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Popularity of SBA 7(a) Loans

Our colleague from the SBA, Patrick Kelley has moved on to a new position. He partnered with Brayden McCarthy of Fundera to write an op-ed in The American Banker about raising the cap for the SBA 7(a) program, which was raised this week. The article had some interesting thoughts on why the program is so popular.

  1. Non-SBA bank lending is broken.

About 80% of small-business owners who apply for a non-SBA bank loan get rejected. It’s tempting to think that this is merely a knock-on effect of the financial crisis. But while there’s no question that the crash is partly responsible for the 10% decline in small-business lending compared to the pre-crisis boom, that’s not the whole story. The fall is part of a decades-long shift: in the 1980s, small-business loans made up about half of banks’ total loans. Today, they account for less than 30%.

A number of factors have led banks to pull back from small-business lending, including the loans’ higher transaction costs and the difficulty of assessing creditworthiness in a standardized, scalable manner.

Banks have increasingly turned to the SBA guarantee to take risk off the table. That is particularly true for borrowers seeking longer-term loans. An estimated 30% of all loans with a maturity in excess of three years are supported by an SBA guarantee, according to our analysis of call report data from the Federal Deposit Insurance Corp. SBA lending is also a boon for borrowers situated in higher-risk sectors who otherwise might not be eligible for bank financing, such as people in the restaurant and construction businesses. SBA loans are also three to five times more likely to go to minority-owned businesses and five times more likely to go to young firms, according to the Urban Institute.

  1. Technology has made SBA lending more efficient.

Myriad operational improvements introduced by SBA since 2009 are bearing fruit. Reduced or eliminated fees and higher loan limits have helped spur lending, as have efforts to cut paperwork, automate processes and let banks use more of their own underwriting models to decision loans. Going forward, technology is the real fulcrum of SBA’s modernization efforts. According to the SBA, the online lending platform SBA One in particular will reduce loan processing times for average SBA loans by 64%. This means that for some SBA products, processing times will fall from 100 business hours to a little over 24 business hours.

  1. Higher capital requirements have pushed banks toward the SBA guarantee.

Greater regulatory vigilance and new capital requirements looming under Basel III have made banks more averse to risky loans, making the SBA guarantee even more attractive.

Under traditional commercial lending methods, a lender funds 100% of its loans and includes the loan in full in its risk-based asset calculations. However, banks fund 100% of SBA loans but include only the unguaranteed portion of the loan, which can run from 15% to 25%, in their calculations. That alone can dramatically improve a bank’s capital ratios.

  1. Secondary markets for small-business loans are heating up.

Resurgent secondary markets have also spurred banks’ 7(a) lending. A sizable secondary market for small-business loans doesn’t exist outside of SBA lending, which makes non-SBA loans both more costly for banks and less desirable.

Secondary markets took a big hit during the financial crisis, with unit volume falling 40% in 2009, according to SBA data. But last year roughly 30% of 7(a) loans were sold on the secondary market, according to the SBA. This has helped lenders grow profits more rapidly while preserving strong capital ratios and a conservative balance sheet. It also provides quick returns for banks looking for fee income generation and incremental yield.. In fact, secondary markets are willing to pay average market premiums on guaranteed portions of SBA loans of 10%-15% of the loan’s face value.

  1. The SBA’s other lending program is underutilized.

Strength in 7(a) volume is also due to weakness in the SBA’s other flagship loan program, 504 loans. Lenders only minimally support this program. In 2014, for example, 56% of lenders made only one 504 loan, while 74% made two loans or less in that category. Rather, lenders are turning to the 7(a) program to make commercial real estate loans, which constitute 40% of all 7(a) volume — precisely the kind of loans that 504 was created to support.

Given rising commercial real estate values and a looming rate hike by the Fed, Congress and lenders must grapple with the question of why 504 loans are underutilized.

Part of the reason is that 504 is a fixed-rate product. In a low-rate environment with a rate hike imminent, that’s less attractive. But the crucial reason is that the economics of 504 loans are generally less favorable for banks.

Because banks cannot sell their 504 loans in secondary markets, they hold them on balance sheets, undermining capital ratios. We estimate that these economics produce a risk-adjusted return on capital of roughly 6% for a $1 million 504 loan, versus 41% for a similarly-sized 7(a) loan sold into the secondary market. Congress ought to insist that the private sector establish a secondary market for 504 loans, which would spur 504 loan volume and address liquidity and capital needs of community banks.

Absent SBA loan options, millions of small businesses would have little alternative but to max out personal and business credit cards or borrow at much more expensive rates with online alternative lenders, some of which carry interest rates reaching the triple digits. Further delays to raising the 7(a) lending limit risk removing a vital, low-cost lifeline upon which small businesses depend to finance expansion and hiring. Lawmakers ought to raise the 7(a) lending limit in short order.

Brayden McCarthy is head of policy and advocacy at Fundera and was formerly senior economic policy advisor in the Obama White House and SBA. Patrick Kelley is a vice president at Live Oak Bank and was previously deputy chief of staff at SBA. Follow them on Twitter at @btmccarthy and @jpatrickkelley.

California Competes Tax Credit Workshops

GO-Biz is Holding Statewide California Competes Tax Credit Workshops

The Governor’s Office of Business and Economic Development (GO-Biz) is holding a series of California Competes Tax Credit technical assistance workshops throughout the state:

Sacramento, CA
Tuesday July 14, 2015
Details and Registration

Visalia, CA
Thursday July 16, 2015
Details and Registration

Fresno, CA
Thursday July 16, 2015
Details and Registration

Vacaville, CA
Monday July 20, 2015
Details and Registration

Santa Rosa, CA
Monday July 20, 2015
Details and Registration

Pittsburg, CA
Tuesday July 21, 2015
Details and Registration

Seaside, CA
Wednesday July 22, 2015
Details and Registration

Santa Cruz, CA
Wednesday July 22, 2015
Details and Registration

Santa Paula, CA
Thursday July 23, 2015
Details and Registration

Atwater, CA
Friday July 24, 2015
Details and Registration

Murrieta, CA
Friday July 24, 2015
Details and Registration

Vernon, CA
Monday July 27, 2015
Details and Registration

Camarillo, CA
Tuesday July 28, 2015
Details and Registration

Lancaster, CA
Tuesday July 28, 2015
Details and Registration

Torrance, CA
Wednesday July 29, 2015
Details and Registration

Redlands, CA
Wednesday July 29, 2015
Details and Registration

Cathedral City, CA
Thursday July 30, 2015
Details and Registration

Rialto, CA
Thursday July 30, 2015
Details and Registration

Tustin, CA
Friday July 31, 2015
Details and Registration

San Diego, CA
Friday July 31, 2015
Details and Registration

Ceres, CA
Thursday August 6, 2015
Details and Registration

Watsonville, CA
Thursday August 6, 2015
Details and Registration

Bakersfield, CA
Friday August 7, 2015
Details and Registration

Online Webinar
Monday August 10, 2015
Details and Registration

The California Competes Tax Credit was created by Governor Brown and is focused on helping businesses grow and stay in California. In the 2014-15 fiscal year, GO-Biz allocated approximately $150 million to 212 companies that are projected to create over 29,400 jobs and make over $7.1 billion in investments. Companies interested in applying for California Competes tax credits can apply during the next application round which begins July 20. Applicants complete a free, user friendly application available on-line at www.calcompetes.ca.gov.  Applicants can access an application guide, FAQs, schedule of application periods, and other technical assistance documents here.

About California Competes
The California Competes tax credit is part of the Governor’s Economic Development Initiative (GEDI) which Governor Brown signed legislation to enact in 2013 (AB 93 and SB 90). GO-Biz evaluates the most competitive applications based on the factors required by statute, including total jobs created, total investment, average wage, economic impact, strategic importance and more. Companies are exempted from paying state income taxes in the amount awarded.

About GO-Biz
The Governor’s Office of Business and Economic Development (GO-Biz) serves as California’s single point of contact for economic development and job creation efforts. GO-Biz offers a range of services to business owners including: attraction, retention and expansion services, site selection, permit streamlining, clearing of regulatory hurdles, small business assistance, international trade development, assistance with state government, and much more. For more information visit:www.business.ca.gov.

Micro Lending Academy: Advanced Balance Sheets

Advanced Balance Sheets

Now that we all know what a balance sheet is and how it operates, what type of analysis can we do with it? In this webinar we will review some common balance sheet ratios used by lenders, but then move onto analysis that is useful for business owner management decisions:

  • How much working capital does the business need to operate and to grow? Are there ways to manage working capital more efficiently?
  • What is the operating cycle of a business and can it tell the owner about business operations? Particularly, how is the owner managing inventory, bills and collections?
  • What does the balance sheet tell us about how a business has used debt and how much the business might qualify for? What type of debt does the business need most?
  • Finally, even if you work with businesses that don’t have balance sheets, how can you use this knowledge to direct clients to better business development decisions?

Watch and listen to the webinar (79 minutes)

About the Presenter

SusanBrownSusan Brown is a Business & Community Development Specialist with a specific focus on Business Finance and Rural Microenterprise. CAMEO engaged Susan to implement our Rural Initiative in 2008 and is now managing our partnerships with Kiva and LiftFund’s MMS platform. Through her consulting service Susan provides strategic planning, facilitation, program development and grant writing services to non-profit organizations and government agencies as well as consulting services to small business owners.

MicroLending Academy Newsletter: Commitment to Scale

 
The MLA newsletter is chock-a-block with articles, resources, technology, success stories, interviews, and big picture ideas on all Lending Academy features. This edition focuses on capacity building and lists several opportunities for training, whether they be peer calls, webinars or tools you can use.  
 
In this Issue…

  • Success Story:  Opportunity Fund, A Commitment to Scale
  • A Banker's Perspective: Fred Mendez, Union Bank
  • Excellence in Lending: Refining the Process for Efficiency
  • Best Practices: Cash Flow and Balance Sheets
  • MMS Update: Welcome Our Newest Lender
  • Research:  Crowdfunding by the Numbers
  • News
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Success Story: Opportunity Fund, A Commitment to Scale

1000947586Earlier this month, Opportunity Fund announced a collaboration to grow responsible lending with Lending Club, the world’s largest online credit marketplace. With a seamless technology integration forged between Opportunity Fund and Lending Club, the potential for scale is unprecedented and the customer experience will be unparalleled.

In fact, Opportunity Fund has said that they want to invest $100 million in microlending over the next five years.  Susan Brown, our microlending guru, spoke to several members of the Opportunity Fund staff about how they are well on their way to accomplishing their goal.

A Banker's Perspective: Fred Mendez, Union Bank

1000947586Fred Mendez, long known as a champion of micro business development and lending in California, recently assumed the position of Managing Director of Corporate Social Responsibility for the Americas for MUFG Union Bank, NA.  Prior to taking on this exciting new role, Fred ran the Community Development program for Rabobank for 8 years, creating a legacy of innovation in expanding small business lending in under-served rural regions.

Fred agreed to talk with Claudia Viek, our CEO, about his new job.  He was also willing to share his perspective on opportunities confronting CDFIs doing small business lending to LMI borrowers and why he thinks they should take more risk in this market.

Excellence in Lending: Refining the Process for Efficiency

1000947586Our Excellence in Lending program started with an assessment of operations and performance, and became the focus of our annual Microlending Forum in January.  We are following up with quarterly peer calls to discuss lending models and fine tune some metrics.

Our goal is to digest big picture topics important to our CDFI members: the frameworks, processes and goals that underlie programs and lead to greater success.  These calls are for the big picture thinker at each CDFI, to support greater competitiveness, volume and efficiency.

Brandon Napoli, Director of Microlending at VEDC, presented on how they close 300 deals per year with a modest staff and little automation.  Brandon has codified, in detail, all the steps in their lending process: who does what, how, and by when.  From packaging to assessment to underwriting to closing — VEDC is a well-oiled machine.  They can get a deal through their process in a week or two.  VEDC has also created a three-tiered incentive system, based on individual, team, and portfolio performance.  He said:  

We cultivate a mission-driven, sales culture.  We strive to meet community needs by increasing scale while maintaining quality.  We don't hide behind a non-profit orientation that doesn't call for efficiency.

Other successful CDFIs will present their secrets to success at future meetings – Working Solutions, Opportunity Fund, Fresno CDFI, to name a few. Please RSVP for our next call on Wednesday July 15 from 1:30 – 2:30pm.

Best Practices: Cash Flow and Balance Sheets

Register for our last MLA Best Practice Webinar on  July 8 – Balance Sheets Part II.  You will gain an understanding of how management decisions impact the balance sheet so trainers can steer clients in the right direction. 

You can watch the other three webinars in the series online (just click on the title)

Technology: MMS Update – New Lender

A big hearty welcome to Economic Development and Finance Corporation of Mendocino.

John Kuhry, Executive Director of EDFC, was initiated into the wonders of LiftFund's (formerly Accion Texas) Microlending Management System on May 13, 2015.  John wants MMS to underwrite his deals so he can focus on increasing capitalization and outreach.  

EDFC has historically been a small business lender with an average deal size of $60,000.  They will be the first MMS user in the CAMEO group to use the system for bigger deals up to $250,000.  But he is also looking forward to building up his microloan portfolio, now that he has MMS to help.  

Contact Susan Brown if you're interested in learning more or participating.  

Research: Crowdfunding by the Numbers

Dr. Richard Swart directs the research program in Entrepreneurial and Social Finance at UC Berkeley. He also is a partner and directs research for Crowdfund Capital Advisors, the world's leading advisory firm in Crowdfunding and Alternative Finance.

He spoke at the CrowdFunding Beat Conference in 2014.  He shares his observations on crowdfunding activity and where the challenges and opportunity lie. His first observation is crowdfunding "is an extremely successful and viable way of funding low-risk equity investment into microenterprises." Start the video at 4:00.

Also, the SBA recently published an Issue Brief – "Equity-based Crowdfunding: Potential Implications for Small Business Capital".

Demystify crowdfunding with this primer.

News

Micro Lending Academy: Balance Sheet Basics

Balance Sheet Basics

We don’t often get to analyze Balance Sheets with our microenterprise clients, but it’s important for all business consultants and trainers to understand them to provide quality advice on cash management, structuring debt, inventory management and much more. This webinar, the first of a two-part series, will be an introduction to Balance Sheets accounts, what they mean and how they work together. We have a fun exercise (you can use it in your classes!) that demonstrates how the Balance Sheet changes with each business transaction. We’ll also take a read on what additional Balance Sheet topics the group would like for the “Balance Sheets Part II” webinar in July.

Watch and listen to the webinar (65 minutes)

About the Presenter

SusanBrownSusan Brown is a Business & Community Development Specialist with a specific focus on Business Finance and Rural Microenterprise. CAMEO engaged Susan to implement our Rural Initiative in 2008 and is now managing our partnerships with Kiva and LiftFund’s MMS platform. Through her consulting service Susan provides strategic planning, facilitation, program development and grant writing services to non-profit organizations and government agencies as well as consulting services to small business owners.

A Banker’s Perspective: Fred Mendez of Union Bank

Fred Mendez, long known as a champion of micro business development and lending in California, recently assumed the position of Managing Director of Corporate Social Responsibility for the Americas for MUFG Union Bank, NA. Previous to taking on this exciting new role, Fred ran the Community Development program for Rabobank for 8 years, creating a legacy of innovation in expanding small business lending in under-served rural regions.

Fred agreed to talk with Claudia Viek, our CEO, about his new job. He was also willing to share his perspective on opportunities confronting CDFIs doing small business lending to LMI borrowers and why he thinks they should take more risk in this market.

Claudia Viek: Now that Union Bank has expanded into not only a national, but global arena, tell us what your role entails in promoting corporate social responsibility [CSR].

Fred Mendez: Right now I am managing all the outreach staff for the Foundation as well as the Corporate Communication and Government Affairs staff. I see my role as a bridge between everything a global bank has to offer in terms of products and services, and the needs of the communities where we have a presence – from Canada to Argentina. I hope to define what CSR can mean in the whole of the bank, but always keeping in mind the importance of supporting and strengthening processes in the U.S., of course. For example, we would like to explore how to open more TRAC [Technical Resource and Assistance Center] centers, such as we did in Fresno. And we are really excited about the branches we have opened in three high schools where we also offer financial capability training.

CV: What is your take on current opportunities for nonprofit CDFIs that do microlending?

FM: Speaking pragmatically, borrowers are engaging in the disruptive, online lending, so CDFIs need to connect more with these disruptors, these platforms. While banks will continue to provide capital funding to CDFIs, banks are limited in how innovative they can be, and can’t easily reach the micro borrower. CDFIs need to look beyond banks and towards virtual and customized products and find a way to provide financial education and credit technical assistance as their value added.

CV: Can you suggest ways CDFIs can better reach Low-Mod Income borrowers?

FM: Boy, I’d love to see the State Loan Guarantee Program, the FDCs, cover the total capital investment, the EQ2s, rather than just individual loans to borrowers. It would increase efficiency and allow CDFIs to take more risk. Let’s remember that CDFIs are chartered to take more risk and more losses than conventional lenders. Also, banks could be serving more high-risk markets, served by the FDCs, because these loans have performed extremely well.

Opportunity Fund, A Commitment To Scale

Thanks to Susan Brown, CAMEO’s microloan consultant for this post.

OppFundforPostFor Opportunity Fund, the desire for meaningful community impact means a commitment to scale.

  • They close 1,500 loans per year, adding up to $26.5 million.
  • To date, they have lent $100 million to 4,000 clients who have a median income of $28,000.
  • They close about 45 deals per staff per year at a cost of $3,400 per loan, that’s with little automation for risk assessment or underwriting.
  • They serve all of California, with offices in Los Angeles, San Francisco and San Jose.
  • Their loan consultants (read: officers) are mostly home-based and spend 75% of their time in the field, finding deals and working with potential borrowers.
  • They are competing with the merchant cash (MCA) advance industry with their Easy Pay loan product, which, unlike MCA lenders, is structured to support business success.
  • In the next five years they plan to invest in $100 million microloans!

These numbers are impressive and set them apart from the rest of their CDFI peers in California.

How are they doing it?

Let’s start with their commitment to a sales culture. Twenty five to forty percent of loan consultant compensation is tied to loan closings and portfolio performance. Opportunity Fund intentionally hires staff with a sales background and mentality. “We use incentive compensation to promote sales,” said Eric Weaver, Opportunity Fund Founder and CEO. “Few people will be high producers without financial incentives.”

Second, Opportunity Fund focuses on lending and leaves other services, like training, to partner organizations. Their goal is to reach out to as many borrowers as possible. “We strive to bring working capital to working people,” said Marco Lucioni, OF’s Executive Vice President of Lending. “We achieve impact through scale.”

In 2012 Opportunity Fund merged with Financiera Confianza, founded by Marco, a for-profit lending company, several years ago which brought in production-oriented people, infrastructure and culture. “This allowed us to amplify our action radius, offer more competitive rates, write bigger loans and offer major benefits to our clients,” Marco said.

Opportunity Fund offers four products.

  • EasyPay loans, which aim to be an affordable alternative to merchant cash advances, with fixed interest rates between 8.5% and 15% and a longer repayment term of up to 3 years.
  • Small business loans, which range from $20,000 to $100,000 at interest rates between 8.5% and 12%, with up to five-year repayment terms and no early repayment penalty.
  • Opportunity Loans range from $2,600 to $20,000 and are suited for inventory, equipment and vehicle purchases. Rates are 8.5% to 18%, with up to two-year repayment terms and no early repayment penalty.
  • Equipment and vehicle financing, like loans for food trucks, taxis, limos, fleet vehicles and vans. Focusing on vehicle financing, a market that Opportunity Fund identified as having scalability, is also part of their growth strategy.

The Easy Pay product is another feature that sets Opportunity Fund apart in the CDFI industry. The loan is repaid by automatically deducting a small share of daily credit- and debit-card sales. It allows Opportunity Fund to take more risk by weighing the cash flow side more heavily. Through underwriting Opportunity Fund ensures that no more than 10 percent of a business’ revenues go to covering debt payments, and provide a payback period of up to 36 months, rather than the average eight month payback period of MCAs. Finally, because EasyPay is structured as a loan rather than as a cash advance, all repayment is reported to the credit bureaus.

Opportunity Fund is clear about their sustainability plan. Sixty percent of the loan program is funded through earned revenue, which Eric sees as increasing modestly over the years.

Our core competence is that we’re trusted to target subsidized credit to underserved small business owners in an efficient way that both policy makers and philanthropists care about. Our goal is not to get 100% cost recovery.

“Were trying to balance efficiency and effectiveness to insure positive community impact,” said Caitlin McShane, Director of Communications. “We don’t price based on what the market can bear. Many customers could and would pay more. We want to make a good impact on the business and the community.”

The Opportunity Fund team is clear that for many of their borrowers this is a business transaction, and not all are aware of or care about Opportunity Fund’s nonprofit mission. Opportunity Fund is competing with many online lenders and want to appear as an attractive business alternative, with all the speed and ease the MCAs offer.

“If you are willing to focus on scale and decide that maximizing impact is your mission,” said Marco, “then any CDFI could do what we do.”

What future innovations does Eric see for the CDFI business lending industry?

Due to technology, the process of lending is getting chopped up into smaller pieces where players are creating expertise and efficiency in one part of the lending process. The current model of one agency doing everything from start to finish may not be the best way to go in the future. CDFIs may want to partner with more efficient organizations to manage parts of the lending process. The more efficient we can be, the better we can attract subsidies to support our work.

Micro Lending Academy: Cash Flow Basics

This webinar will help train your staff on projections and give you a format for teaching projections to your business clients. We’ll answer questions such as: What is a cash flow projection? Why does a business owner need one? How is it different than a P&L projection? If cash is tight, what are some cash management strategies to stretch each dollar further? We’ll provide a couple of sample spreadsheets to ‘take with you’ to use with clients.

Watch and listen to the webinar (61 minutes)

About the Presenter

SusanBrownSusan Brown is a Business & Community Development Specialist with a specific focus on Business Finance and Rural Microenterprise. CAMEO engaged Susan to implement our Rural Initiative in 2008 and is now managing our partnerships with Kiva and Accion Texas’ MMS platform. Through her consulting service Susan provides strategic planning, facilitation, program development and grant writing services to non-profit organizations and government agencies as well as consulting services to small business owners.

2015 Annual Member Meeting Prep

For the member meeting we ask that you do two things: 1) make appointments with your legislators for the morning; and 2) read AEO’s white paper on Understanding the State of Technical Assistance for the afternoon discussion.

Meetings with Legislators

In the morning, after a short member meeting, we will give you tips, training and talking points for our key advocacy issues this year. Then, you will be off to visit your legislators between 10:45 and 12:15. Please make your own appointments; here’s how:

  • Find contact information for your assembly member(s) and your senator.
  • Send a written request to the scheduler as well as call the office.
  • If the legislator is not available, ask for a meeting with the chief of staff.

If you are from an area that only has one representative in each house, coordinate with other CAMEO members who may be attending. If you are from a large area that has many representatives, we will divide and conquer. Contact Andrew, who will help coordinate with other members who will be going.

The topics of your legislative visits include the importance of the microbusiness sector to local economies and three crucial issues – depending with whom you meet:

  • SB 197 (Block), co-sponsored by CAMEO and Opportunity Fund, will help small businesses be more aware of capital resources offered by mission-driven microlenders. This bill has passed through Senate appropriations and is likely to pass the Senate floor, which means the Assembly is the next stop. It will be crucial to educate your assembly members on the merits of this bill. You will thank your Senators for their support.
  • AB 184 (Garcia) will codify business technical assistance (SBDCs, WBC, SCORE, VBOC and PTAC) and allow state agencies to directly contract with them and fund them. Right now it is in the Assembly Appropriations Committee.
  • We are looking for a champion for the importance of women’s business ownership in closing the wealth gap.

For more information and a full agenda for the day, visit the annual meeting page on our website.

Re-imagine TA Business Assistance Services

At the recent AEO Leadership Summit, a big topic of conversation was the possibilities and future of the microbusiness industry. We’re going to engage in an interactive exercise to ponder these questions.

  • In what ways does business assistance need to change for the industry?
  • In what ways does it need to change to support the entrepreneurs of the future?
  • What obstacles must the industry overcome to redesign business assistance delivery to support the future Main Street?

Read AEO’s white paper on Understanding the State of Technical Assistance for background.

Michael Shuman Biography

Michael Shuman is an economist, attorney, author, and entrepreneur, and a globally recognized expert on community economics. He is one of the architects of the crowdfunding reforms that became the “JOBS Act,” signed into law by President Obama in April 2012. Michael is currently Director of Community Portals for Mission Markets and a Fellow at Cutting Edge Capital (a CAMEO Member), and Post-Carbon Institute. He is a founding board member of the Business Alliance for Local Living Economies (BALLE – a CAMEO reciprocal member). He is also an adjunct instructor in community economic development for Simon Fraser University in Vancouver. Michael has authored or coauthored eight books on the topic.