Sorry America, But 10 Million Businesses That Can’t Get Loans Isn’t “Normal”
So, word on the street is 90 percent of economic forecasters report that the recession will come to a grinding halt by the close of 2009. That’s good news for consumers, business owners, and ACCION USA’s microentrepreneurs—the group most dear to this blogger’s heart.
For American microbusinesses, the glass has always been half empty
But frankly, these were not the first thoughts that crossed my mind when I heard the news. My immediate reaction was one of panic–with the economic gloom almost over, what am I going to have to blog about? Credit will be more plentiful, increased consumer spending will mean less of a struggle for ACCION USA’s clients, and things will go back to normal—all boring topics, in my glass-is-half-empty opinion.
But “back to normal” is the catch. I had to remind myself that even before the recession hit, a significant segment of businesses lacked access to sufficient capital for reasons that had nothing to do with the credit crisis. Small loan requests, insufficient credit histories, and short lengths of time in business have always been challenges for microentrepreneurs.
According to my favorite statistical source, AEO, there were over 10 million small business owners that could not access small business loans even before the economic crisis. If that continues to be the norm, our nation’s small businesses are still in it for the long haul.
So, the moral of my story is that recession or not, business owners still lack capital and I’ll rest easy knowing that I’ll still have sufficient microfinance blog fodder. I hope that one day, neither will be true.
Matriculation and Microfinance at Bentley, Harvard Universities
Microfinance programs are popping up at colleges and universities around the U.S.
At most U.S. institutions of higher learning there are long-standing traditions of community service. Today, growing needs among the economically disadvantaged, coupled with President Obama’s signing of a $5.7 billion national service bill last month, has made volunteerism as prominent as it was back when Jefferson Airplane sang of its virtues. (President Obama has even proposed creating a $4,000 tuition tax credit for college students who perform 100 hours of community service.)
In particular, microfinance is fast becoming a hot area for student philanthropy, with microfinance clubs springing up at many colleges and universities around the country. A piece on Boston NPR affiliate WBUR this week provides yet another case in point. The story covers a group of students at Bentley University whose microfinance class grew into the idea to launch a microloan program for local entrepreneurs. (The story was also picked up by our friends over at the Change.org blog.)
These enterprising students add Bentley to a growing list of schools with budding microfinance programs. At Harvard University a group of students founded the Cambridge Microfinance Initiative (CMI) to provide technical assistance to microentrepreneurs in Cambridge, Mass. Unlike the Bentley group, which has chosen to fundraise for loan capital from alumni and parents, the CMI focuses on education and technical assistance to emerging microentrepreneurs. The CMI helps clients who need capital access loans from the ACCION USA loan fund. (Read the Boston Globe’s story on the CMI, which includes a profile of ACCION USA client Nasrin Imam, who reached us via the CMI).
Are you a student group interested in creating a microfinance program at your school? Contact ACCION USA and let us know. We can help you get started with small business training materials, as well as information how you can help microentrepreneurs in your community access microloans up to $50,000 via our Internet loan program.
You’d Never Guess (or Would You?)
Which state is number one in entrepreneurship in the nation? That’s right: our very own state of Georgia. I, too, was surprised to learn of the findings of the Kauffman Foundation’s 2008 Index of Entrepreneurial Activity, released earlier this month. Georgia ranks first, with 580 entrepreneurs per 100,000 adults, and our capital Atlanta tops U.S. metropolitan cities with 740 per 100,000 adults!
Home to more than just peaches, Georgia ranks first in entrepreneurs per capita.
Then again it should not have been a surprise given that working at ACCION USA we come in daily contact with many budding and seasoned entrepreneurs. So we like to think that we had something to do with Georgia’s ranking. Last year, ACCION USA Georgia alone helped 134 entrepreneurs with $751,082 in loans. Interestingly, Massachusetts and New York, where two of the other ACCION USA offices operate, follow in the third and fourth spot. Impressive, right? And there’s good news throughout the country, with all regions showing an increase in entrepreneurial activity from 2007 to 2008. With our Internet lending we reach out and help entrepreneurs all over the nation, so “yay” to us ACCIONistas (and goes without saying our many colleagues and partners in the microfinance field).
Kudos also go to the small business owners: the Index reports that it is the smallest businesses just like our clients (a good percentage of which are immigrant-owned) that drive this trend. Larger businesses, on the other hand, show a decline in entrepreneurial activity, which is not surprising given the current state of our economy. Small businesses come to the rescue, yet again, and tackle recession by creating jobs and increasing prospects for their families, employees and communities. This just goes to prove that ACCION USA’s mission is right on target. So the next time you come across an entrepreneur who is looking for help with starting or growing a business, send him/her our way; chances are there is one right around the corner.
As for us down South, that person is probably sitting right next to you. So if the rest of you still think the South is laid back – a common (mis)perception – think again all y’all. Come visit Georgia, the state of entrepreneurs (oh, yes, and peaches too).
Tags: accion, accion usa, accion usa georgia, atlanta, entrepreneurs, entrepreneurship, georgia, kauffman foundation, small businesses
Credit Card Accountability Now!
One day, 4 years ago
I receive a pre-approved credit card offer. <cue excited squeal> My 20 year old self had never signed up for a credit card before so I call the phone number on the letter. I speak with a very nice customer service person. He explains that for the first 3 months I would have 0% APR on purchases and balance transfers. After 3 months I would pay interest on purchases, but I wouldn’t have to pay interest on balance transfers for 6 months. Awesome! I ask some more questions that I’d prepared, and it looks like I have all the relevant information. So I sign up for the card, use it to pay some bills, and transfer $500 to have some just-in-case cash since I won’t have to pay interest for 6 months. Brilliant, right?
**** Fast forward 3 months ****
I’ve only purchased $75 with my card because I know if I don’t want to accrue interest I need to pay this down before my statement comes (electronically to save paper, of course). I pay the $75, but the statement has accrued interest. WHAT!? There must be a mistake, so I call customer service. Another very nice customer service person tells me that my payments pay down the balance transfer first and then card purchases. WHAT!? You have got to be kidding… but he’s not. Awesome. I didn’t even know to ask that question. What a nasty trick! Why hadn’t the first customer service person made this clear to me? Does this happen to other people? Am I just incompetent? I feel angry, hurt, and duped. I pay back all the balance transfer and the purchase amounts, and sit down with a pint of ice cream…
******************************************
What do we want? Credit Card Accountability and Disclosure!
But first a message from my favorite fake news pundit
The Credit Card Accountability and Disclosure Act (CARD Act) aims to:
- Prevent Unfair Increases in Interest Rates and Changes in Terms
- Prohibit Exorbitant and Unnecessary Fees
- Require Fairness in Application and Timing of Card Payments
- Protect the Rights of Financially Responsible Credit Card Users
- Provide Enhanced Disclosures of Card Terms and Conditions
- Strengthen Oversight of Credit Card Industry Practices
- Ensure Adequate Safeguards for Young People
- Enhance Penalties for Non-Compliant Credit Card Companies
- Provide Gift Card Protections
- Encourage Transparency in Credit Card Pricing
- From US Senate Committee on Banking, Housing & Urban Affairs
A more detailed, but very reader-friendly explanation of the bill can be found here.
The CARD Act would have protected me in various ways.
- As a 20 year old, a person over 21 would have to provide a signature for the card.
- I may not have even received that offer by mail because the bill would restrict pre-approval offers to those under 21.
- Payments would first be applied to the credit card amount with the highest interest rate.
- Terms of the credit card would be disclosed in plain written language and in plain sight.
Small business lifeline…
Many small business owners put business debt on their personal credit cards. Not only does this mean an APR of up to 30% on their debt and the potential for sudden, baseless terms changes, but it also can hurt their ability to access other business working capital. Lending institutions, banks, SBAs, and even ACCION USA, look at credit reports to process loan applications. A person with business credit card debt of $65,000 (which I’ve seen before) probably has a low percentage of available credit and already has a big monthly payment (whose terms could change any day). Plus, after you spend over 35% of the cards limit your credit score starts decreasing. Oy gevault!
Help is on the way
These are some great tips gems of advice
Credit Card Tips in a Recession
Also important
Make your voice heard in the Senate! Go here to add your name to the petition of people supporting the CARD Act. Or contact your senator directly. Find your senator here. If you want me to email you a letter to send to your senator leave a comment (I’ll see your email address on the back end so you don’t have to write it in the comment) and I’ll send you one. Couldn’t be easier.
Let’s show those credit card companies what we’re made of!
Tags: CARD Act, Colbert, credit cards, small business
Microfinance Leader Headed to Obama Administration
María Otero, President & CEO of ACCION International and Director, ACCION USA
Congratulations to ACCION International President and CEO and ACCION USA director María Otero. Yesterday President Barack Obama announced his intention to nominate Ms. Otero for the position of Under Secretary of Global Affairs in the U.S. Department of State. In this role she will oversee a wide variety of global issues, from democracy and human rights to population and the environment.
During her long tenure at ACCION, Ms. Otero has been a tireless advocate for microfinance in the United States (to say nothing of her critical role in ACCION International’s global expansion). Since taking over the leadership of ACCION International nearly a decade ago, the U.S. ACCION Network’s active portfolio has grown more than ten-fold (from less than $4 million in 1999 to now over $40 million).
Please join us in wishing Ms. Otero well as she begins the transition into this new role.
Tough Economy, Tough Questions
For all that missed this week’s New York Magazine cover story, Gotham residents are wondering what’s to become of them now that the flow of money in the city has become more like a trickle. Will their marriage survive economy-induced stress? Is now actually the time to buy? In these times, the only thing that’s certain, is well – uncertainty.
However, thanks to an announcement by the Mayor Bloomberg’s office today, fewer New York City small business owners will have to ponder the possibilities. The New York State Economic Development Corporation and ACCION USA are making small business loans more readily available to local entrepreneurs via a reduced-fee loan fund. Read: More New York City small businesses will have the funds they need to hire employees, survive the economy, and even increase taxable city revenue.
That’s good news for both ACCION USA, who gets funding dollars to continue lending, and area small businesses, which get easier access to essential capital. While the partnership won’t answer all of the city’s questions, business owners that take advantage of the small business loans offered won’t have to wonder if they’ll meet payroll this month, or be able to build that new Website they planned.
Now, can anyone answer MY burning recession question…where can I find a good “economic stimulus” shoe sale?
Looking for Some Inspiration?
If you need some energy or inspiration I can recommend one women who may provide that- Congresswomen Nydia Velasquez. She is a fierce and energetic woman who is completely dedicated to supporting small businesses.
This week at Brooklyn Borough Hall Velasquez opened a panel discussion about the current economic stimulus package and what has been implemented to help small business in America. The panel included CFO Paul Quintero of ACCION USA.
Quintero spoke warmly about AUSA’s commitment to its communities and the importance of collaboration within the industry. Velasquez resounded with extreme vigor and honesty about the role of government in helping small businesses. She talked about the importance of supporting institutions like AUSA, before leaving to attend a similar rally in Manhattan.
After the panel spoke, there was a short discussion and later entrepreneurs from diverse industries mingled to share ideas and learn more. I watched as Glamis Haro, an AUSA loan consultant representing Brooklyn listened to the challenges, hopes, and concerns of each individual and spoke wholeheartedly to them about their options for attaining capital through ACCION USA.
As I was leaving, in walked Velasquez again! She had finished her delivery at the other small business rally and was anxious to be in the crowd talking to entrepreneurs in Brooklyn. A young woman came running to give her a warm embrace and many other entrepreneurs gathered as the congresswomen lent an open ear. Velasquez, along with AUSA, understands that by supporting small businesses you are supporting something much larger.
Check out the video to see both the commitment and dedication conveyed by Velasquez and Quintero.
ACCION USA and Nydia Velasquez from Erica Dorn on Vimeo.
Tags: accio nyc, accion, accion usa, erica dorn, microfinance, microloans, nydia velasquez, paul quintero, small business, us microfinance
The Times They Are a- (slowly) Changin’
I recently attended a meeting on the FDIC Survey of Banks’ Efforts to Serve the Unbanked and Underbanked. It was hosted by the Boston Alliance for Economic Inclusion, and was being presented by the FDIC.
Now you could ask why the FDIC isn’t surveying the unbanked and underbanked on what services they’re lacking; I’ll address that monumental job in a moment…
The fact that the FDIC is concerned about this segment of the population is good, the fact that a bit over 50% of banks surveyed actually responded, is really good. As Bob Dylan would say “The Times They Are a-Changin.”
So what did I learn at the meeting?
- Many banks offer basic financial education materials, but few participate in the types of outreach efforts that are viewed by the industry as most effective to attract unbanked and underbanked individuals as long-term customers.
- Most banks offer basic checking accounts to all customers, but few offer deposit, payment, credit, and electronically-based products that address the unique needs of these particular customers.
- Banks are concerned about the profitability of doing business with unbanked and underbanked individuals, according to the survey they cite “perceived regulatory issues related to anti-money laundering laws and regulations.”
But the good news is…
- Many are incorporating outreach and financial education into their customer service, sometimes even holding workshops right inside the bank.
- Individual Development Accounts, credit rebuilder programs and Second Chance Checking accounts are being offered on a more regular and widespread basis. Second Chance Checking accounts are important to people who have negative banking records as reported by bureaus like ChexSystems; which banks use the same way a credit card company would use Equifax.
- Some banks are even offering check cashing services to non-customers in an attempt to undercut and take business away from predatory check cashing establishments.
- Banks are incorporating bilingual employees and making their environments less casual in order to attract immigrants and other people who may feel intimidated by the traditional formal bank environment.
In 2009 the Census Bureau will be asking communities in large urban areas how well they’re being served by their neighborhood banks. Microfinance institutions like ACCION USA will be able to use the data collected to better serve communities throughout the United States. While many banks in the US are still learning how to reach out to these communities it’s good to see that they’re incorporating some of AUSA’s practices, like making financial education part of customer service, offering credit builder products, and hiring staff that speaks their language.
Like Bob said “The Times They Are a-Changin.”
ACCION USA Celebrates El Barrio
This just in from Ashley Wessier in ACCION USA’s New York office:
“May 5th proved to be a great day for both ACCION USA and our client, La Fonda Boricua. Mayor Bloomberg paid a visit to East Harlem in the afternoon to recognize the spirit and relentless support which the Ayala brothers have shown the local community through their family business, La Fonda Boricua Restaurant and Lounge—a level of recognition which was long overdue for the Ayala brothers.
ACCION USA Celebrates El Barrio from Erica Dorn on Vimeo.
At 7PM, the “ACCION USA Celebrates El Barrio” event kicked off, welcoming Microfinance Council members, New York Advisory Board members, ACCION USA staff, and many good friends. As usual, the Ayala brothers were incredibly hospitable, personally thanking everyone for coming, inviting their best house band, and even extending the open bar for an extra half-hour.
Council Member David Yassky made a guest appearance early on in the night to stand up and share several kind and encouraging words about the work ACCION USA is doing in New York City. One thought of his stood out in my mind which I think is worth sharing: ACCION USA has only just begun to make a significant impact within our communities, and we are set to make an even greater impression on this city in the years to come.
Thanks to the two professional dance instructors who generously volunteered to accompany the band, most of our guests left their comfort zones (the bar) to enter the dance floor. Despite their initial reluctance to take part, it was obvious they were all enjoying themselves, as every one of them (myself included) were recorded and fed to the four flat screen TVs displayed throughout the bar.
Needless to say, the event was a great success due to the tireless efforts of Jessica Royston, Lucy Villar, and Nathalie Walton from the Microfinance Council. We raised a considerable amount for ACCION USA, but most importantly, we won (once again) the continued support and respect of some of our most loyal ACCION USA friends. Thank you again to all those who joined us last night.”
A Bustling Boston Brewery Sees Dynamic Speed Coaching
Sixty entrepreneurs gathered to take part in a unique and exciting Business Speed Coaching event held at the Samuel Adams Brewery in Boston, Massachusetts on April 14, 2009. The session was part of the Samuel Adams Brewing the American Dream program, launched by The Boston Beer Company in partnership with ACCION USA in June 2008. The program provides entrepreneurs in the food, beverage and hospitality industries with the tools their businesses need to grow and succeed.
To date, the program has provided more than 30 loans, preserving or creating over 200 jobs! The Boston Beer Co. and ACCION USA are also committed to offering education and networking venues for entrepreneurs. Over 150 business owners have taken part thus far in seminars or speed-coaching workshops.
The speed coaching kicked off with a networking event catered by the owner of a local specialty grocery store and café, City Feed & Supply, a beneficiary of the Brewing the American Dream program. Jim Koch, founder and CEO of the Boston Beer Co. offered an inspiring welcome to the business owners present, sharing the story of his beginnings as a microentrepreur.
A session at the ACCION USA/Sam Adams Brewing the American Dream speed coaching event.
Participants jumped on the opportunity to rotate through 20-minute stations with the 26 coaches — many of them Sam Adams employees — to get practical advice and guidance in the areas of business consulting, marketing, financing, legal advice and more. For many, the highlight of the event was having the opportunity to listen to the valuable insights of individuals like Jim Koch or Carol Coutrier, the president of the Massachusetts Specialty Foods Association. Coaches were described as ‘very validating and supportive’. As one participant said, ‘the event was wonderful as the coaches helped to crystallize a few major points we (owners of business) need to focus on.’
Enthusiasm continued to circulate as the speed coaching neared its end. In the words of participants, the night proved both ‘encouraging and insightful’. The extraordinary turnout, dedication of the coaches and positive feedback were a great confirmation of Brewing the American Dream’s success in providing the much-needed support to ensure that small businesses can thrive in the midst of today’s many challenges.
In an effort to extend the opportunity to participate in speed coaching to microentrepreneurs outside of Greater Boston, ACCION USA and Samuel Adams will be hosting the next event in Providence, RI at the end of June. Watch for a date to be posted on ACCION USA’s workshop calendar.