. They do a rational mix of private sector-public sector financing.

CFDCs Benefit Communities and Local Businesses is another regional branch of the same nationwide organisation. Their website is a bit more "self-congratulatory" about their successes, and they may be more forthcoming with useful info if you ask.

Maybe try and tie in with your Small Business Administration and see if they have any programs that help?

Good luck with this, it's not an easy or simple task...but there are few more worthwhile.

 

[foodfisher]

Re: An answer to TINA investment?

Even screw ups have good ideas and with a little coaching turn out good, sometimes.
(push in the right direction with person working with them goes along way)

Does that make me an optimist??

Uninformed, Unprofessional Pessimist: You might prolong the agony of a dying business with no ROI

 

[rbh]

Re: An answer to TINA investment?

Uninformed, Unprofessional Pessimist: You might prolong the agony of a dying business with no ROI

HUH??

Of course there will be no ROI if the guy/gal never gets a start up and chance to prove himself.

 

[coastalrichard]

Re: An answer to TINA investment?

CORRECT ANSWER, my friend!:cheer2::hail: