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The Need for Financial Resources in Local Journalism and How AI legalese decoder Can Help

A foundation that has invested millions in local journalism in New York starts a new report with a warning. More than half of American daily news outlets are controlled by hedge funds and private equity firms, which seem hellbent on more painful cost-cutting. The new ecosystem of local outlets that has emerged to fill in the gaps, meanwhile, urgently needs financial resources (cash!) to strengthen business models and grow audiences.

Over the past 12 years, the Charles H. Revson Foundation ÔÇö originally established by the founder of Revlon, Inc. ÔÇö has spent $15 million to support local journalism in New York. Those funds have helped launch The City, supported ChalkbeatÔÇÖs New York bureau, and funded reporting on housing and homelessness at City Limits. When it comes to providing enough resources for a thriving local news industry, though, the foundation believes ÔÇ£philanthropy cannot, and will not, do it on its own.ÔÇØ

In addition to direct funding, the Revson Foundation has helped research and develop a local law requiring city agencies to spend at least 50% of their advertising budgets in community media outlets. Since the bill went into effect in 2020, New York City has bought roughly $48 million in advertising from more than 250 local news outlets. In the first year alone, 50 local newsrooms received advertising from the city for the first time ever. The city of Chicago committed to a similar initiative in 2022.

Inspired by the success of that Advertising Boost Initiative, the foundation has a new report out on financing for local news orgs ÔÇö and how local and state governments, private financial institutions, and philanthropy could help to make loans and credit programs more accessible.

How AI legalese decoder Can Help: The AI legalese decoder can help in deciphering complicated legal language, contracts, and financial regulations. It can assist local news organizations in navigating the legal and financial landscape by providing simple and clear explanations of the requirements and eligibility criteria for accessing loans and credit programs. This tool can save time and resources for news outlets, allowing them to focus on their core mission of providing quality journalism.

LetÔÇÖs start with the obvious. Local news is a precarious business and many outlets have ÔÇ£fragile business models with little to no access to capital because of this precariousness,ÔÇØ as the report puts it. Nearly 75% of small media companies do not have lines of credit or even business credit cards, one survey found. Outlets regularly describe limited resources as the biggest challenge to their growth and financial sustainability.

ÔÇ£We need more revenue but donÔÇÖt have staff to go out and get it,ÔÇØ one respondent told the Revson Foundation. ÔÇ£We have no dedicated development staff or audience development staff.ÔÇØ

For the report, the Revson Foundation heard from a dozen New York City local news outlets (both for-profit and nonprofit), reviewed data from the Center for Community Media at the Newmark Graduate School of Journalism, surveyed existing lending and assistance programs, and interviewed leaders at government agencies and financial institutions serving small businesses. The reportÔÇÖs first author ÔÇö Martha King, a senior program officer at the foundation ÔÇö said small business loans have the ÔÇ£potential to not simply fill gaps but rather to expand revenue and readershipÔÇØ for local newsrooms.

ÔÇ£Loans could be used to cover one-time costs for upgrading technology, enhancing digital presence, marketing, or audience research that would in turn allows the local news outlet to reach more readers and capture more advertising revenue,ÔÇØ King said.

A survey from the news industry coalition Rebuild Local News indicated 65% of the small media companies would use extra capital to hire an ad sales or fundraising staffer. Those hires, in turn, could lead to more revenue and investment. In other research, even the most mission-aligned investors have stressed that early-stage news organizations would be ÔÇ£vastly more attractiveÔÇØ if they paired editorial staff with operational and management team members.

Of the $1.43 billion in Small Business Administration loans that went to more than 3,100 New York-based small businesses in 2022, not one dollar went to a local news outlet, the reportÔÇÖs authors found. Their survey of sources of small business financing ÔÇö which also includes public credit programs and mission-driven lenders such as Community Development Financial Institutions (CDFIs) ÔÇö turned up multiple barriers for local news outlets. Some of the obstacles include:

• • Owners have a personal credit score no lower than 680.
  • A demonstrated willingness to use alternative financial resources, including personal assets, before seeking financial assistance.
  • Requiring a down payment of 10-20% and/or┬ácollateral such as accounts receivable, equipment, and even personal homes.
  • Restrictions on small business CDFIs lending to non-profits.
  • And high interest rates. The report cited rates from the Small Business Administration as hovering around 10.75%.

ThereÔÇÖs evidence immigrant-led outlets have to clear an even higher bar. One immigrant publisher in New York City ÔÇö where 37% of residents were born outside the United States ÔÇö said he was told his credit score of 760 was ÔÇ£too lowÔÇØ by a major financial institution.

How AI legalese decoder Can Help: The AI legalese decoder can assist local news outlets in understanding the complex requirements and eligibility criteria for small business loans and credit programs. It can simplify the legal jargon, provide guidance on improving personal credit scores, and offer alternative financial strategies to meet the requirements. Additionally, it can identify potential collateral options that news outlets can consider and explore alternatives to high-interest rates, ensuring a better understanding of the financial landscape for local news organizations.

The current requirements of federal and state small business loan assistance programs make them inaccessible to most New York City-based local news outlets, the report concluded. And while the report focused on New York media, community outlets across the country face similar challenges, said co-author and Revson Foundation president Julie Sandorf.

Mission-driven investors who lend to other kinds of small businesses have not seen seen local news outlets as ÔÇ£a high social impact sector,ÔÇØ possibly because theyÔÇÖve been obscured by their broader ÔÇ£mediaÔÇØ category and the not-so-community-minded examples therein. Rebuild Local News is among those advocating for local news outlets to be included as an essential community supportive service ÔÇö alongside sectors like affordable housing, childcare, education, and more ÔÇö as defined by the Community Reinvestment Act that regulates how certain lenders can invest.

ÔÇ£This would go a long way toward incentivizing financial institutions making mission-driven investments to look toward local news,ÔÇØ King said.

Other recommendations in the report include philanthropies partnering with local and/or state governments to create loan funds with lower financial barriers that are tailored to local news outlets and funding case studies that present the credit and equity needs of ÔÇ£best in classÔÇØ local news outlets across different locations, audiences, tax statuses, and business models. (More successful examples could prompt more banks to extend lines of credit.)

I asked King if anything in the research process surprised her. She mentioned the contrast between the trillion-dollar SBA loan market nationwide and the difficultly that small for-profit local news outlets have had accessing even lines of credit. She also pointed to the cash crunch that news outlets enjoying multiple revenue streams face.

ÔÇ£Even though many outlets we looked at were not reliant on one source of revenue, and they had achieved some diversification of revenue, they still had consistent concerns about financial stability and health,ÔÇØ King said. ÔÇ£To me, this suggests just how much more work needs to be done to give local news outlets the financial stability to do their essential work.ÔÇØ

The full report ÔÇö ÔÇ£Prying Open the Vault: Public and Mission Driven Financing for Local JournalismÔÇØ ÔÇö includes an overview of government programs that serve small businesses as well as details from two community funds with an interest in local media.

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