Latest Blog Posts

Contreras-Sweet Confirmed as SBA Administrator

Senate Confirms Administrator Maria Contreras-Sweet to Lead the SBA

Maria Contreras Sweet Confirmed as SBA AdministratorToday the Senate confirmed Maria Contreras-Sweet as Administrator of the U.S. Small Business Administration (SBA). CAMEO congratulates Administrator Contreras-Sweet as she takes on this important new role.

Administrator Contreras-Sweet spoke at CAMEO’s 2009 Viva! Event and is a founding board member of the Los Angeles Latino Chamber of Commerce, a CAMEO member. We know firsthand that she understands the importance of microbusinesses to the economy. During her testimony she said she “is very much in support of microloan programs” and CDFI’s and “programs like CAMEO… have been really good stewards of making sure that particularly underserved communities… that they’re [CAMEO, et al] providing for that first line of credit.“

We look forward to working with Administrator Contreras-Sweet, whose roles have included: entrepreneur, founder of ProAmérica Bank, a Los Angeles-based community bank, and cabinet secretary of the California Business, Transportation and Housing Agency. Her experience will serve her well in her new position at the SBA.

We welcome Administrator Contreras-Sweet and we are excited to have an ally who understands the need of America’s smallest businesses at the helm of the Small Business Administration. We look forward to partnering with her to help entrepreneurs of all shapes and sizes start and grow their businesses.

Women’s Business Centers Factsheet

Women’s Business Centers Effectively Growing Entrepreneurship
Association of Women’s Business Centers

Published March 2014

The SBA’s Women’s Business Center (WBC) Program supports 106 nonprofit organizations that provide business training and counseling to female entrepreneurs and aspiring entrepreneurs, which includes women in underserved communities. The program is supported by the Small Business Administration and matched by donations.

(read more)

President Obama’s FY2015 Budget

Note the following budget summary is from AEO.  President Obama’s requested budget is the first of many steps in the budget process.  CAMEO will work to ensure that the programs we care about are funded.

Budget in Brief: An Overview of the President’s FY2015 Budget Submission

On March 4, 2014, President Obama released his FY2015 proposed Budget.  The Budget, which is submitted annually to Congress, is a blueprint of the Administration’s priorities for the upcoming fiscal year. It details funding requests for government programs and proposed policy changes.  The Congress uses the President’s Budget as a starting point for the appropriations process as it considers how to fund the government agencies.

For FY2015, the President’s Budget adheres to the funding level – $1.014 trillion – agreed to in the December 2013 Budget deal.  This is somewhat misleading, however, because the President attached an additional request for $56 billion to fund new projects in defense, transportation infrastructure, universal preschool education and an expanded Earned Income Tax Credit (EITC) for individuals.

Small Business Administration

The President has requested $710 million for the Small Business Administration in FY2015 — a significant [23.6%] decrease from the FY2014 enacted funding level [$929 million].  The Administration attributes the reduced request to improving economic conditions, which are expected to reduce guaranteed loan default rates.  The Budget, nonetheless, expects that the SBA will continue to guarantee loans at the Congressionally authorized level of $25 billion in FY2015.

Microloan Program (Lending) – $25 million
Microloan Program (TA) – $20 million
Small Business Development Centers – $113 million
Office of Advocacy   – $8.5 million
Boots2Business – $7 million
Emerging Leaders ([formerly E200) – $15 million

The President’s Budget submission would eliminate the SBA’s Program for Investment in Microentrepreneurs (PRIME).

Please note: For other entrepreneurial counseling programs, such as the Women’s Business Center (WBC) Program, the Budget does not provide funding amounts at that level of detail.

The Budget includes a policy proposal to reauthorize the SBA’s 504 Loan Refinancing Program.  This offshoot of the standard 504 loan program allows small business owners to access low, long-term interest rates to refinance commercial mortgage and equipment debts.  Similar legislation has already been introduced in the Congress.  (Please note: this is not to be confused with the standard 504 loan program for commercial real estate mortgages.)

Department of the Treasury

The President’s Budget requests $225 million for the Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund, unchanged from the FY2014 appropriated amount.  The Budget specifies that $35 million of the $225 would be reserved for the Healthy Foods Initiative.

The Budget also requests $1.5 billion for a second funding round of the State Small Business Credit Initiative (SSBCI).  The SSBCI allows states to use federal funds to support programs that leverage private lending to help finance small businesses and manufacturers that are creditworthy.  The SSBCI is expected to help spur up to $15 billion in lending to small businesses.

Department of Labor

The President’s FY2015 Budget includes $3 billion grants to States and localities to provide Employment and Training (ETA) services at 2,500 American Job Centers across the country through the Workforce Investment Act (WIA).

Building on the President’s pledge in his State of the Union address to improve workforce training, the Budget requests an additional $750 million to restore prior cuts to these grants, increase the investment in innovation, evidence-based practices, and performance in the workforce system.

The Workforce Innovation Fund (WIF) request is for $60 million, while the FY2015 Budget also includes $80 million for Incentive Grants, a new grant to reward states that succeed through their WIA programs in serving workers with the greatest barriers to employment.

Expanded Earned Income Tax Credit (EITC)

The President’s FY2015 Budget includes a proposal to expand the eligibility of the EITC.  The proposal would increase the maximum credit for workers without children from $500 to $1,000 and expand the age of eligibility to 21 – 66 years of age (currently 25 – 64).

Veteran Program In Full Swing

LizPerezIn August 2013, we hired Liz Perez (pictured left) as our Veteran Outreach Consultant to ramp up our veterans program, driving outreach efforts and facilitating referral relationships between traditional veteran serving organizations and CAMEO member organizations that specifically serve veterans. It’s been about six months, so we decided to check in with Liz for an update on the program.

CAMEO: What are your main goals?
Liz: Our goal is to work with CAMEO members to reach the veteran entrepreneurs or wannabe entrepreneurs. Our ultimate goal is to create more veteran entrepreneurs and business owners.

CAMEO: What kinds of activities are you engaged in or planning?
Liz: During the first three months I met a lot of CAMEO members throughout the state and planned a lot. As a new program, we’re looking at which strategies will have the most impact for the members and the veterans.
We hit the ground running with two veteran events in San Diego during October. On the 8th of October, we participated in Reboot’s Veteran Women’s hiring and Entrepreneurship event. Over 150 Veteran women attended the event, 26 of whom showed interest in starting their own business. We connected the veteran women with local CAMEO resources and some have attended additional CAMEO workshops. The following day, we were on a panel at the UCSD/MIT Veteran Entrepreneurship event, where we promoted the CAMEO Entrepreneurship Veteran Program and promoted CAMEO partners like ACCION San Diego, and the SBA and the SBDC’s in San Diego.

CAMEO: The workshops kept you pretty busy, right?
Liz: Yes, in November, December and January we had six workshops in San Diego and Riverside. These workshop topics included veteran franchising, business financing, and certification. We also provided veterans with local and national resources and introduced them to CAMEO members.

CAMEO: What are the outcomes so far?
Liz: To date through workshops or working remotely, we have assisted over 228 veterans to start or grow their business through. In every case, we have referred these veterans to CAMEO members in their region and other resources that might be available.

CAMEO: What are the plans for the next few months?
Liz: I’ve got a few things on our agenda. One is to follow up with CAMEO members to see how the referrals are working. So if anyone has served a veteran that’s attended a workshop, let me know! Another priority is to connect CAMEO members with veterans groups and foster relationships between the micro sector and the veterans groups, so if you’ve got a group that you’ve been trying to make headway with, let me know and I’ll see what I can do. And number three would be to help CAMEO members market their services to the veteran population. And we’ll be partnering with the Prosperity Center and others for a workshop in Orange County on March 26 and attention LA partners – we’ve got something scheduled for the end of April.

CAMEO: Thanks Liz, we’re excited to see what manifests and hear about new veteran businesses that are opening across California.
Liz: And we are extremely excited about being a part of the CAMEO family, too!

What the SOTU Really Said

SOTU2014 word cloud (minus American)

To get an idea of what’s important, I did a word cloud but took out the word America and Americans because well, that’s the obvious topic of the President’s speech (check out the original word cloud of the SOTU.)

Some of the phrases that jump out at me?

help people work / support work
need working home businesses
jobs families country

What about you?

AEO Response to the SOTU

We couldn’t have said it better ourselves…

AEO’s Reaction to the President’s State of the Union Speech

January 29, 2014 – In his State of the Union address, President Obama articulated a key theme that likely resonated with Main Street entrepreneurs and the organizations that support them, when he said, “Opportunity is who we are.” All businesses in our country, from the self-employed to the mega-corporations, have two things in common: they started small and took a chance, hoping to create a job and generate income security.

The Association for Enterprise Opportunity (AEO) is encouraged by the President’s call to action to help our nation’s entrepreneurs and small businesses. “We know where to start: the best measure of opportunity is access to a good job,” the President said. We are hopeful, however, that the President and his Administration will move beyond the outdated model of employment and realize that today millions of Americans are creating jobs for themselves. In fact, AEO’s report Bigger than You Think found that starting a microbusiness is often a necessary and an increasingly viable option. Microbusinesses create a variety of positive social impacts by providing income, wealth-creation opportunities, and a path to upward mobility – in other words, the very definitions of opportunity.

We also support the President’s proposal to expand the Earned Income Tax Credit (EITC) for workers without children. An important tax credit for low-income workers, the EITC allows entrepreneurs to reinvest their EITC credit back into their microbusiness. Each year, the EITC benefits roughly 15 million families and provides an average tax cut of about $800. Similarly, expanding retirement savings options for working individuals is a smart idea. AEO supports the President’s “myRA” retirement plan proposal.

With respect to the President’s call to conduct a review of the nation’s job training programs, we will continue to urge the Administration and Congress to address a shortcoming that discourages job training centers from offering entrepreneurship training. A simple fix – to allow these centers to count self-employment as a successful employment outcome – is all that is needed to allow entrepreneurial training to be offered at no extra cost. AEO will be investigating whether this change could be achieved by Executive Order, something the President made clear he will not shy away from.

For more than 22 years, AEO and its 450 member and partner network have advocated for policy solutions that help entrepreneurs – especially in underserved communities – access the tools they need. AEO will continue to work with Congress and the Administration to promote the interests of our nation’s microbusinesses and push for policies that encourage entrepreneurship.

Read the full transcript of the President’s State of the Union speech.

Congrats to SBA Chief Nominee

CAMEO congratulates Maria Contreras-Sweet, the founder and board chairman of Pro­América Bank in Los Angeles, who was nominated by President Obama to head the Small Business Administration on Wednesday.

Contreras-Sweet’s experience gives her a unique understanding of community banking, the non-profit world and large government agencies. In addition to founding a community bank, she was founding director of The California Endowment and the cabinet secretary of the California Business, Transportation and Housing Agency. Throughout her career, she has worked closely with small businesses and advocated for opportunities for Hispanics.

Contreras-Sweet spoke at our Viva! event in 2009 and is a founding board member of the Los Angeles Latino Chamber of Commerce (formerly Latino Business Chamber of Greater LA), a CAMEO member. We’ve heard firsthand that she understands the importance of micro-businesses to the economy.

Microbusinesses, those with fewer than 5 employees, have very different needs from businesses with over 100 employees. And it’s the very small businesses create the jobs. From 2004 to 2010, U.S. micro-businesses (1 to 4 employees) created a net of 5.5 million jobs, more than any other firm size. And microbusiness ownership is a productive pathway to the American Dream by many immigrants, minorities, women and other underserved populations.

Contreras-Sweet would become the second Hispanic and the eighth woman in Obama’s Cabinet. CAMEO is excited to have a friend who understands the needs of very small businesses in such a position. CAMEO looks forward to working with her to help entrepreneurs of all shapes and sizes create jobs and businesses and as President Obama said, “help lead the way — because small businesses are the lifeblood of our economy.”

State Gets More Money for Small Business Loans

According to a press release from California Governor’s Office of Business and Economic Development:

The U.S. Department of Treasury has authorized an additional $27 million in federal funding for the California Small Business Loan Guarantee Program (SBLGP) to provide loans to California small business owners and entrepreneurs.

California’s SBLGP originated over forty years ago with the mandate of providing repayment guarantees to lenders of loans to small businesses having difficulty securing financing on their own. The guarantees are issued by non-profit Financial Development Corporations (FDCs). Currently, there are eleven FDCs servicing the state. FDCs partner with banks, credit unions, and other lenders to help small business owners finance their plans including expanding operations, purchasing new equipment and infusing businesses with working capital. Guarantees may also be issued on loans for start-up costs. In fiscal year 2012-13, the program issued guarantees totaling $71,615,382 and supported the creation or retention of 5,666 jobs…. In total, California is receiving $55,645,861 for two programs including the SBLGP and California Capital Access Program (CalCAP) at the California State Treasurer’s Office.

California State Treasurer Bill Lockyer said, “Microloans have been especially successful in helping businesses in low-and moderate-income communities.”

2014 MicroLenders Forum Recap

Scaling Up Microlending in California
Disruptive Technology

Download Susan Brown’s powerpoint: MicroLenders Forum on Disruptive Technology.

The recurring theme: how to incorporate the new norms in lending brought on by technology into our high-touch/community-based approach so that our organizations are sustainable and we scale microlending. According to Paul Quintero of Accion East, because of our mission,” we will never be a pure play imitator of what the for-profit alternative lenders are doing.”  But Paul is implementing lots of new technology at Accion.

Despite their crucial role in the economy, less than 1% of potential microbusiness borrowers are being served. In California, CAMEO’s microlenders struggle to achieve scale. Microlending is expensive for many lenders to sustain and as a result, some of CAMEO’s lenders have left the microloan market.  Our 28 member lenders made 1,500 microloans in 2012. And as our friends at California Reinvestment Coalition reported “bank lending to small businesses shows only the barest improvement since 2009.”

Simultaneously, new players, new technology, and seismic shifts are new forces in our industry. New internet-based technology is changing the microlending process, allowing for cost reduction, increased efficiency and volume.  New players into the field means increased competition for loan ready borrowers. Just so happens, the day before the forum, The Wall Street Journal posted an article “Alternative Lenders Peddle Pricey Commercial Loans; With Credit for Businesses Tight, Nonbank Lenders Offer Financing at a Price” (it is behind the pay wall.)

This year’s MicroLenders Forum explored these changes, how they affect us, and how CAMEO can help smooth the way.

In preparation for the Forum, we asked the Stanford University Microfinance Research Group to survey the landscape and describe what our members are facing. Luis Armona, a senior and president of the group, presented “Big Data Meets Microfinance” and explained what machine learning is and what big data can do. He believes machine learning will only get better and that big data will seep its way into the market, but that is the direction of lending.  The conclusion was that our members must pay attention and prepare for the future – as big data allows for massive economies of scale and the new products are very consumer-friendly.  However, the tradeoffs are high interest rates and a low-touch process.

Next up were two panels that talked about the disruptive technology and how its affecting microlending and possible responses and issues to think about.  You can download a detailed description of the New Players Panel and the Bankers Response including product descriptions of each of the lenders and how Accion East may be a resource.   What follows is a summary.

The new players included:

They are using automation, big data, and crowdfunding to break into California’s microlending market. It was clear that the new norm in lending is very quick loan approvals (or denials) with a stripped down application process.   Using data and technology efficiently allows these firms to assess their risk almost immediately.  They stagger information request and only collect documents if the borrower qualifies for a loan.  Money can be distributed in days, not months.  Customers expectations are altering in the microlending market to coincide with these new options.  However, these lenders are only reaching the top 10% of borrowers. The big questions of the day were:

  • how to reach the other 90% of borrowers? and
  • can the for-profits partner with the non-profits to bridge the gap?

Paul Q. challenged our field to re-assess pricing and focus on a niche. On pricing: the interest rate should equal expected loss plus cost of funds plus operating costs; if an organization is not charging enough then the funders are paying for risk. On niche: the marketplace is going to force a decision on how to compete; define three-to-five segments and focus efforts because we won’t be the quickest or cheapest, so we have to be the most suitable.

According to Fred Mendez of Rabobank, technology is something that should be embraced.

How will you choose to connect to these platforms? … If you choose not to partner, this room will be empty fast.

Other salient points:

  • Only do what you have to do, you don’t have to do everything (as in you can automate your underwriting, but can’t automate your personal touch).
  • Provide what you do best, let others do what they do best (as in use high touch when it makes sense).
  • Technology redefines what people do.
  • Prioritize what requires philanthropy (e.g. technical assistance), but grant funding is not sustainable.
  • A trade off exists between pricing risk and rationing credit.

In the afternoon, we presented two new game-changing tools – i.e. the disruptive technology – that have proven effective in reducing the costs of technical assistance and increasing loan production.  The first was a Mobile Entrepreneurship Toolkit developed by Centro Community Partners.  The toolkit consists of a loan readiness assessment tool and a business plan tool that has decreased the cost of technical assistance by 80%!  The second tool is the Microloan Management System tool that CAMEO brought to its members as a way to decrease the cost of microlending. Women’s Economic Ventures reports that using MMS allows them to double the number of loans they are processing.

CAMEO, as the effective small business CDFI coalition for California, supports the growth and sustainability of microlending in California. We feel that it’s our role to bring forth these new trends and technology and to support our members to expand their capacity, skills, capital resources and technology adoption. To that end, CAMEO introduced a new program at the Forum — The MicroLending Academy.  We believe that it will be well-received as members expressed the desire for CAMEO to continue to provide training and support around best practices during the members-only discussion. Something that CAMEO will explore for the future is other platforms – as in a HUB for backroom services or helping members to onboard/partner with one of the existing for-profit alternative lenders or developing a platform to serve the 90% – that will help decrease costs and increase productivity.

Small Business Saturday and Go Local

CAMEO Supports Small Business Saturday and the ‘Go Local’ Movement

Local small businesses need three basic things to start, grow and thrive: connections to customers, small amounts of capital, business coaching and training. This holiday season, CAMEO supports ‘Go Local’ campaigns that support small business and the microbusiness development infrastructure that sustains them.

Campaigns That Promote Local and Independent Businesses:

  • Shop local on Small Business Saturday
  • Take the pledge at Independent We Stand
  • Find local bookstores at IndieBound
  • Make one purchase of $50 in 3 stores with the 3/50 Project

“By shifting the focus of holiday shopping to locally owned, independent businesses, we seek to build an annual tradition that strengthens local economies, expands employment, nurtures a sense of community, and provides a more relaxed, fun, and rewarding gift-buying experience,” said Claudia Viek, C.E.O. of CAMEO.

Anil Rupasingha of the Atlanta Federal Reserve found that “local entrepreneurship matters for local economic performance and smaller local businesses are more important than larger local businesses for local economic performance.”

Civic Economics has studied the costs and benefits to cities, both large and small, of locally-owned businesses versus larger chain stores. They find that overall, locally owned businesses generate more money for a community than chain stores, as the profits generated by the businesses stays within the local community instead of draining away up the chain.

CAMEO’s mission is to grow a healthy, vibrant, thriving environment for all entrepreneurs and start-up businesses by advancing the work of our statewide member network – the over 160 organizations, agencies and individuals dedicated to furthering the growth of micro-businesses in California. Last year, CAMEO member organizations assisted the creation of 21,000 businesses that created 38,000 jobs.