Alternative Finance for Underserved Communities of Color By Bill Huston Global Crowdinvesting Expert

Hello JMCC Communities and Guest. It is with great satisfaction to introduce one of the most monumental events to occur for underserved communities the passing of Title III of the JOB ACTS of 2012. We have the priviledge of being educated to why this new law has such major financial impact for people of color, underserved communities, and people who wanted access to a financial system that can improve communities and create inter generational wealth. 

Alternative Finance for Underserved Communities of Color By Bill Huston Global Crowdinvesting Expert

Introduction to Alternative Finance

Business owners are acutely aware that most small businesses and startups struggle to get access to capital and underserved communities of color receive extremely small amounts of funding from traditional funding sources. So, instead of protesting and complaining maybe small businesses and small-scale real estate developers should begin to implement different methods of alternative searching and deploying capital. We are going to talk about different types of investing alternatives that are on the cutting edge of new capital formation for underserved communities of color.

Local Investment Clubs

A traditional investment club is a small group of individual investors who come together to learn, share investing experiences, and help each other become more successful investors. Clubs provide education, camaraderie and buying power, plus the confidence of knowing you don’t have to go it alone. Clubs can also choose not to pool investment dollars and instead simply come together to discuss investment ideas and analysis.

Local crowd investment clubs will have a focus on investing in local businesses and local real estate development in underserved communities using crowd investing to allow the club members the ultimate reward derived from local crowd investing to be owner, customer and brand advocate all at the same time. Again this is a way to build local wealth in underserved communities.

Impact Investing from Corporate and Philanthropic Foundations

“Philanthropy is commendable,” said Martin Luther King, “but it must not cause the philanthropist to overlook the circumstances of economic injustice which make philanthropy necessary.” Philanthropists and philanthropic advisors who champion equality must work to shift from a framework that grounds giving in “charity” to one that grounds giving in “justice.”                  

Dr. Dorian Burton

As mentioned in the above section making local place based impact investments makes a lot of sense for foundations because the benefits that locavesting bring to both the investor and the community where they live. So, let’s take the next logical step and examine why more philanthropic and corporate foundations should look to the local market to make impact investments along with a small percentage of their endowments that they use to make grants.

So many of the problems and issues that plague inner-city communities are poverty based and many of them stem from government policies such as redlining and urban renewal. If foundations change their relationships in these communities from charity and began the process of providing location based impact investment into these communities coupled with crowd investing as an inclusive investment option to fund local businesses, real estate development, and wealth building initiatives based on market principles many of the poverty based issues could be eliminated.  

Crowdinvesting

Crowd investing is the truly revolutionary centerpiece of the JOBS Act of 2012. It became legal on May 16th 2016. Crowd investing provides a platform for small real estate developers and small companies to raise money from the general public—wealthy, not wealthy, friend or stranger—as long as the investment takes place on a web site operated by a traditional broker-dealer or an S.E.C.-sanctioned crowdfunding portal, and certain other requirements are met.

Specifically, the law allows companies to raise up to $1 million in a 12-month period from the public. Investors are capped at the greater of $2,000 or 5% of their income, if their annual income or net worth is less than $100,000. The final rules also impose a limit on how much those with an income or net worth greater than $100,000 can make: they are limited to $10,000 per year or 10% of their income or net worth.

Alternative Finance

There are many new and emerging forms of alternative finance that provide the democratization of capital in underserved communities of color. Many of the communities find themselves isolated in urban centers and are areas of concentrated poverty. These areas of concentrated poverty tend to be places that lack hope and many residents become trapped in the despair and hopelessness of the environment. But just like policy created these communities policy and the commitment of investors that want to see their communities changed are able to use their dollars to vote!

Understanding Crowd Investing

Securing capital for businesses and real estate development for communities of color has always been a very daunting task and in some cases it has been flatly denied by government policy such as “Redlining”. Since the “Great Recession” it has been increasingly difficult for businesses and real estate developers to secure finance through traditional channels. As a result, more and more businesses are turning to crowd investing to raise the necessary funds.

Online investors have been quick to respond to the growing number of investment opportunities and offers and, as a result, crowd investing is growing by leaps and bounds. The process has been slower in communities of color for a number of reasons, but BHEC has a mission to provide the needed education to position our communities to take full advantage of this President Obama era law.  

Join Us

If you want to learn more about community capital and crowd investing’s ability to create change in your community, business venture, or small scale real estate development come over to bhec.rocks and learn how to make this information actionable for you and your community.