Evaluating Local Investment Opportunities

Deciding to invest locally can be an exciting and daunting decision. There are so many factors you need to consider beyond just which business you want to support. When you do pick a business to invest in, what happens next? Do you just cut them a check, shake hands, and hope for the best? Not if you want to be a savvy local investor. Cutting a check is more like a donation. If you want to invest, you need to make sure you follow through with due diligence. Due diligence is evaluating risks in order to make better investment decisions and, in turn, improve positive outcomes for you and the local business.

Step one in the due diligence process is deciding your own needs, goals, and the risk on investing in the particular company.   You may need to consult with a financial adviser for this step. Look at your current investments, income, and expenses. Do you have enough to pay your bills? Can you cover an emergency if needed? If your current situation is meeting all your needs, then investing locally is a great idea. If you’re unsure if you’re ready to take the big step into investing in small businesses, invest in yourself. You are your own business. Pay off your credit cards, pay down your mortgage, buy a house if you currently rent, go solar. There are a lot of ways to invest in yourself before moving on to a higher community impact project like investing in a small business.

After you’ve done your due diligence, you can move on to step two which includes researching and evaluating the local business you hope to invest in.  You may want to look over the business plan, read through financial statements, ask for profit projections, and talk to their current investors (if they have any).   The important thing to remember is you need to do as much research and gather as much information as you personally need to make a decision regarding the potential investment. Are you comfortable supporting the business? If so, great. If not, figure out why or move on to doing due diligence on your next investment opportunity.

Step three is deciding on contract terms. Make sure you get all terms from investment amount to time frame on return in writing. The contract should be drafted by a lawyer and signed by both parties. After that, it’s cutting a check time! Once that’s out of the way, don’t just walk away from the investment. Stay engaged. It’s better to be hands on (unless you’ve agreed to be a silent partner).

If there is any part of the due diligence process that you are unfamiliar with, you may want to consider teaming up with several like minded local investors. This is usually referred to as a “club” or “network.” Local investment clubs are a great way to play off the strengths of the other members. Maybe you’re great with understanding contracts but not so great with reading profit projection reports. Team up! Everyone wins when you’re well informed on all aspects of the risk process.

The number one piece of advice to remember when evaluating local investment opportunities, is to trust your instincts. If there is anything at all that makes you uncomfortable about the deal, don’t sign.   Expressing interest means just that – you’re interested. You only commit when you are ready.

Investing locally is a wonderful way to support your community.   Have fun with it, though never lose sight of the fact that it is an investment, not a donation. Do your due diligence so everyone involved – you, the business, and the community – can be winners.


With so many crowdfunding projects and options available, it’s tough to choose what to support. Do you want to help that new tech gadget get made? What about that movie or video game? Creative arts are great, but why not try looking in our own community for investment opportunities.   Moving money from Wall Street to Main Street is becoming more and more popular. Here are some great reasons why you should consider investing locally too.

  1. Growth Potential – Local businesses make up 50% of US economy but receive almost none of the investment. Most are highly profitable.   Recent data from the IRS shows that start ups with one owner are often as much as eleven times more profitable than corporations. Out of date laws that kept the 99% of Americans that aren’t billionaire investors out of investing, are now changing. This makes it easier for everyone to support local causes and small businesses.


  1. Multiple Returns – By investing in local businesses, you get two points of return – money in your portfolio and positive growth and changes in your community. It’s great to see a monetary return on your investment, but it’s even better to know you are doing your part to build a strong, stable community. Every dollar you invest in a local business goes back out into the community through new jobs, higher wages, maintaining parks and recreation centers.


  1. Superior Access – Investing locally allows you to get to know the business from the inside. You can meet the owner, talk to the staff, sample the goods and services, learn about how they run the business and what they plan to do with any investment money. You effectively become your own investment analyst.


  1. New Tools – As investing locally becomes more and more popular, a wealth of tools to make it easier for you the investor have cropped up. With investment clubs, networks, and investment public offerings at your disposal, investing locally has never been easier.


Now take the time to look around your community. You probably already have some favorite restaurants or stores. You might already be friendly with some of the owners. By becoming a local investor, you open numerous opportunities and doors. Your favorite businesses benefit from your faith in their product or service. Helping others is one of the greatest feelings you’ll ever experience. Now you can do it on a grander scale by investing in local businesses. Happy helping!

Amazon Best-Seller: Invest Local by David Barnett

Invest Local BookBack in 2006, I started a new business as a finance broker. I would help small businesses obtain leases, bank loans and finance receivables via a tool called factoring.

I had studied business in university. My education, unfortunately, was all about big companies. In the real world, most businesses are quite small. I had to learn about small business finance ‘in the trenches.’

Over the years, I learned from my finance partners how they made decisions about where to invest their money. I learned about the documents you need to have in place and how to determine the risk involved in a particular loan or lease to a small business.

Eventually, I took the plunge and started doing my own deals with my own money. Loans and leases are the easiest way to invest in a small business that you don’t own or control.

The problem with being a shareholder in a small business is that profits can be affected based on how the controlling owner or manager decides to run things. A fancy new pickup truck can mean no money left to pay dividends to any minority shareholders.

The beauty of a loan or a lease to a small business is that you can define the payments, calculate your rate of return, and create a contingency plan in case things don’t go so well. For example; in a loan to a business you can have physical collateral. In a lease situation; the property is actually in the investor’s name, they hold the title.

These are the exact reason that when Wall St. invests in small businesses, they do so via loans and leases. I’ve never heard of a Wall St. bank wanting to buy stock in a corner store or local dry cleaner.

Since it’s a proven strategy, it’s the one I follow in my own investing.

To learn more about investing in local small businesses, ready my 2014 Amazon Best-Seller: Invest Local. I describe the different investing scenarios that I’ve been in and the different ways to make smart local investments at superior rates of return while controlling risk.

You can find it on Amazon here: http://amzn.com/1497371198 To buy a .pdf copy, learn more about local investing, buying and selling small businesses, personal finance or to sign up for my FREE weekly small business e-mail, visit my blog site; www.InvestLocalBook.com

David Barnett spends his days helping people buy, sell and finance businesses privately.
This Guest Post was to provided by the books author, David Barnett.


Investing locally is a great way to build a strong community.   You live in your particular town, why not invest in it too? By supporting local businesses, you’re not only helping them – you’re helping your community stay strong. As an added bonus, every time you invest in a local business, you’re allowing an entrepreneur realize their dream of owning their own business. It’s a win win for everyone. The only problem is, unless you’re one of the top tier 2% of investors that securities regulators consider accredited, you may be told your investment options are limited. That’s not true. Here are the tools you need to invest local if you’re in the 98% of unaccredited investors.

  1. Invest In Yourself – The best rate of return happens when you invest not only locally but in yourself. Get rid of your credit card debt, buy a home, grow your own food, and generate your own heat and electricity with solar energy.   You are your best local investment.
  1. Create Targeted CDs – Many banks and credit unions are wary of loaning small businesses money without the guarantee of full collateral. To invest local and help out small businesses, you can put your money into a special certificate of deposit that offers full collateral to local businesses. If your bank or credit union currently doesn’t offer this program, ask them to create it.
  1. Pre-purchase Good and Services – This is an approach that works well on crowd funding sites like Indiegogo and kickstarter. The business creates a page and usually a video explaining the product they are trying to create. You decide if you want to support them.   The reward on your investment depends on the level of support you’ve given. By purchasing the goods or services before they’ve been produced, the business raises capital without all the sticky red tape. Type in your town’s name in the search box to find local campaigns to invest in.
  1. Form A Local Investment Club – If you find it difficult to get in to a more established investment fund because you’re an unaccredited investor, form an investment club! Gather community minded individuals together and form a club to pool your assets together. The more funds, the more you can do for your community and local businesses. A new option is participating in equity crowdfunding with a focus on your state or metro area.
  1. Put your money in local banks/credit unions – Forgot using big chain banks. If you are serious about investing local, you need to put all your checking, savings, credit cards, and loans in a local bank or credit union. Credit unions are responsible for 30% of small business loans to companies that may not get a big, chain bank to give them a second look. By moving your assets to a local bank or credit union, you are also showing your support to invest locally.

By investing locally, you’re sending a powerful message to the local, state, and national government. You’re saying ‘I care about Main Street – not Wall Street.’ Make your community special by supporting local businesses.


You’ve heard of Small Business Saturday where, one day a year after Black Friday, you’re encouraged to go out and support local businesses. Why should you limit your support to once a year? Small businesses are the cornerstone that holds a community together.   They make a community unique by providing specialized products instead of just the standard cookie cutter goods and services you can get from the big name businesses that pop up everywhere. Chain stores serve a purpose, but local Mom and Pop stores existed long before the chains moved in.   You may already shop local, but have you considered investing local? Just like giving a pledge to your local PBS station keeps them on the air, you can invest in local businesses to keep them up and running.   Sound easy? It is. Investing locally creates a strong, local economy and sense of community. Here are some of the best ways for you to invest local:

  1. Move your money –   Move your checking, savings, credit cards, and loans to a local credit union or bank versus the national chain banks. Local banks and credit unions account for 20% of small business loans. They invest locally when you do. If your community doesn’t have a local credit union, start one! Credit unions are easier to start up than banks and most can be run by part time employees and volunteers.


  1. Donate Locally – Giving to charity is a great way to help others. You probably know the big names, but what about smaller local charities and non profits? Your donations allow the local charities to invest local by helping small businesses be successful. It’s a win win for you and the community.


  1. Sponsor Local Businesses – Investing locally by sponsoring small businesses goes beyond getting you or your business’s name up on the sport’s field, on the back of a t-shirt, or in a yearbook. Check popular sites like Kickstarter and Indiegogo for local business campaigns to invest in. You may only get a t-shirt or a thank you note, but you can feel good knowing you and others like you invest locally to help a entrepreneur achieve their dream.


  1. Prepare a Community List – Sites like Craigslist and Freecycle are great for finding local goods, but what about finding local investment opportunities? Create a craigslist like list for local investors looking to support local businesses. It may take time to track down leads, but overall it is an easy project to create. As a bonus, once word gets out about your invest local list, businesses will come to you with leads.


  1. Promote Program Related Investments – By law, foundations must donate at least 5% of their assets each year. The other 95% usually goes to non local stocks, bonds and other causes. Try to convince your local foundations and non profits to invest that 95% into local businesses instead. This is called Program Related Investments.   If the local business is not successful, the foundation can always apply the loss toward their grant-giving requirement.


Investing local is a great way to give back to your community.   It strengthens the local economy and ensures that small businesses will continue to be around to produce their unique goods and services. Why be cookie cutter when you can stand out? Investing locally is also a lot easier than you’d think. Anyone can do it. With a little bit a practice, you can become an Invest Local pro! What are you waiting for? Go Invest Local.