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Despite Obama’s words of support of small business, experts say some aren’t relying on government, but more and more on community groups and micro-lenders. That’s what Making Contact correspondent Li Miao Lovett found, talking to micro-entrepreneurs in the San Francisco Bay Area.
This segment is part of a 29-minute audio program titled How We Survive: Getting Creative About Jobs.
LOVETT: At this farmer’s market in the foggy southern tip of San Francisco, a girl band entertains the lunch crowd, while vendors sell everything from heirloom tomatoes to ethnic food. One booth has a line of customers for pulled-pork sandwiches and tacos.
(Sounds of grill)
Voice at Good Foods booth: “Folks have any questions on the menu here?”
LOVETT: That’s Dontaye Ball. He prepares the pulled pork in a 3-day braising and smoking process. He’s a San Francisco native who grew up on farmers market food. Several years ago, at the age of 19, he ventured onto the streets with his sandwiches.
Ball: “I sold two sandwiches and three minutes later I had a line outside, and the local bar owner was like, ‘When are you coming back?’”
LOVETT: At the same time, Ball continued to work at restaurants, honing his cooking skills. He took the leap to start Good Foods Catering in May 2009, right before the engines of financial lending had ground to a halt.
Ball: “I have so much creativity and so many ideas that they need to be pushed out…people need to have them. So I was like, I’m definitely going the business route.” “Recession to me means opportunity. It means opportunity for smaller micropurveyors.”
LOVETT: Amidst the bustle of activity here on a Sunday morning, you wouldn’t know that the country has been in a recession, with almost 7 ½ million jobs lost. While unemployment ranks have swelled, some have turned to generating income on their own, by starting small businesses that may or may not be on the radar. California is the leading state in microenterprise – businesses employing less than 5 people.
Defying the naysayers, entrepreneurs like Ball have persisted despite the tide of bad economic news. Robyn Fountain is program coordinator at Renaissance Entrepreneurship Center, where she has coached Ball in managing his business.
Fountain: That…mobile aspect to his business has enabled him to be successful in this economy where it doesn’t – sort of – work very well to open up a brick-and-mortar business.
LOVETT: Ball needed a formal office for meetings as well as help with bookkeeping. That’s where Renaissance provided the resources. Since launching his catering business, Ball has had to obtain permits for each of the 4 farmer’s markets where he operates, and comply with city ordinances and laws for handling food.
(sound of cars passing in Bayview Hunters Point neighborhood)
LOVETT: Fountain works with residents of Bayview Hunters Point, a community of mostly African American and low-income folks. Lots of people here don’t have access to credit, or lack the credit scores and business experience required for a traditional bank loan. While Dontaye Ball might be a born businessman, Fountain says many people have turned to entrepreneurship since the downturn in the economy. In the last two years, she’s seen a doubling in the number of clients served by Renaissance.
Fountain: “One of the things that’s happening in this recession is that large banks are not lending credit anymore, which I think… is disproportionately affecting small business owners, and one of the things we do is help business owners identify where they need access to credit and-sort of create relationships with them and bankers, and specifically community development lenders, ‘cause that’s a big piece.”
LOVETT: On a sunny Thursday, Fountain meets with Tamika Edwards, a new client with plans to grow her online crafting supplies business. She hands Fountain a business plan.
(People talking: “The reason I wanted to come back today was to get your feedback on my plan…So tell me about your business…”)
LOVETT: Tamika Edwards is a Bayview native with a wealth of business ideas, but not much access to capital. When she lost her job at a large crafting supplies store, Edwards decided to start her own online venture. She’s considering a microloan for the $30,000 she needs to build inventory and grow her business. Edwards says the support from Renaissance will help take her business to the next level.
Edwards: “It takes a village. You can’t do anything by yourself. I’m really happy that there’s opportunities like this not only in the Bayview but in San Francisco.”
LOVETT: Bayview residents like Edwards and Ball have defied the challenges afflicting their neighbors in a community that has been marginalized, according to Robyn Fountain.
Fountain: “If you don’t have education or you’ve been in prison, it’s like nearly impossible to have access to formal employment, specifically the kind of formal employment that would enable you to support a family. So a lot of the time, entrepreneurship is the only way for people to sort of lift themselves out of poverty.”
LOVETT: Small businesses are vital for generating employment in the community. Renaissance Entrepreneurship Center found that on average, three jobs were created by each business they assisted, in addition to full-time employment for the owner.
Nonprofits aren’t the only ones trying to give a leg up to small businesses in this economy. Through the Small Business Association, or SBA, the federal government offers ARC loans as part of the stimulus dollars to business owners in trouble. But Fountain says that the program hasn’t been as attainable as her clients think.
Fountain: “Clients come in and they say, ‘The Obama administration is giving thousands of dollars to business owners,’ and it’s like, not really (laugh)…the SBA decided these things are so special that we have these ridiculous requirements that nobody can meet, so nobody has access to those ARC loans, unfortunately.”
LOVETT: While the ARC loans are modest, microenterprises don’t usually meet the criteria. Small businesses seeking ARC loans must have posted profits and then suffered a setback.
While Renaissance provides support and resources for start-ups, they don’t provide capital. They refer out microlenders, known as community development financial institutions or CDFI’s.
(sound of streetcar on Market Street)
LOVETT: Eric Weaver, CEO of Opportunity Fund, heads up one of the leading CDFI’s in the U.S. He started Opportunity Fund in 1992, when the Clinton administration began to enforce a law encouraging banks to make loans in redlined communities. Weaver saw a chance to reach out to the underserved; that’s why, as a microlender, they take character into account, not just a credit score.
Weaver: “In general you’re often going to find a reluctance to engage with traditional financial institutions which could have to do with…immigration status, language barriers, past experience that have been humiliating.. We want to provide opportunity for people who deserve it and haven’t had it, and we think that’s wrong.”
LOVETT: Since the economic crisis put a freeze on credit, even bankable entrepreneurs have been denied loans. In 2009, Kiva, a key player in microlending abroad, started supporting small business in the U.S. They partnered with Opportunity Fund and another CDFI, Accion USA.
Weaver: “We didn’t know anything about international microfinance but we just started doing it and we had the same experience as the people that were doing it overseas. The money got paid back, by and large about a 90% repayment rate, and people’s lives improved.”
LOVETT: Many of the businesses financed by Opportunity Fund provide basic services to their communities: they’re truckers, housecleaners, and caterers, providers of health care and childcare. It’s not the sexy high-tech industry associated with the San Francisco Bay Area, but these businesses play a vital role.
Weaver: “You can’t have engineers inventing new software or faster chips if they don’t have a place for their children while they work.”
LOVETT: Weaver says these businesses are the backbone of the economy. And their backers, such as Opportunity Fund, are scaling up their microlending to meet the increased demand. Dontaye Ball recalls President Obama’s focus on small business in his speeches.
Ball: “He talked about small business owners and how if the country was to get out the recession and turn around, it’s up to us to really push that. This country is founded on small business.”
LOVETT: It’s risky to start a small business in these times, and not everyone will see their business grow as Ball has. And yet, the support for microenterprise that we’re seeing on the local level has tremendous impacts on the health of the U.S. economy as a whole. For MAKING CONTACT, I’m Li Miao Lovett.