Thursday, April 24, 2014
PORTLAND — The Local Sprouts Cafe is meant to be a community-centric space. Foods grown and produced locally will be served up to members and customers. The space will be a real-world classroom for job skills and a venue for art and educational offerings.
With that kind of approach, it made sense to look to the community for assistance. Organizers hope supporters will lend a good portion of the money they need to renovate the space in a former dormitory.
The Local Sprouts Cooperative has begun a community financing program for its cafe. The plan is to raise as much as $40,000 in loans from supporters. The interest -- ranging from none to 5 percent -- will be decided by lenders. Legal documents will formalize the loans, which will not be secured by collateral.
''With the community financing model, it's really about growing a community around our project and having the community have a stake,'' said Jonah Fertig, one of the cooperative's founders and worker-owners.
Other groups have used the model as an alternative to borrowing from the usual financial institutions. Earlier this year, the JED Collective in Greene made a $132,000 down payment on the purchase of 30 acres. Housing cooperatives in Oregon and California have used similar programs.
Fertig was exposed to the idea through the JED Collective, which wanted to expand its organic farm and orchard and preserve the land. He liked the idea of supporting the work of friends in the collective, and thought the same principles would apply to Local Sprouts.
The cafe will be at 645 Congress St., the former site of the University of Southern Maine's Portland Hall dormitory. The property is being turned into apartments, with retail on the ground floor. The cafe is expected to open around March.
Lenders will be able to see where their money is going as the cafeteria is converted into a cafe. They can support local agriculture while earning a small return on their investment, if they opt for interest on their loans, Fertig said.
There will be some flexibility in the program. The plan is to seek loans ranging from $1,000 to $20,000 and to defer payment for six months to provide time to build the business.
One advantage for the cafe is that the loans will be unsecured. The cooperative doesn't have much capital, so the loans will be based on the community's trust in the project, Fertig said.
''Because it's our community and because it's people we know and respect, we're going to want to pay back on that loan and make good on our loan agreements,'' he said.
While the cooperative appreciates the community aspect of its program, it isn't averse to other types of borrowing. It is finalizing a $10,000 loan from the Cooperative Fund of New England, a Massachusetts-based community development loan fund. The group is also looking into loans from the city and banks.
The Local Sprouts project is getting under way as other types of nonconventional lending become more widespread. People are increasingly participating in peer-to-peer lending through Web sites like Prosper and Lending Club. Entrepreneurs are building Web sites to solicit small contributions from the public for their projects.
Many people are feeling disillusioned by large financial corporations, said
Tom Leach, a business professor at the University of New England.
That may make some people more willing to look at the ''double bottom line'' -- the social responsibility of a venture -- rather than just the conventional bottom line of profitability, he said.
''They're willing to take the risk because they want to build community and they want to be socially responsible,'' Leach said.
The JED Collective looked outside of conventional loans because it didn't want to use the land as collateral. It found that the community financing model got others involved, said Kate Boverman, the collective's community financing coordinator.
''It gives them a greater sense of being part of something bigger, allows them to give back, support that project financially, even if they can't be there to raise the barn, plant the garden or whatever it may be,'' she said.
After packets about the project were sent to about 75 people who were close to the collective, 16 lenders provided the money for the down payment. The collective has since gotten closer to its $200,000 goal; it needs another $58,000.
Boverman said the collective has gotten more and more inquiries about the community financing model.
One was from Mary Blue, an herbalist who owns Farmacy Herbs, an herbal products company and community health center in Providence, R.I.
Blue is thinking about community financing to raise $100,000 to buy the land on which her business operates. She hopes to avoid banks.
''They're just not very accountable to the community. They're not very flexible,'' she said.
Staff Writer Ann S. Kim can be contacted at 791-6383 or at: