Helping Clients Raise Community Capital Using A Direct Public Offering
By Cameron Rhudy
Cameron Rhudy is the Grassroots Finance Attorney at Sustainable Economies Law Center, which provides research, education, advice, and advocacy for just and resilient economies. Cameron is currently working on a project with the Grassroots Finance team that is focused on increasing access to capital for farmland conservation. Cameron also supports the Resilient Communities Legal Cafe, the Law Center’s national Fellowship program, and its Transformative Policymakers project.
Access to capital is one of the largest barriers to new and emerging businesses. The capital needs of new and emerging businesses are often higher than what is feasible to raise from friends and family, but also lower than the minimum amount most large banks are willing to lend. New businesses have little to no track record of steady income and few assets or collateral for banks to lend against, often making them ineligible for a loan even if they are asking for amounts that would otherwise be worthwhile for the bank. According to a 2016 study funded in part by the Kauffman Foundation, only about 18% of businesses ever access a bank loan.1
Rural businesses, women-owned businesses, and businesses owned by people of color are disproportionately affected by these barriers to capital. Conventional financial strategies rely on institutions that have a history of exploitive and discriminatory practices, including predatory lending and redlining. Despite California being one of the few states that receives a concentrated amount of venture capital (VC) funding compared to most U.S. states, the actual number of businesses that receive VC funding is very small, with rural businesses, women-owned businesses, and businesses owned by people of color grossly underrepresented.2