The First Lady’s mantra, “Let’s Move,” has spurred families, government agencies, and groups across the nation to move into action and improve the health of our country. As we all work to find our rightful place in this Healthy Foods movement, it’s becoming clear that small businesses will play a vital role in making it possible.

The key to the success of this program is being able to get healthy foods into low-income areas where healthy options are dangerously out of reach. While many Americans enjoy the ability of choosing whether to take carrots or potato chips for lunch, there are millions of Americans who do not have that choice. In a 2009 report to Congress, the U.S. Department of Agriculture (USDA) found that 23.5 million people, including 6.5 million children, live in low-income areas that are more than one a mile from the nearest supermarket. Not surprisingly, low-income communities suffer disproportionately from a number of health problems stemming from poor diets, namely heart disease, diabetes, and obesity.

To improve the food options for these “food deserts,” many are recognizing that it will take a network of small businesses, farmers, truckers, nutrition specialists, and neighborhood coalitions to create a sustainable healthy food system. Small businesses that are either already embedded in these communities, or that are seeking to open up shop, will play an important role—but they will need financing to expand their products to include more nutritious foods.

Having access to funding specifically designated for healthy foods related business will motivate local store owners, business leaders, policymakers, concerned residents and other stakeholders to create some real solutions to solving the grocery gap in their neighborhoods. The $25 million, if approved, will be a modest yet good start. These funds will allow CDFIs to make loans to small businesses that demonstrate that they are doing their part to sustain health and wellness in the most rural and low-wealth parts of the country.

Programs like this will bring a host of economic and social benefits, and start us on a journey to ensure that all communities have healthy, fresh food options.

- by Vicki Lee Parker, Development & Communications Director

The plan has received mixed reviews. Small business advocates seem torn—on the one hand they feel the new streamlined approach will create a “one-stop-shop” for America’s small businesses and make accessing information and assistance much easier. On the other hand, advocates feel that the reorganization may minimize the emphasis placed on small businesses by the federal government, which could lead to an even greater imbalance toward promoting the interests of larger businesses over those of smaller businesses.

However, outside-the-box thinking is what we need to get the American economy back on track. Of course, special care should be taken to ensure that small businesses do not get lost in the shuffle. The proposed 2012 SBA budget includes $3.8 million in subsidies to support $25 million directed in Microloans to small businesses; the remainder of the $27 billion budget for capital support will be targeted at loans to community development, financing for specialized start-ups, and loans to support innovation and high-growth firms. The President’s plan could be an opportunity for more funding to be allocated for small businesses, especially considering there are roughly 23 million self-employed small businesses across America.

A stronger agency that will allow business to find assistance and resources in one central location, rather than having to go from department to department, will help businesses and lenders alike. But for now, having all the information for small businesses in one place is a very helpful start.

-by Ed Timberlake, Small Business Lending Manager

The U. S. Chamber of Commerce stated in a 2010 report, Small Business Access to Capital: Critical for Economic Recovery, that “small firms represent 64 % of net new jobs created over the past fifteen years.” This reinforces the point that providing capital is necessary to sustain small businesses.

While it is without dispute that small businesses are central to the recovery of our economy and traditional lending sources have in the midst of this economic downturn increased lending standards, capital is still available for small businesses. I want to suggest that the problem is not really lack of access to capital but not knowing where capital is available to support small business lending.  Many small businesses look only to traditional lending sources, perhaps never being told about non-traditional lenders such as Community Development Financial Institutions (CDFIs).  There are over 900 across the country and 20 in North Carolina.  For many years,  they have  been successful and productive lenders to small businesses across the state.

The Chamber’s report suggests that any strategy to jump start the economy must have a robust small business development component.  Why, then, is there such little debate around making capital accessible to small businesses?  Not only should this be central to policy development in all segments of government, but also in the lending policies of banks as well.  Instead, banks complain that their purse strings are being tied by bank regulators. Rather than playing the blame game, there should be a cooperative push by the public and private sectors to make sure there is a strong flow of capital to our small businesses in order to help with our economic recovery.  I applaud the CDFI Fund for doing its part to get capital into the hands of those who need it most—since 1996, $69 million in CDFI funding has been awarded to CDFIs in North Carolina alone.  

Success, however, requires a flow of information from all lending sources down to small businesses. If this flow improves, then the flow of capital to small businesses would improve. Let’s allow small businesses to become the driving force for bringing all sectors of our economy back to a place of thriving. Help spread the word about alternative access to capital.

For more about the CDFI fund see http://www.cdfifund.gov/.

 - by Lenwood V. Long, Sr., President/CEO

How much can you afford?
You don’t want to take on a mortgage that is too expensive and end up house poor. Bankrate.com has lots of helpful information, including explanations of terms like ‘debt to income ratio’ and calculators to help estimate how much of a mortgage you can afford given your income. You should also consider any other real estate that you currently own, and assess whether you would be able to afford those in addition to your new house.

You’ve heard it before: location, location, location!
There are many factors that influence the desirability of a location. Consider the property value and make sure the area you’re looking at is not a declining market area. The quality of neighborhood schools is also important. Being in a good school district increases your chances of re-selling the property in the event you move. Other important things to look at: taxes, services, crime rates, transportation, and zoning. If you find a property you like, free property value analysis tools at sites like Zillow or Home Gain are pretty accurate

Get pre-qualified for a loan.
UnderstandingHomeLoans.com lists the three most important reasons to make sure you are pre-qualified:

1. You’ll uncover credit problems
2. You’ll know how much house you can afford
3. Most real estate agents require a pre-qualification letter signed by the lender, along with a purchase contract

Be clear about the price and all other costs—don’t be afraid to ask questions.
When you find your perfect home, work with your agent to negotiate the price. When you’re ready to close the deal, make sure you understand the settlement statement, which details all the funds paid by the buyer and the seller. Request a copy of the settlement statement, review it carefully, and discuss with your agent about who pays the closing cost and any other fees associated with the loan. If anything is unclear, don’t hesitate to clarify.

For more information on home buying, visit http://www.homebuyingtips.net.

The NC Justice Center in early January presented a plan for how North Carolina’s Economic Development Incentive Programs could be leveraged to not only create more jobs, but also better jobs for our economy (available here).  This program would emphasize the creation of jobs that pay a living wage, allowing North Carolina families to meet their most basic needs.  Their plan includes:

1. Attracting and retaining high-growth industries to North Carolina such as manufacturing, boat building, and pharmaceuticals.  An emphasis would be on targeting higher-wage occupations.

2. Increasing the wage standard for all incentive programs to meet the North Carolina Living Income Standard.

3. Enforcing the current performance criteria for incentive deals.

4. Requiring all incentive firms to meet certain wage standards in exchange for the subsidies.

5. Publishing quarterly and annual reports on firm performance in a public, searchable database.

Public reporting and an emphasis on job creation might have led to different results in Maiden, NC, where Apple recently completed a $1 billion data center, as reported by the Washington Post.  According to the report, both the state and the local government awarded Apple huge financial incentives.  However, the facility created just 50 total new full-time jobs and 250 indirect contracting jobs.  “There is not an immediate payback – there’s no doubt about that,” Michelle Bailey of the International Data Corp. said, as quoted by the Washington Post article.  In the future, the economic development programs should make sure incentive dollars are used to create more and better jobs.

- by Sarah Grimme, Development & Policy Associate

1. Have a plan—a real one.  You must have a written business plan for what it is you want to do. It should include the market you plan to serve, a projection of demand with facts to back it up, projections on how much money you plan to make, how much it will cost you to run your business (at least annually), and lastly, but most importantly, what you want the money for!

2. Determine how much money you need to get started, and be prepared with some of your own cash.  Lenders will not give you 100% of what you need.

3. If you are going to set up your business outside the home, have an idea of where you want your business to be, but please don’t sign a lease until you know you can get a business loan.

4. Be willing to be flexible.  You might not get exactly what you ask for.  Have a plan B.

5. Have a secondary method for paying the lender back.  If you have a job, don’t quit it!  At least until you see your business can make it.

6. Make sure you complete the application in its entirety.  A lender will quickly deny you if s/he is buried in paperwork and your application is submitted incompletely.  And guess what— it’s legal!  Lenders can legally deny you just for an incomplete application, regardless of your qualifications.

Good luck!

“Small business” in this case is measured by the SBA definition of “an enterprise with fewer than 500 employees.” However, most of the businesses The Support Center works with are typically much smaller. What about the impact of smaller enterprises on job creation?

As stated by PolitiFact, 85 percent of net new jobs in the first quarter of 2011 were created by businesses with less than 500 employees.  The data also reveal that businesses with fewer than 100 employees created just about 50 percent of jobs in the same quarter, and businesses with fewer than 50 employees created almost a third.

This is a significant percentage, particularly in places where most of the businesses are much smaller than 500 employees.  For example, the SBA’s profile for North Carolina published in February 2011 showed that 86 percent of employer firms in the state have fewer than 20 employees. It also shows that firms with less than 100 employees accounted for 87 percent of net new jobs between 2006 and 2007.

It’s clear that small businesses play an important role in our state and national economy, but it isn’t just a matter of firm size.  As Jared Bernstein explained recently in an OpEd in the New York Times, new small businesses create jobs when they can expand and become larger firms. While Bernstein’s main argument is that the role of small businesses in job creation may be overstated, he still makes an important point: public policy should not abandon small businesses. Given all the hurdles they face, a more nuanced approach to public policy can provide the support that small businesses need to grow and create the jobs this economy needs.

- by Sadaf Knight, Policy & Research Director

In the meantime, here’s a sneak peak…

Bank Transfer Day worked! But… now what?

Bank Transfer Day (November 5) was clearly a win for credit unions. The Credit Union National Association, or CUNA, reports impressive surges in credit union membership, new savings, and loans made on that day. In a Washington Post OpEd this weekend, Fred R. Becker, Jr., President of the National Association of Federal Credit Unions, proudly states that “credit unions are no longer the best kept secret in banking.”

But then he rightly asks, now what? And he raises one particularly important concern:

“This victory will be incomplete without the much-needed access to capital that many of those members who own small businesses critically need.”

Becker discusses legislation to increase the lending cap that currently limits the amount of lending that credit unions can do. Sure, this would help expand access. But what about the intermediary loan funds that are already filling this gap by providing small business loans in underserved communities? The Support Center’s Small Business Revolving Loan Program, for example, has worked with our affiliate Community Development Credit Unions (CDCUs) to make $8.2 million in small business loans that led to over 1,000 jobs being created or retained—all in North Carolina’s most distressed communities.

In response to Becker’s question, any next steps must involve these loan funds and CDCUs. And then we have to ask why—despite programs like ours—access to capital persists as the major barrier for small businesses. We can’t expect a broadly shared economic recovery when many of our communities are lagging behind, facing soaring unemployment and deepening poverty. Expanding access to affordable financing for small businesses in these areas is critical, but what are the real barriers?  For those who can’t get financing through traditional banks, these lending programs are a lifeline. Getting to the bottom of this issue will be crucial to developing policies and programs that will benefit our most vulnerable communities.