A new law allows local investment in small business
Kyle DeWitt has spent three years trying to open a brewery in Tecumseh. He's a veteran brewer, and he owns the building where he plans to brew his beer. But, he still needs money for equipment.
Despite his experience and a solid business plan, banks think of breweries as restaurants, he says. He’s a risky investment in the eyes of traditional lenders.
A few days ago, DeWitt and his business partner, Tim Schmidt, decided to try something new. The men are trying to be the first in the state to test a new crowd-funding law. They have a loan, but it’s not enough. They want to raise $250,000 in 90 days.
"We kept running into walls with banks and other lending institutions," DeWitt says. "The crowd-funding thing came about right as we were starting to get frustrated. It's opened up a lot of doors for us."
The crowd-funding law changes the way private business owners like the Tecumseh two can seek investors, says Kevin Hitchen, the co-founder of Localstake, the crowd-funding web site helping the two men via a partnership with the Michigan Municipal League.
Before, DeWitt and Schmidt couldn’t ask for investments from the general public – be it someone in Tecumseh, or a craft beer fan in Detroit, says Hitchen. The two couldn’t market their efforts to raise cash because they are privately owned. Everything was behind closed doors, and only after they’d inked a deal could they announce it.
But now, DeWitt and Schmidt can offer the general public a chance to buy into the brewery. Michigan is one of a few states with an intrastate crowd-funding law. The brewery will pay out a small percentage of its profits each month to investors, until everyone gets back 1.5 times what they put in.
On top of that, says Hitchen, many of the brewery’s investors will be local. They will be customers who have a stake in the success of the company.
“We really believe that things are changing. [People] want to invest local. They want to help out the local economy. They want to create jobs,” says Hitchen.
-Megha Satyanarayana, Michigan Radio Newsroom