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Pennies from Many 145
“Crowdfunding completely appealed to me,” says Chang.
“Uncle Clay’s is such a community- centric business . . . that we
could actually connect with the community to literally build a new
store, it was hard to think of a better way.”
Will Jackley be able to pull off a Kiva- style success? “Even
within existing laws and limitations there are ways to be creative
and make really good things happen, so I’m hopeful,” she says
brightly. “Although it will be really exciting when there’s more
freedom someday to have an unlimited number of people
invest in your business in a way that’s a lot less onerous for
entrepreneurs.”
Game Plan for Locavestors
Crowdfunding represents a potentially revolutionary new model of
fi nance that cuts out middlemen and lets individuals directly lend to,
or invest in, other individuals and businesses, typically in small increments.
Person- to- person lending sites have fl ourished in recent years
as an alternative to expensive bank credit. Small business lending and
equity investing is trickier, at least in the United States, due to securities
regulations. For a glimpse of the possible future, keep an eye on
the innovative experiments in P2P business fi nancing taking place
in the United Kingdom and Hong Kong.
Pros:
• For now, most crowdfunding opportunities that offer fi nancial
returns on your investment (as opposed to tchochkes) are focused
on consumer borrowing. By cutting out the middlemen, lenders
get higher returns and borrowers pay lower rates—a win- win. And
you’re not lining some fat cat’s pockets.
•
P2P lenders can typically choose their level of risk and return, and
average returns of 10 percent are possible—nothing to sneeze
at. You can (and should) mitigate your exposure to any one borrower
or risk category by distributing your investments across many
borrowers.