If you've been keeping up with recent economic news, here's a familiar statistic: small businesses are responsible for 70 percent of job creation in the U.S.
Through financing small businesses, microloans are an important factor here -- something every American should keep in mind as job growth continues to stall. Last March, FIELD at the Aspen Institute released a study of 240 clients who had received micro-loans and training from 35 groups nationwide between 2002 and 2007. The study found that the average client more than doubled their revenue - from $103,000 to $243,000 - while the average number of employees skyrocketed from 2.1 to 5.6 within five years.
Of course, micro-loans are not a panacea for unemployment and not right for all communities. And despite increased access to capital, businesses can fall short in the absence of the right support and financial education. But with organizations across the industry working ever more closely with borrowers and their local communities, micro-finance has the potential to create lasting change in America, and it's up to us to see it reach its fullest potential.
With each new piece of legislation that comes up, we ask every official to consider its impact on small business owners. And we encourage government support for domestic micro-loan programs, which can be particularly effective and efficient in helping to create jobs. Here's how:
(Pictured in headline: Stephanie Mack's document destruction business provides a steady source of employment for herself and her team of Bronx, NY-based employees.)
If a dollar saved is a dollar earned, than in this economy, a job retained is a job gained. At the most basic level, each microloan provided in the U.S. directly supports a self-employment opportunity. Whether a microloan goes toward a one-person, home-based business or a fully staffed operation that has been around for ten years, each microloan, at the very least, supports the continued employment of the loan recipient.
Many domestic microloans support small business endeavors that are rooted in the community, and geared toward supporting, or directly fueling, further economic activity in that community. For example, ACCION recently granted a loan to a successful beauty salon owner in New York who wanted to expand her services with the opening of a beauty training school. The school, in addition to teaching beauty techniques, will help mostly minority and immigrant women to get the licensing they need to open up their own salons. In San Diego, we recently granted a loan to the owner of a small, bilingual law firm that specializes in helping the members of her low-income community with tax and bankruptcy issues. The loan helped her to hire a marketing consultant, helping the effects of her loan trickle throughout her community. Still other loans have been made to businesses focused exclusively on providing services to other local small businesses, such as marketing and accounting, which are critical to their continued success and growth. (Pictured Above: Berlin, New Hampshire)
Some microloans go directly toward staffing up, or employing other professionals for their services. For example, Justine PETERSEN, a microlending nonprofit based in St. Louis, provided a mere $2,200 loan to a client starting up in the furniture delivery business who needed to cover the upfront costs of getting licensed and leasing his own truck to meet the contract requirements of a major retailer. Because of the loan, he was able to secure the contract, triple his income, and hire an additional delivery person to work full time, with plans to hire one more worker. Opportunity Fund, another microlending nonprofit serving the San Francisco Bay Area, provided $10,000 to a mobile catering business owner to move into a full retail deli location, serving the region’s best local barbecue. The owner invested the $10,000 to pay for the necessary permits and kitchen equipment. Within a month, his Santa Clara barbecue joint was up and running and after just one year, profits soared so that he’s taken on three new employees – one assistant roaster, one cashier, and one delivery person.
As any entrepreneur will tell you, it takes more than just a loan to run a truly successful business with the potential to expand and create employment. You also need business know-how, experience, and savvy. That’s why organizations across the country are focused on providing training and educational opportunities to small business owners in addition to financing. From tools to help clients manage their cash flow and strengthen their personal credit history, to free workshops on how to grow their small business and access to personal advisors, microfinance organizations are leaving no stone unturned when it comes to ensuring that small businesses have everything they need to grow and hire. (Pictured Above: A job training specialist assists a client at Maricopa Workforce Connections in Arizona.)
Our most recent unemployment numbers weren’t pretty, and when you break them down, they look downright ugly. In November, unemployment was 8.9 percent among white workers, while 16 percent and 13.2 percent of African American and Hispanic workers, respectively, were left jobless. It’s not coincidental that the communities disproportionately hit by unemployment are the same communities that lack access to adequate financial services. Roughly 21 million households in the U.S. are “underbanked,” meaning they have limited or sporadic access to mainstream financial services, including loans, according to recent research from the Federal Deposit Insurance Corp., or FDIC. Fourteen percent of this community is white, while 31 percent is African American and 24 percent is Hispanic. Microlenders are known for working very effectively in these minority and immigrant communities. By targeting these underserved communities with loans and financial education services, they’re helping to combat unemployment in the communities that need jobs most. (Pictured Above: Day-laborers in search of employment in Miami.)