Finding finance for your startup may be easiest within your own community. Your ‘community’ could be in terms of relationships, geography, field of interest or affiliation.Community Financed Business is not a generally accepted term. However, there are an increasing number of ways that businesses are financially supported within a community. Some are very traditional, such as coops that started in the nineteenth century and new ones are emerging all the time. An example is crowdfunding, that springs very recently from the social networking phenomenon.The impetus is coming from two directions. The first is the disaffection for Wall Street and all that ‘big banking’ represents. The other is the burgeoning ‘local’ movement, the natural offspring of environmentalism.Keeping funding in your own community has advantages and disadvantages. Some of the plusses are that you know the people providing money and your business is ‘visible’ to them. Banks have a very bureaucratic approach and lending decisions have to be ‘passed up the line’ to a corporate office somewhere else. With community finance, your access to the lenders is easy and in most cases will be face-to-face. Minuses include the reverse of that coin: you will have nowhere to ‘hide’. I always tell business borrowers to ‘over-communicate’ with their bankers. If you borrow from those you know, the time spent on communicating with them is likely to take a lot of your energy (and emotion).Family and Friends (some say also, Fools)For many generations, startups have looked to their family and friends for finance, whether equity or loan money. This is often extended to customers and suppliers, too. According to the Angel Capital Education Foundation, startups annually raise $60 billion through friends and family. Thus it’s probably the biggest single source of ‘series A’ funding that there is.There are some strong caveats to this route, since emotion and relationships are to the fore. You will be focused on getting the money, but you need to know their point of view, too. Treat them as if they were a business and give them good reason to help. Be clear about how you will repay them and use a promissory note to make it legal.Have a backup plan. If the loan from a family member needs to be called in for reasons like the lender lost a job, you need to be able to repay quickly or risk a family feud. Ask yourself if it’s the right course in the first place, and beware that it’s tough to price and structure the right deal for both parties. Think about how things will be if your startup goes belly-up. Checking downside risks is often the key to a successful startup.Community Financed BusinessCommunity Supported Agriculture (CSA) is now a widespread means of providing small-scale financial support to farmers. Typically, members in a community buy shares in the produce of farms pre-season and receive delivery as and when the particular crops or meat becomes available. The process has now spread to other sectors of the economy, mainly in ag and food. There are examples in seafood (Port Clyde, ME) and restaurants where patrons invest and get repaid in meals and other perks over time.This tends to be a very effective, but somewhat risky way of raising funds-for the investor. I lost several hundred dollars, supporting a small bookshop in my village, where my up-front money was to have been repaid in books on a monthly basis with a small amount of interest. The business model was not carefully enough prepared and the startup was poorly managed, and resulted in failure.Interestingly, about two years later in the space next door, another community supported business has opened – a restaurant. Not only did these founders sell shares to local supporters, but they, themselves, are buying produce from local CSA farms. There are many other ways in addition to the CSA model of pre-funding product sales by subscription or ‘shares’.CooperativesThey are much more widespread than you might imagine, both locally and nationally. There are nearly 30,000 of them in the US. I used to serve on the board of the Brattleboro Food Coop, a two-store retailer in my local Vermont town. We had reached capacity in our main store with a $16 million turnover, and decided to build an entirely new store at a cost of several millions. Coop members in the locality advanced well over $1 million in 3 and 5 year loans as part of the shareholder equity to back the bank and other financing. In addition another local coop partnered in the building – Coop Power – by providing the solar roof.A significant proportion of coops are small and locally oriented. Many are among farmers and banking. Savings and Loan Associations are, in effect, coops. Some started small and local but have grown into large entities, with the strength of local support. An example is Land o’ Lakes, now pretty much a national brand of dairy products.Direct Public OfferingsA direct public offering is a way for a company to “go public” without the intermediaries that orchestrate an IPO. A company completes required offering documents and securities filings, which enables them to sell shares directly to the public – the company’s customers and community.A recent example of a DPO is Quimper Mercantile in Port Townsend, WA, that has raised over $500,000 in a DPO to open a general store. They were assisted by Cutting Edge Capital. Another of CEC’s clients is People’s Community Market, whose model of grassroots investing allows Californians of all economic backgrounds to become Founders and Shareholders in creating a food store in West Oakland.CrowdfundingYou will surely have heard of Kickstarter. An MBA student of mine raised over $15,000 (on a $10,000 target) seed money locally for Raleigh City Farm in North Carolina, via a Kickstarter campaign. Well, the movement is much more widespread and often locally oriented. You can take a look at my crowdfunding page for more info.The JOBS Act which is due to come into force this year, allows anyone to invest up to $10,000 a year, or up to 10 percent of their net income if they earn less than $100,000 a year, in private companies. This contrasts with the present, given that crowdfunders are largely rewarded non-financially. One of the first platforms off the block will be Earlyshares, an equity based crowdfunding platform.Revenue-based Funding & Customer FinancingAnother new approach to funding business is Revenue-Based Funding. The idea is that instead of the risk being associated with the capital growth of the investment, the lender takes a risk on the revenue, by charging a percentage of the top line. A US company called RevenueLoan now offers a Revenue-Based Funding product, but on relatively large amounts for startups. As they say, “Revenue Based Financing (RBF) is a hybrid financing method that fills a need in the growth capital market for companies with approximately $1 to $10 million in revenue and a proven plan for growth.Maker CommunityTypical interests enjoyed by the maker subculture include engineering-oriented pursuits such as electronics, robotics, 3-D printing, 2-D plotter cutting, water-jet cutting, and the use of CNC tools (even applied to embroidery), as well as more traditional activities such as metalworking, woodworking, and traditional arts and crafts.The whole print-on-demand industry is another example, where authors can produce books even one at a time. While these are not funders, they reduce the costs that would otherwise be associated with small-scale manufacturing. However there are hybrids that combine maker facilities with startup seed funding, as well as incubation space in factory-like settings.Business Accelerators and IncubatorsUnlike many business assistance programs, business incubators do not serve any and all companies. Entrepreneurs who wish to enter a business incubation program must apply for admission. They also tend to be physical places where you can start your business under a collective roof. Many incubators/accelerators are competitive to join, but once in seed capital is provided.While it is possible to generalize about accelerators, there are almost as many variations as there are similarities. Business Accelerators may focus on very specific geographies (such as cities or States), industrial sectors (such as information technology or clean energy), industrial processes (such as manufacturing or industrial kitchens). Accelerators can offer physical space on short or medium terms, networking, mentoring, funding or introduction to funding, training, peer group support. These may vary in time, for instance: pre-launch, startup, early stage.Other Community Finance OpportunitiesMany other community or ‘local’ finance opportunities exist. There may be financial incentives such as grants available from local government agencies, or business plan competitions run by local development bodies and academic institutions, for instance.Depending upon the governance structure of your startup, there may be program funds that are accessible. For instance, in those States where the L3C form (limited liability company that limits the level of profit) exists, you could get foundation funding.There are also combinations of some of the different community funding avenues to be explored. For instance, you could use crowdfunding to extend the family and friends route. You could add other people in your network and, by having a larger lender base, each contributor’s risk could be reduced, because they’d be providing smaller sums. The downside of the hybrid would be the time you would need to commit to keeping lenders informed of progress.How You Can Do It?Brainstorm with friends and associates, but do it in an organized way. You probably have fixed ideas about how you are going to raise money for your startup and it will be important to spawn new ideas. On a solo basis, one of the methods I use is mind-mapping (several free programs and apps are on the Web); it lets me get all my scattered ideas briefly noted in one visual space. It helps me see the wood for the trees.Affinity diagrams might be something you can use in a group. It sounds daunting, but all you need is some wall space and sticky-notes. Participants work on their own ideas and post them. When you have them all on the wall you can begin to see which ideas are related, or which may generate new ideas.Be as wild as you can about where you can capital or loans from. You’d be surprised about how many sources there are, and just how many people would love to help.