A photo of a typical small town main street in the United States of America. Features old brick buildings with specialty shops and restaurants. Decorated with spring flowers and American flags.

Local Investment Networks

WSU Extension is partnering with the Association of Washington Cities (AWC) to foster local investment networks (LIN) in communities across Washington. A Local Investment Network connects local investors with local business owners who need capital. However, a LIN is not a bank, an investment club, a community fund, or a financial institution of any kind. For businesses, LIN is an alternative to banks and other commercial lenders or formally regulated investments. LIN offers businesses an alternative to borrow money from those who are your neighbors, customers, and others interested in your success. Many people need to be involved such as citizen investors, business owners, local economic development councils, elected officials, and others. Successful local investment networks are started at a grassroots level by ordinary people that care about the businesses in their communities.

The process starts with WSU and AWC working with interested communities, a community champion, and a local organization that is interested in promoting local investing. Training will be provided to both businesses and potential investors in the process, encompassing how loans are made, operating rules, etc.

For investors, LIN is a way to see where your money is going and who it is helping. A LIN enables you to invest in what can be seen; local businesses.

How does the connection between business and investor work?

  1. A business contacts the LIN and submits an application. A LIN contact person directs the application and funding opportunity to relevant investors in the network.
  2. Interested investors contact the business and vet the opportunity.
  3. A deal is negotiated and funded.

What are the pros and cons?

Pros:

  • The level of familiarity and knowledge that comes with a local investment can provide investors with greater insight into the business.
  • Dividends and repayment may also take the form of in-kind payments.
  • The rewards are more than financial; by investing in a local enterprise you support your local economy and increase the local quality of life.

Cons:

  • Private transactions carry risk. There is no regulatory oversight or recourse, and investors must conduct their own due diligence.
  • If loans are unsecured, the investment could potentially be lost if the business fails.
  • Investments are likely to be long-term, with no easy way to cash out.

Contacts:

Anthony Gromko

Project Co-Lead

anthony.gromko@wsu.edu

Trevor Lane

Project Co-Lead

trevor.lane@wsu.edu

Want more information about how to set up a LIN?

Read the LIN Field Guide for best practices, success stories, contract templates, and step-by-step guidance. An assessment of currently operating LINs was published in 2019.

 

Explore the impact and stories of some of the LINs in Washington State

Local Investing Opportunities Network (LION) – Jefferson County

Ferry Investment Network (FIN) – Ferry County

Thurston Investment Network (ThINk) – Thurston County

Methow Valley Investment Network (MIN) – Okanogan County