There is no magic wand that transforms an artist who is a hobbyist into a small-business owner in the growing creative economy. There are, however, resources available to artists who want to make that leap into entrepreneurship.
At the Mountain Association for Community Economic Development (MACED), headquartered in the arts community of Berea, helping small-business owners – including artists – get their entrepreneurial effort off the ground is a mission.
MACED, which serves the 54-county Appalachian Regional Commission geographic area, has credibility in working with artists. The association partnered with Berea Tourism and the Berea city government to found the Gallery 123 Arts Accelerator program. That program provides gallery and studio space to a group of artists, selected each year, as well as business education and microloans (less than $50,000) for materials and to get started as business owners within that gallery space.
MACED has also embraced a unique approach to crowdfunding to help artists generate capital, said Paul Wright, MACED’s vice president of enterprise development.
Crowdfunding is a process used by entrepreneurs to raise small amounts of money from a large number of people. This practice is typically done via the internet with crowdfunding sites like Kickstarter and Indiegogo.
“There are a lot of artists using crowdfunding. We’ve decided to come alongside that and rather than compete head-to-head with a crowdfunding site, we created the Crowdmatch Microloan Program.”
If an artist engages in a successful crowdfunding campaign, MACED, through its Crowdmatch program, will match the amount that is raised, dollar for dollar, at 0-percent interest.
“Crowdfunding is good for the startup entrepreneur who has a following, which lends itself to creatives,” Wright said. “Our program doesn’t require collateral or a credit score to apply. We just look at the business owner’s ability to leverage crowdsourcing as a strong indicator of the viability of the business.”
That’s an opinion shared by Vallorie Henderson, a management consultant with the Kentucky Small Business Development Center’s Louisville branch.
“It’s a hard fit to connect artists with traditional lenders,” Henderson said. “I see a lot of success across the board with crowdfunding.”
Echoing Wright, Henderson said crowdfunding is well suited to artists.
“It’s individual people who are investing in the artist. They have an interest,” she said. Henderson cited Louisville’s nationally renowned Forecastle Festival, a three-day music festival that began in 2002 thanks to a Kickstarter crowdfunding campaign.
“I like to call it community funding,” Henderson said. “You are building a community with it. You are getting people involved in building something unique.”
Artists who choose to go the traditional route of applying for a bank loan should be prepared with their information, said Mark Johnson, president of Lexington-based Arts Inc., an incubator for artists seeking to start their small businesses. Among its many services, Arts Inc. provides technical assistance to artists regarding price point, marketing strategy, and how to keep and maintain a business. That’s the kind of information a bank is interested in knowing before making a loan decision.
“It comes down to whether an artist can help a bank understand how the arts business is going to make money,” Johnson said. “Instead of getting the banker to think like the artist, though, I’d counsel my clients to think like the bank, to understand what their critical issues are going to be.”
An example of translating the business of art into something tangible for a bank is knowing the cost of materials, studio space, and the all-important but sometimes elusive variable of how much an artist’s time is worth.
“Sometimes being able to produce a pricing strategy as an artist is a challenge. We as artists don’t think that way,” Johnson added. “A banker wants to know the cost though.”
Even if artists raise capital via crowdfunding or other private sources, there is still a place for the banking community in helping grow the creative economy. MACED President Peter Hille said his organization welcomes the input and participation of banking executives in advisory capacities.
“There are multiple opportunities for bankers to help,” Hille said. “They bring valuable perspectives. We think the private sector has a critical role to play in creating the new economy.”
Chris Cathers is interim executive director of the Kentucky Arts Council.