As the still fragile U.S. economy cranks out new jobs, with concerns that a jolt from a world event or higher interest rates could spark a slowdown, much of the public and private sectors have ignored the potential of the nation's smallest businesses to help fuel economic growth.
These microbusinesses, enterprises with five or fewer employees, comprise more than 92 percent of U.S. businesses, annually generate $4.8 trillion, and contribute to the employment of more than 41 million people. Yet public policymakers and corporate strategies barely take notice, rarely implementing policies and practices that support these businesses or understanding their power to fuel job creation.
Facilitating growth of the nation's smallest businesses could address one of the underlying problems facing the U.S. economy today, and even more so as a concern in the future: creating good paying jobs for millennials, minorities, and disenfranchised groups, especially as the nation inches towards majority-minority status.
The Economic Policy Institute reports that unemployment for high school (19.5 percent) and college graduates (7.2 percent) remains high, as does underemployment--14.9 percent for recent college graduates and 37 percent for high school graduates. Meanwhile, unemployment for African-Americans has dipped under 10 percent, but is still double the unemployment of whites.
Business ownership can be a route to economic advancement for a wide of variety people, regardless of class, race, gender or ethnicity. In fact, if one in three microbusinesses hired just one additional employee, the U.S. would reach full employment, according to research by the Association for Enterprise Opportunity (AEO), a trade association of mission-driven lenders and organizations that offer support for micro and Main Street business owners.
But many entrepreneurs, underserved business owners in particular, face the daunting task of raising the funds to start and sustain their businesses. It is part of a larger market failure in regards to business lending. Each workday, financial institutions decline 8,000 business loan requests, according to the Treasury Department. However, a new solution has the potential to bring transformational and systemic changes that can expand opportunities for entrepreneurs whose businesses on Main Street and in neighborhoods need access to capital and services, and are often the most challenged in getting them.
AEO has launched its TILT Forward Initiative with a $2.7 million grant from the Sam's Club Giving Program, and assistance from other partners. Utilizing cutting-edge technology, the Initiative connects business owners and entrepreneurs to best-in-class products, competitive interest rates, and capital solutions from a growing network of community and nonprofit lenders, while also simplifying the underwriting process for loans.
During a pilot run over the last year, TILT Forward originated more than $1 million in loans. Jonathan Loor, of Local Battles Entertainment, LLC, in Fort Lee, N.J., says a Tilt Forward loan originated by Intersect Fund "saved" his business. His video gaming parlor needed new chairs for its gamers. Despite being turned down by traditional lenders, the business received a $10,000 loan that allowed the family business to purchase comfortable chairs essential to their operation.
"Our business is extremely unique and considered very high risk, so traditional lenders such as banks are very weary to underwrite a loan to something so unfamiliar," Loor says. "TILT Forward provided a bridge that helped us get to a much-needed place in our business."
Across the country, businesses like Loor's are generating economic activity that will support families, while revitalizing Main Streets and communities.
Entrepreneurs and business owners with successful enterprises are bringing confidence and financial security to families, while inspiring young people by providing urban and rural communities with valuable role models. Boarded up store fronts will become bakeries, dry cleaners, frame shops, and other enterprises that bring much-needed services to communities.
The Initiative is demonstrating that innovative thinkers and good corporate citizens can collaborate to fix a broken support system for the nation's 25.5 million microbusinesses and change the life outcomes for individuals, families, and communities.