Entrepreneurs Provide Demand for Credit

President Obama gets it. He understands that small businesses hold the key to the American economy. But the president has a demand problem. His latest proposals, such as making TARP money available for community banks to lend, and tax deductions and incentives for more hiring and better wages, will only work if the nation’s small businesses are achieving growth. At the moment, they are not.
That does not mean the economy is completely lacking demand for government small business expansion programs. It just means policy makers have yet to embrace where the demand does exist. The current demand for government incentives to create jobs is coming from the unemployed and underemployed who have decided to take matters into their own hands and become entrepreneurs.
These people are taking what they know best – their own skills and ideas – and selling them in local markets to earn incomes that used to come from jobs. Simply put, more and more Americans are launching their own micro businesses as result of frustration with the traditional job market.
Micro businesses, firms launched for less than $35,000 and employing five or fewer people, are so attractive to people out of work because they are often supported by small loans from local community development organizations that also provide ongoing business training and assistance to ensure success.
This is where the demand for government assistance comes in. This population of entrepreneurs is not made up of the small businesses with property, equipment and payrolls, considered small merely because they aren’t corporations. They are individual former wage earners eager for help to sell their products or services as means to make a living.
That help traditionally flows through local Community Development Financial Institutions (CDFIs), organizations specifically charged with assisting entrepreneurs unable to get help from banks or credit unions. Unfortunately, very little CDFI Funds (under the Treasury Dept.) go to small business lending. Over the past 18 months less than $4 million in CDFI awards went to nonprofit small and micro business lenders in California.
Of course, micro businesses aren’t the solution to turning around the national or global economy. But they are solutions for millions of Americans whose incomes disappeared when their jobs did. When politicians speak of ‘pocketbook issues,’ earning an income and providing for a family is at the top of the list. Right now, helping people become self-employed needs to be a pocketbook issue.
If just $1 billion in TARP funding were channeled through the CDFI Fund to nonprofit lenders, about 50,000 businesses would benefit with small amounts of capital. For just $150 million in grants, an estimated 60,000 businesses could get the management assistance they need to be successful and eventually create new jobs. 80% of businesses that receive assistance through a Micro or Small Business Center make it through the start up phase and, on average, create another two jobs in addition to the owner.
There are 24 million micro businesses and self employed people in the US. The potential for new job creation, with just a little bit of assistance, could go a long way of reaching President Obama’s vision for job growth in our economy.

MS. CAMEO GOES TO WASHINGTON, NOVEMBER 2009

After 3 days of intensive advocacy on Capitol Hill as well as DOL, SBA and CDFI Fund, it is fair to say that our government leaders are waking up to the reality that micro businesses are the real job creators in our economy.

Senator Feinstein serves on a Working Committee for job creation and she is open to new ideas, e.g. by fostering self employment through DOL-WIA training funds.

My meeting with Donna Gambrell, Director of CDFI Fund continued the efforts of our members and CRC to promote the needs of small businesses in CA for a fair share of CDFI funding. We discussed how CAMEO was leveraging CDFI dollars by working with banks like Wells Fargo and Rabobank to make more investments in nonprofit lenders, and why we need more loan loss reserves for this purpose. She also agreed to co-host a webinar to help our members improve the quality of our CDFI grant applications. And she agreed to take a look at creating a separate track for grants for small and micro business lending, so we are not competing against the large housing and real estate focused CDFIs.

With SBA’s Chief of Staff, Ana Ma, we discussed ARC and our position that CDFIs could run this program more effectively than the banks. I also advocated for the Women’s Business Centers and the need for WBCs to serve Fresno and Rural North regions. Both the House and Senate Small Business Committees are presenting conflicting positions on future funding for WBCs. We were advised to provide compelling impact data to these committees to support increased funding.

Jane Oates, Assistant Secretary for Dept. of Labor’s Employment & Training Division, told both AEO’s Policy Director, Jenice Jones, and myself that we would need a new statute to change performance measures for self employment training under WIA. We were hoping that a simple policy letter would serve, but now CAMEO is exploring a number of strategies to change the statute and allow funding to flow to micro business training and TA: reauthorization of WIA in 2010, new language in DOL’s budget appropriation, and if President Obama creates a new Jobs Bill, we would seek an amendment of WIA at that time. All of these approaches would take time, which, of course, unemployed people don’t have. Please keep sending us your stories of clients who were unemployed and then successfully started a small business. This will help CAMEO maintain a high profile for our position.

In the meantime, we are securing bi-partisan support from CA members on the Labor & Education committees and building awareness among committee staff. Everyone wants to do something support job creation. Our meetings, along with the urging of Micro Enterprise advocates at the Access to Capital Forum held simultaneously on Nov. 18 (Thanks Connie Evans (AEO), and CAMEO members Eric Weaver and Kurt Chilcott!!!) are driving the message home: Micro Enterprises are California’s Job Generators.

Thanks to Cathy Townsend of Townsend Public Affairs for securing these top level meetings and focusing our message.

Legislature Responds to Calls for Restoration of Loan Guarantee Fund

Members of CAMEO and the Association of Financial Development Corporations took another positive step this week toward restoring the $10 million gutted from the Small Business Loan Guarantee Trust Fund in the budget process. While cuts to every state program need be considered in order to get through these historic budget deficits, certain programs that actually create jobs and generate revenue for the state have to be viewed differently.

Assemblyman Manny Perez and others are working to restore this funding because they understand this connection. In fact, a recent UC Davis study shows that for every dollar invested in small businesses from this fund, two dollars are returned to the state in tax revenue.

CAMEO and other small business advocates continue to push hard for recognition from state policy makers that dollar for dollar, investing state resources in micro businesses is the most efficient way to create jobs and lead California out of recession.

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