The pandemic affected many small businesses with lockdowns and mandates. Companies had to adjust on the fly, temporarily close, or close-up shop altogether. Small businesses play an essential role in the economy and, more importantly, your local community. Supporting your local businesses has never been more important. Below, we discuss why your support helps your community and how you can provide the support they desperately need.
6 Reasons Why Supporting Local Businesses Helps Your Community Overall
Local jobs are ideal because they do not require much travel and will decrease your area’s unemployment rate. Employment levels influence a range of other standard-of-living metrics, such as disposable income, home foreclosure rates, and new small business startups.
More Money Circulating in the Local Community
When customers use a local business, most of that money will go back into the local economy. Workers may grab lunch or dinner around where they work, run errands on breaks, or grab drinks after work. Small businesses also tend to outsource with other local businesses. For example, suppose a local pizza restaurant wants a new logo or help designing ads. In that case, they are likely to reach out to a local graphic design company versus a national brand.
They Build the Community
With thriving small businesses, the impression can be vitality and wealth. A thriving community has many shops and restaurants ,which is attractive to local consumers, nearby communities, and tourists. The positive vibes can even increase property values.
Increase Tax Revenue Close to Home
A small business generates revenue and tax dollars for your local community. In doing so, your school districts, police, firefighters, public transit, and healthcare will all receive more funding. The same cannot be said if you shop online and purchase goods and services from a business outside of your local community.
Spurs Innovation and Growth
Small businesses are unique from large corporations. All large corporations you see today likely started as small businesses and grew over time. McDonald’s began with one location and now has millions. Facebook started at one school and now has billions of users worldwide. Small businesses need to stand out from the competition to attract business which can lead to innovative ideas.
Overall, small businesses tend to be more involved in their communities. Small companies are more likely to donate time and money to local charities and nonprofits. They also tend to sponsor, organize and host local events to maintain an active community.
4 Basic Ways to Support Local Businesses
Use Their Services/Products
The most obvious of them all, shop locally. Try out a local restaurant you haven’t dined at before, or go into a mom-and-pop shop.
Stop Buying Online
Even if you buy something from a national brand but do it locally in person instead of online, you are still helping the community. Buying from a brick-and-mortar business instead of online helps that specific location succeed. This success ensures jobs stay in the area and also helps generate tax revenue for your local community.
You do not have to dine-in to support a local restaurant. Order food to-go and pick it up at the restaurant. Don’t want to leave your house? Many local restaurants offer delivery.
Buy Gift Cards
The gift card can be a gift to someone or a way for you to help your local business now by saying you’ll eat or shop there in the future, just not today.
Did You Know That You Can Support Local Businesses Using Your IRA Funds?
Here are two ways you can infuse capital into a local business using your IRA.
Businesses looking to raise money quickly may need to take out a loan. Generally, people think they need to go to the bank for a loan, but that is not necessarily the case. An individual can also lend a business money via a promissory note, a legally binding contract. This loan can be either unsecured or secured. With a loan to the business, you name the terms for how they pay you back. Payments could be quarterly, semi-annual, yearly, or even balloon payments made with interest.
You could buy your way into the company and form a partnership. For example, give the business $100K in exchange for a 10% ownership interest in the company. Not only would you be helping the business grow, but you now may receive a share in the profits and have a say in the future of the business. If you find an opportunity to invest in a local, private business, consider using your IRA.
There are few investments you can make that will benefit the good of the people. Investing in your community is one of them. Believe it or not, the IRS states that your IRA can invest in anything except life insurance and collectibles. This means that you can invest in and support a local business within your self-directed IRA. Depending on the type of business, you may be able to see your return on investment come back tax-deferred like most IRA investments.
Caveat: when an IRA is involved, you cannot receive any special treatment. This means you would not be able to get free meals from the restaurant, for example, or a larger discount on services than what a typical customer would receive.
How To Get Started With an IRA
Midland specializes in self-directed IRAs and HSAs that hold alternative investments such as real estate, promissory notes, futures/forex accounts, cryptocurrencies, real estate, and private stock. Midland will be able to hold your investment and do the necessary record keeping and reporting to the IRS that allows you to invest in alternative assets through your self-directed IRA.
Written by Andy Anger
Senior Client Services Associate
MIDLAND TRUST COMPANY, OR ITS AFFILIATES OR SUBSIDIARIES (COLLECTIVELY REFERRED TO AS “MIDLAND”), IS NOT A FIDUCIARY: Midland’s role as the Custodian and/or Administrator of self-directed retirement accounts is non-discretionary and/or administrative. The account holder or his/her authorized representative must direct all investment transactions and choose the investment(s) for the account, and is responsible for conducting his/her own due diligence. Midland has no responsibility or involvement in selecting or evaluating any investment and does not conduct due diligence on any investment. Nothing contained herein shall be construed as investment, legal, tax, or financial advice or as a guarantee, endorsement, or certification of any investments.