Alternatives to traditional small business loans
Many small businesses can’t qualify for a small business loan from a traditional local bank. A bad credit record disqualifies many. Lending standards have tightened. Some small towns are limited by local banks that don’t support small business; others don’t have locally-owned banks any more. The good news is that alternatives are available. We are profiling alternatives to traditional small business loans in this ongoing series on financing.
One of those alternatives is community ownership. We’re used to thinking only of debt financing (loans), but there is also equity (or ownership) financing, like a corporation issuing stock to raise capital. Now, most small town businesses aren’t in a position to issue stock, but some could be targets for community ownership. In most community ownership cases, the business is part of social good. And that’s true of these two examples of community ownership in real small towns.
Minneola, Kansas, population 745.
Their grocery store was closed for 2 and a half years. In March, it re-opened with community ownership.
Interested locals formed a board, then a corporation, and sold shares for $50. They raised $200,000. Volunteers came together to do the renovations and get ready for opening. (That’s another common theme for community ownership: volunteers get involved, too.)
Following another of the small town rules, they diversified their income streams, adding a deli, a fresh meat department and a floral shop.
Lampasas, Texas, population 6,700.
Their hospital closed in 1991. The community decided to reopen it “at any cost.” It’s possible they were heartened by knowing community volunteers were key in establishing the hospital decades before.
Groups, businesses, and individuals got involved in raising $565,000. They contracted with a health system to manage it, and reopened it in December 1991.
It not only stayed open, it thrived. In 1997, the community sold the hospital to Adventist Health System. It remains open in the community today.
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