Small Business and Community Developers: A Primer

1. Small Business and Community Developers: A Primer 2011 2nd Fellowship Workshop: “Understanding How to Make Community Development Happen”, Kansas City, MO

2. Conversational Outline • Context of CDC and CBO • Federal Policy • Targeting Small Businesses • Systems of Support • Determining Your Role • Community Development Finance Institutions (CDFI)

3. Context • CDC’s and CBO’s around the country, especially in low income communities, both rural and urban, are often asked to undertake a wide variety of activities. • Moving from Social Services to Housing and Beyond! • Wealth building in low income communities is built aroundhelping people develop some type of asset. • CDC’s display Ingenuityand creativityto create and retain jobs in local economies. • From revitalizing commercial corridors, to providing training and technical assistance, non-profits play a key role in catalyzing small business development.

4. Federal Policy • History of CDC • Economic Development: Past, Present, and Future • TELACU • FIERRA & TARP • Most focus on housing • Future trends in Economic Development • Entrepreneurship as a catalyst for economic recovery

5. The Big Picture:Targeting Entrepreneurs and Small Businesses 1. Information and Referral Services to existing programs 2. Community Education and Training for new or emerging businesses 3. Microlending/Small Business Lending Support 4. Support of Physical Redevelopment Efforts 5. Creation of Venture Funds

6. Targeting EntprepreneursandSmall Businesses • Definitions • Small Business • Mircrolending • Venture Capital • Community Development Finance Institutions (CDFI) • Other Definitions (?)

7. Supporting Economic Development • Large scale development reserved for economic development agencies. • Typically publicly funded • Example: Municipal economic development department • Small Business Administration • Funds local small business development centers • Business planning, marketing and packaging services to small businesses • NALCAB Example: VEDC

8. What is the best role to take? • Consider the following to determine your role: • Existing staff capacity of the organization. • Is there a demand for a specific type of service? • Does the organization have the resources to undertake this role absent any committed sources? • How does this tie in to mission?

9. All things considered • Support for training and technical assistance in grants is very competitive • Limited Grant Funds to do business • CDBG/SBA • USDA Microlending • EDA Programs • Will your organization want to link in to a local community development finance institution (CDFI) to access dollars for loans to small businesses? • Is there a gap in access to capital and other resources that can be documented?

10. Introduction to CDFI’s • Best known capital providers are microfinance lenders. • Who is a microlender? • CDFI’s can be pivotal to a local economy by working in partnership with local banks to qualify small businesses they are assisting to meet underwriting of larger lenders • Through partnerships CDFI’s leverage their capital by spreading the risk • Often a CDFI partners are also investors into their loan funds, acknowledging that CDFI’s provide higher risk capital

11. Non-profits, capital and small business • CDFI’s • Determine their lending parameters and target market • Some CDFI’s are primarily small business lenders • Most CDFI’s lend for housing and or facilities

12. Key Considerations when thinking CDFI • Is your organizational house in order? • What type of capacity will you need to have or attract to be a viable CDFI? • Is your organization credible with a track record of working with small businesses? • Are there investors in your local community willing to capitalize your loan fund? • What types of loans are most needed in your market?

13. Key Considerations when thinking CDFI • Do you want to lend to other non-profits? • Who is your competition in the area you work in? • What gaps in the local capital markets will your organization be filling? • Do key banks and public agencies want to work with you?

14. Take Aways • Questions?