What is Locals best investment

Locals.Best  is the social network of  local entrepreneurs, business leaders, and creative people; a social platform for connecting local people and promoting their businesses and  things they create.  Local businesses and entrepreneurs us Locals.best   to find professional contacts and projects, promote themselves, advertise their company's products and services, and show off their creations to the locals .

Our goal is to launch a platform to help In  business fundraising  based approved crowdfunding equity funding to U.S. small-business and startup entrepreneurs seeking to raise money. 

Local businesses always look for new way to make more money and add to the bottom line. What is better to invest in successful local businesses?

Local Investment

Following is short review of local investment opportunities and its options. For more information you can  contact Equity CrowdFunding experts.
If you want us to contact you. Please complete the form at end of this page. 

Introduction:

“Small businesses are entitled to and deserve local support because they provide so many benefits within their communities, while operating in a challenging and competitive economic environment. If we don’t look out for them, the banks certainly would not. 

Why is it important to invest in local small businesses ? They help create the color, culture, and uniqueness in our communities and neighborhoods. They are owned, managed, and staffed by our friends and neighbors. In what’s called the “local multiplier effect,” the money we spend and invest with local small businesses has a much higher probability of being re-spent at other local small businesses, circulating more of our money throughout our communities - increasing and improving the general quality of life for everyone. Yet, local small businesses face enormous challenges. They lack the time and connections to influence laws and regulations in their favor; as a result, it’s harder for them to take advantage of tax loopholes and subsidies that larger corporations receive from governments. Since they typically operate in a very convergent business, in just one or a few places, they are less diversified and more exposed to seasonal and other regional challenges which do not affect big businesses as much. What’s more, due to their small size, securities laws and regulations are difficult and expensive for them to navigate through, making it all the more harder for them to legally raise money from investors, often limiting their options to high interest credit cards and lopsided bank loans.  


We define local investing as putting one’s money to work for the mutual benefit of the investor, the local small businesses , and the community. These benefits can be financial, in-kind (products & services), cultural, and more. By using their money to help start, expand, and support local businesses, local investors catalyze many positive changes, such as:
  • Bringing essential and/or desired products and services to their communities
  • Putting their money to work close to home, rather than in global markets and corporate banks
  • Growing their local economies, enhancing the local quality-of-life
  • Creating new relationships with local business people, building community
Local investing is very different than conventional investing. In today’s globalized world, investing has become a way of putting one’s money into shares and debt of multinational corporations and governments via high-speed, electronic trading platforms. A vast network of funds, brokers, advisers, and investment managers allow investors to disconnect from knowing what their money is really doing.

“Consider that in the early days of investing, all investments were local, as neighbors came together to pool money and help start essential businesses within their communities. In so many ways, local investing brings us back to our roots.”

Local investing by comparison, is slow and engaging. Local investors must have the passion, time, and energy to find and evaluate local investment opportunities; and these local investors must get to know the people that offer these opportunities. This is possible because local investments are much simpler and easier to understand and evaluate, than Wall Street investments. In return, investors can make money on their investments, which is very important, but local investing is about impact as much as it is about profits. Local investors can help start or expand businesses, create jobs, and increase the prosperity in their communities. They build relationships and goodwill that lasts well beyond the investment time horizon. 

We highly recommend that local investors work together, not alone, in order to help each other out. Sharing expertise and insight helps everyone find better investment opportunities and these investors make better investment decisions by drawing on the diversity of backgrounds and perspectives of the group. Since traditional sources of investment advice—such as accountants, brokers, financial advisers, and lawyers—do not always have the background to evaluate, understand, or encourage local investing, local investors have the opportunity to learn and become their own experts. The next three parts of this course, Local Investing Clubs & Networks, Organizing Business Showcases, and Evaluating Local Investments, all address how investors can work together to start investing in their communities.

The Many Flavors of Local Investments

Locally Grown! Local investment opportunities come in many forms, with varying degrees of complexity and risk. Broadly speaking, there are two main categories: securities, which are legally regulated and generally more complex, risky, and appropriate for experienced investors, and non-securities, which are typically simpler and more appropriate for novice investors. Although non-securities are not traditionally considered investments, they do enable you to create a positive local impact with your money while receiving benefits in return. Here is a brief list of local investments that are not securities, and are therefore most appropriate for those just getting started with local investing to consider:

  1. Deposits at local banks & credit unions: these institutions can lend your money back out to local small businesses and nonprofits, but you should inquire about their commitment to do so. BankLocal is a great website that can help you identify which banks near you reinvest in your community the most.
  2. Donation-and reward-based crowdfunding, through websites such as Kickstarter and Indiegogo, where investors can help fund both local and non-local businesses, nonprofits, and other projects, and investors can receive non-financial rewards, such as products or services, in return. Be on the lookout for worthy local projects you might find through your network of friends and family, local news sources, and by searching crowdfunding sites themselves.
  3. Peer-to-peer lending at a zero interest rate, through websites such as Kiva Zip and Community Sourced Capital, or directly to local people and/or businesses. As with crowdfunding, keep your ears open locally and/or look online for these opportunities.
  4. Pre-sales whereby local investors/consumers pay for products or services up front, often at a small discount to retail value, in order to provide startup, expansion, or operating funds to local small businesses, which fulfill their commitment to their investors over time. Community Supported Agriculture (CSA) is a great example of this, as farmers are paid for their work before the season, when their expenses are the highest, and deliver their harvest weekly throughout the season. CSAs are great way to support local farm businesses, and are available in most regions. Credibles is a website that facilitates pre-sales for growing food businesses so that they can expand their operations to meet demand. Sometimes, creative local businesses such as restaurants or breweries will run their own presales campaigns to fund their growth. Be on the lookout for these kinds of independent campaigns and support them when you can.
Securities, on the other hand, are essentially any kind of agreement in which an investor gives money to someone else with the expectation of receiving repayment plus a profit in return. Securities include ownership stakes (shares, or equity) in a business, loans to a business (also called promissory notes, or debt), revenue-sharing agreements, and virtually any other kind of investment contract – even personal loans made between friends and family at any interest rate greater than zero (because zero percent loans are not securities; see above). Since the eventual return of the investors’ principal (the money they put in) plus any profit depends on the management and business skills of the borrower or investee, there are inherent risks in securities, which is why they are carefully regulated by governments and are generally more appropriate for investors (and their advisers) that are ready to do the work to evaluate those risks and decide if they are appropriate to take.

In addition to the type of security (equity, debt, etc.), local investment securities also vary significantly in how and to whom they are offered, advertised, and sold:

  1. Private Offerings of securities are generally not advertised, not as heavily regulated by governments, and arranged directly between the parties. Generally, the investment sponsors may only offer their investing opportunity to people they have a pre-existing relationship with, which is why building direct personal relationships and networks is so vital in local investing. The vast majority of local investing securities fall in this category, so the courses on this site provide guidance for both investors and businesses that want to facilitate these kinds of direct investments. They can be offered by the whole spectrum of local businesses, such as retail stores, small manufacturers, farms, construction businesses, and professional service providers; and nonprofits, such as private schools, radio stations, employment agencies for disabled people, and land trusts and other conservation organizations. Creating or joining Local Investing Clubs & Networks and Organizing Business Showcases are the best ways to meet the people that can offer these local investing opportunities.
  2. Direct Public Offerings (DPOs) are like local IPOs (Initial Public Offerings) that enable small businesses and nonprofits to run public campaigns to raise money from large numbers of people. DPOs must be reviewed and approved by securities regulators in one or more states before advertising and sales to eligible investors can begin. They are relatively rare because of the commitment of time, energy, and money an organization must make to receive regulatory approval and run a successful campaign, but they are growing in popularity because they allow relatively large public outreach campaigns that would not be possible otherwise. You can find out about nearby DPOs through your local networks and online listing services like CuttingEdgeX.
  3. Investment Crowdfunding is a new type of offering that is based on the online Donation-and Reward-based Crowdfunding model, except that the issuer may offer securities to investors, with the possibility of eventual profits, instead of just product or service rewards. As of mid-2015, investment crowdfunding is legal in several states, and is likely to expand to more states and the federal level in the coming years.

What about the legal issues?

The purpose of securities laws and regulations are very clear: they exist to protect investors. They are intended to prevent fraud by investment issuers and to level the playing field by requiring disclosure of material facts and risks to potential investors. Although these laws and regulations can be hard to understand, and investors are not primarily responsible for complying with them, it can be empowering to have a basic understanding of them. Investors can avoid potentially troublesome investments and legal issues by recognizing when the sponsor of a given investment is complying with the law or ignoring it, either intentionally or unknowingly.

For local investors in the USA, here is a very brief overview of what you should know. Laws are passed by legislative bodies, such as Congress, and are generally intended to set broad policies. Rules and regulations are written by government agencies for the purpose of filling in the regulatory details needed to comply with and enforce the laws. Both laws and regulations have full legal effect. Securities laws and regulations exist on two levels: federal and state. The Securities & Exchange Commission (SEC) creates federal regulations authorized by laws that Congress passes, and it also enforces those laws and regulations. Every state also has its own securities regulator (sometimes contained within a larger department or subdivision of state government) which writes regulations based on laws passed by the state legislatures, and it enforces those laws and regulations. As a result of this system, there are always at least four legal areas pertaining to any given investment offering: federal and state securities laws, and federal and state securities regulations. They all collectively dictate the “rules of the road” for all securities offerings you will encounter.

Crowdfunding for BusinessUnaccredited Investors and new approved equity CrowdFunding

A company using equity crowdfunding is limited to raising a maximum of $1 million per year. Those raising smaller amounts would have to share financial statements and income-tax returns with investors. In a change from a proposal released in October 2013, the agency will allow a business raising more than $500,000 to provide financial results that have been reviewed by an accountant rather than formally audited.

Crowdfunded shares will be open to any investor regardless of his or her income or net worth. Those who buy stock will have to hold it for at least one year before trying to sell. Under the rules, crowdfunding must be done online through a broker or funding portal that provides financial information about the companies and discloses how much money it makes for selling the shares.

People whose income or net worth is less than $100,000 would be limited to investing a maximum of $5,000 annually. Investors with income and net worth greater than $100,000 could contribute as much as 10 percent of their annual income or net worth, up to a maximum of $100,000 in one year.
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Accredited Investor Definition:

Net worth of over $1 million (not including primary residence)

- OR -

Individual income over $200k or joint income over $300k in each of the last two years.

Accredited investor is a legal term that all investors should know, whether it applies to them or not, because it comes up quite often around securities offerings. In short, accredited investors are people with enough assets or income that lawmakers feel less need to protect them from risky investments. The legal definition, as it applies to individuals, is someone with an individual or joint net worth of over $1 million, not including the value of their primary residence, or an individual income exceeding $200,000 or a joint income exceeding $300,000 in each of the two most recent years, and a reasonable expectation of exceeding the same income level this year. Federal and state securities laws and regulations allow companies to offer securities to accredited investors only under less stringent regulatory requirements than are normally imposed on companies. Therefore, businesses that believe they can meet their funding goals by working with accredited investors exclusively will often take advantage of those types of less regulated (and therefore less expensive) securities offerings. The very real, and many people feel, unfair consequence of accredited-type offerings is that only a limited number of wealthy people have access to these investments, which typically include the most risky and also most profitable investments such as private equity funds, venture capital funds, and hedge funds. Everyone else is locked out of these opportunities. Fortunately, accredited-only investments are fairly rare in the local investing world, because most local small businesses feel they need to be able to raise money from all types of investors. For this reason, and because there are extensive resources available elsewhere that support accredited investors and businesses that want to offer accredited-type investments, the Local Investing Resource Center primarily focuses on securities offerings available to nonaccredited investors.

One final word about legal documents: When investing in local securities, a legal agreement will be needed to spell out all the relevant terms of the investment between you and the investee. For DPOs and accredited-only private offerings, it’s likely that the agreement will be written beforehand and presented to you for your review and signature. For other private offerings, as often as not, the agreement will need to be negotiated and written by one or both parties. If you are just getting started with local investing, or uncomfortable with legal agreements, you should consult an attorney before negotiating or signing any investment agreements. However, many local investors, over time, develop a level of comfort with negotiating simple investment contracts such as promissory notes. Basic template documents are available for free online, and it’s a simple matter to edit the document’s terms to match what has been negotiated. Take the “Do-It-Yourself” approach at your own risk, but know that many experienced local investors do this, especially for smaller and more straightforward local investments.

How to Get Started Investing Locally

Review your financial situation. Do you have money to invest that you can afford to lose? Have you paid off any high interest credit card debt? Are your non-invested savings sufficient to cover emergencies, and are they working for you at a locally-focused bank or credit union? Note: IRAs can be invested locally using a tool called a Self-Directed IRA, but there are modest extra costs and paperwork involved.

If you are just getting started, or prefer to work by yourself, consider looking for local crowdfunding and local peer-to-peer lending opportunities online, using our resource list. Be on the lookout for local businesses that are using pre-sales to fund their startup or expansion, and support them.

Read our next module on Local Investing Clubs & Networks. If possible, join a group in your community. Use our Group Directory to look up nearby groups. Being part of a local investing group can help you build mutually beneficial relationships with other local investors, create connections to local business people that offer investing opportunities, and generally learn how to invest locally in your community.

If there are no local investing groups nearby, consider teaming up with other interested individuals to create one yourself. Often, locally-focused economic development groups (like BALLE chapters, some Economic Development Councils (EDCs) and Small Business Development Centers (SBDCs), and local sustainability groups such as Transition Networks will have members, or know people, that will be interested in helping you create an investing group dedicated to your area. You may also use our User Directory to see if there are any interested people on our site nearby you. If so, you can send them an e-mail through our site.

New Possibilities EmergingUse your connections, including through local investing groups or similarly interested groups, to find out about local investing opportunities. To kickstart these kinds of connections, read Organizing Business Showcases and organize one. Check Direct Public Offering listings on CuttingEdgeX. Be patient and wait until you hear about an investing opportunity that interests or even excites you. Reach out to the people that are offering the opportunity. Unless they have registered their investment offering with regulators in a way that allows advertising, they may only be allowed to offer the investing opportunity to people they have a pre-existing relationship with. In these cases, if you don’t know them already, you can start building a relationship by calling or meeting up in person. Ask about who is involved, the history of the business or project, what opportunities they are pursuing, and how you can support their efforts. If the relationship develops in a promising way, you may eventually be able to take the next steps.

Once you have a potential investment you are interested in, and a quality, trusted relationship with the sponsor, do your due diligence. Read Evaluating Local Investments for a step-by-step guide and support in this process. The investment sponsor should be able to provide financial and other types of information that will help you make a decision on whether to invest. Be sure to work with other investors, if possible, to help make the best decision. If something does not feel right, and you can’t get a satisfactory resolution from the sponsor, you should politely decline to invest.

Once you have invested, stay involved! In good times, you will enjoy financial and community returns on your investment, and in tough times, your continued support can help a local small business get through. You are now a part of a growing movement that helps build community ties, strengthens community resilience, and increases local prosperity using your investment dollars.