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The Underground Economy

Thanks to Small Business California for this information.

The underground economy is one in which employees are paid on a cash basis thereby eliminated the cost of taxes and workers compensation.

The Labor Enforcement Task Force put out a Fiscal Year 2013-2014 Report about the underground economy in California. Here’s a smattering of results they found.

  • Agriculture where 72% of the businesses looked at were out of compliance
  • Automotive where 94% were out of compliance
  • Beauty Salons where 72% were out of compliance
  • Construction where 81% were out of compliance
  • Garment where 87% were found out of compliance
  • Manufacturing where 71% were found out of compliance
  • Restaurant where 75% were found out of compliance.
  • Other where 74% were found out of compliance.

The Labor Enforcement Task Force (LETF) welcomes referrals and leads on underground economy activity from both employers and employees. The public can contact LETF by any of the following methods:
LETF Public Hotline: 855 297 5322
LETF Email Address
The new LETF Online Referral Form

CRA Resources

for Bankers & Community Development Practitioners

Do you know your local bank’s CRA rating or where to find it? Could you write a performance context for your bank’s next CRA exam? The San Francisco Fed is pleased to offer resources for those looking to expand their understanding and application of the CRA.

cra-ratings-tool CRA Ratings Search Tool  The CRA Ratings Search Tool allows you to quickly and easily locate CRA evaluations for state member banks regulated by the San Francisco Fed. Beyond the ratings themselves, the performance evaluations (PE) contain valuable information about an institution’s CRA activities and assessment areas. The search tool allows you to filter by bank size and geography and directly links users to a bank’s two most recent PEs.
Community-Development-Data-Guidebook-cover Community Development Data Guidebook The Community Development Data Guidebook is meant to serve as a “how to” for those interested in conducting more robust community development research. This type of community-based research, often termed performance context in the regulatory world, is critical to bankers looking to make impactful investments and loans pursuant to Community Reinvestment Act (CRA) requirements.
Understanding-Community-Development-Needs-through-the-CRA-Performance-Context-cover Understanding Community Development Needs through the CRA Performance Context

This working paper attempts to demystify the performance context and establish its strategic value to the CRA process. The paper explores new opportunities for strengthening the performance context as a community development tool, from the perspective of both bankers and regulators.

For more, please visit our CRA page.

Claudia Talks DIY Economies at IEDC

Joint Small Business Credit Report, 2014

JointSmallBusinessCreditSurveyReport2014Joint Small Business Credit Survey Report
Federal Reserve Banks of New York, AtlantaCleveland and Philadelphia

published on January 26, 2015

Small businesses are important to the U.S. economy and the well-being of local communities. They employ half of the nation’s private sector workers and in recent decades have created two-thirds of net new jobs. Yet, unlike large firms, which rebounded relatively quickly from the Great Recession, the pace of recovery for small firms has been slower and more uneven.

An important part of measuring small business vitality is tracking firms’ demand for and ability to access capital. In the aggregate, there is mounting evidence of improvements in business lending, but small dollar lending only recently began to show signs of modest growth after years of decline. This slow recovery is particularly concerning since microloans ($100 thousand and under) account for 90 percent of small business loans.

Since 2010, the Federal Reserve has been monitoring small business credit conditions through regional surveys of business owners. In 2014, the Federal Reserve Banks of New York, Atlanta, Cleveland, and Philadelphia collaborated on a common small business credit survey to cover much of the eastern region of the U.S. The survey offers insight about the quality and pace of the sector’s recovery by providing evidence on credit conditions from the perspective of borrowers. It is noteworthy in capturing state, industry, and segment level information about firms’ motivations for seeking credit, where they apply for credit, and their success rates.

The survey also highlights the often underdiscussed diversity of small businesses, especially across revenue categories. As illustrated in the key findings and in the detailed report analysis, credit needs, demand, sources, and success vary considerably within the small business sector. Overall, the survey results are intended to provide more precise intelligence to key decision makers, including national and local policymakers, service providers, and lending institutions.

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Healthcare Reform and Small Biz

What Healthcare Reform Means for your Micro-Business

Health care continues to be an important issue for small business owners. The Small Business Administration and Small Business Majority are committed to helping businesses navigate the changes and opportunities in health care through the Affordable Care Act 101 webinar series.

Small business owners can learn the basics of the Affordable Care Act and how they can enroll in small business health insurance marketplaces. Other topics discussed include insurance reforms, the small business health care tax credit, and employer shared responsibility provisions. SBA representatives help small business owners understand the facts of the Affordable Care Act so they can make informed decisions about providing health insurance for their employees.

What the Healthcare Law Means for your California Small Business



Learn more about how the new health care law affects small businesses.

For more information visit Covered California.

Profile – Accion San Diego

Combining Growth and Mission

Susan Brown, CAMEO’s microlending guru, interviewed Elizabeth Schott, CEO of Accion San Diego and CAMEO’s board president for the first installment of our series profiling California’s most prolific microlenders: Accion San Diego, Opportunity Fund, and VEDC. Here’s Susan’s profile:

We have averaged 15-30% portfolio growth over the past several years and project continued growth for the next five years…. We don’t make loans. We change communities and local economies. –Elizabeth Schott

This impressive growth is combined with her commitment to a high-touch lending process that amounts to “more of a movement than a set of transactions.”

Accion San Diego is a member of the Accion Network, worldwide leaders in micro-enterprise development. Launched in May of 1994, Accion San Diego’s mission is to create economic opportunity for primarily low-to-moderate income business owners who lack access to traditional sources of credit. Through business loans and support services, the lender strengthens the roots of emerging entrepreneurs and helps them to thrive in their communities, creating social and economic change.

Accion offers two main products to entrepreneurs in San Diego County:

  1. The Quick Loan, $2,000 or less, has a 48 hour turn-around time.
  2. The Complete Loan, from $2,001- $75,000, has a turn-around time of approximately 2-3 weeks.

They closed 209 loans in 2013, and will close around 270 in 2014, with an average loan size between $11,000 – $12,000 and a current portfolio of $4.4 million. Their self-sufficiency ratio (percentage of operating expenses covered through earned revenue) has increased from 38% in 2007 to approximately 60% in 2014.

Schott saw an opportunity to meet increased market demand in 2008-10 — when banks tightened lending to small entrepreneurs. This has become an ongoing strategic objective. She notes three organizational pillars she has pursued to support this objective:

Increased focus to raise program revenue and loan capital. A growing portfolio, along with 10%-19% interest rate, has provided increased earned revenue to support operations, as reflected in their nearly doubled self-sufficiency ratio. Schott has also focused on building successful and diverse relationships with key stakeholders and funders providing a broad base of grant revenue for operations and programs. As for increasing their loan fund capitalization, ASD has received four back-to-back CDFI loan fund grant awards.

Investment in technology and infrastructure. ASD has upgraded their portfolio management system to offer more-detailed, real-time reporting which informs management and outreach decisions. In addition, the staff, now out-fitted with remote technology (smart phones and laptops), are not tied to their desks, but rather spend their time in the field generating deals while still responding to new inquiries, answering borrower questions and gathering loan documents. ASD is also participating in a pilot with the Accion Network to automate some of the assessment and underwriting process, “without losing the personal touch” so critical to their mission. This in-the-field approach combined with remote technology generates high productivity, with approximately 17 deals closed per FTE staff member in 2014.

Investing in The Team. “We have invested a lot in our people, which has a direct correlation to our growth,” says Schott. ASD provides all staff flexibility accessing training opportunities for professional growth. They have restructured their staffing to provide career ladders within ASD and they plan to continue building this as future growth occurs.

“People can join ASD at an entry position, and see a next step for their career path within the organization,” says Schott. They also invest in ongoing, bottom-up team building activities, offering opportunities for staff at all levels to design and lead activities to build employee engagement and highlight those who have gone above and beyond. “Managers underestimate the power of small things that can lead to an increase in productivity and retention of valuable staff.”

a next step for their a career path within the organization for themselves right here,

When asked what she sees as important future focus for the CDFI microlending industry, Schott notes, “We have to invest in tracking data capacity to demonstrate our effectiveness. I can’t tell you how often funders comment that they love to see all the results we pack into our annual report. This is what will set us apart when competing for future funds.”

Excellence in MicroLending Step One

by Susan Brown

CAMEO’s long-standing commitment to building California’s microlending sector is the force behind many of our recent programs: Kiva and Accion Texas partnerships, the training series last October, Claudia’s many successes in building resources for lending, to name a few.

Our latest program, Excellence in Lending (EiL), focuses on the program elements needed for a high-quality loan fund poised for growth. Using Kiva’s Field Partner metrics as a starting point, we created an assessment that included:

  • Marketing
  • Product Design
  • Technology Use
  • Portfolio Management
  • Underwriting
  • Approval Process
  • Servicing
  • Risk Management
  • Earnings, Liquidity, Capitalization
  • Delinquencies and Collections

Fifteen of CAMEO’s 28 lending members responded. We compiled the aggregate answers, and have created confidential reports to each responding organization so they can see how they stand compared to their peers.

We will use the assessment responses for the morning portion of our 2015 Microlending Forum on January 15. The assessment yielded rich content for discussion. Some topics that show a wide variety of standards and practices are:

  • Use of technology
  • Staff time in the field
  • Servicing practices
  • Loan volume per FTE staff
  • Portfolio at Risk definitions
  • Use of State Guarantee programs
  • Risk rating practices
  • Interest rates charged

At the Forum participants will discuss what they think of the results: Are there areas that the industry as a whole should address or improve? Are there areas where establishing performance metrics make sense? What needs to be in place for a CDFI to successfully scale up to, say, 200 loans per year?

Ginger McNally, Senior Vice President for Strategic Consulting at Opportunity Finance Network, will join us to give us her take on the results, relative to the CDFI small business lending trends she sees around the country.

We look forward to our members’ participation in this discussion to digest the results and plan future direction for meeting the need for small and microloans in California.

Who Are MMS Borrowers ?

With the first year of CAMEO’s MMS program completed, and our users having made over 100 loans, we’re taking a closer look at what MMS borrowers look like. MMS offers a robust set of demographic tools, and CAMEO will be taking fuller advantage of these program features in the coming year.

Most MMS borrowers are young businesses, with 70% of loans going to businesses less than three years old.


Borrowers serve a variety of industries, from accounting services to fashion design. The top three industries were personal/design services, retail, and restaurant service.


Most loans were for $15,000 or less, with a median loan size of 15,000.


The three most common reasons for needing a loan were working capital, start up costs, and leasehold improvements. The majority of approved loans were for working capital, which was most commonly used to purchase inventory.


Sonora – DIY Economy in Action

IMG_1813On December 17, the CAMEO staff took a field trip to visit Larry Cope, the head of economic development in Tuolomne County, at his office in Sonora. After chatting with him for a few minutes, it was clear to all of us that the work Larry and his team do represents the epitome of a DIY Economy.

Shortly after Larry started his job in March of 2009, Sonora (the county seat) lost 4,500 jobs from the closure of Mervyn’s, Gottshalk’s, and Sierra Pacific. He had his work cut out for him.  So he set his team to work.

Not wanting to lose more companies, they focused on business retention for the first three years – and entrepreneurship. They weren’t planning on beefing up the latter, but he found out that all of the entities that provided business assistance were duplicating services. And in a rural area with a small economic development budget, that needed to change. He sat everyone down at the table – Columbia College, SCORE, the SBDC and other stakeholders – and created the Business Alliance of Tuolome County. They streamlined their offerings and each entity concentrated on what they did best.  They organize 25 basic classes a year in workshop format in everything from business plan basics to marketing to social media; and they started an enhanced counseling program with CDBG funds for businesses in the city of Sonora.

In 2012, Larry organized the Central Sierra Economic Development District that includes Alpine, Calaveras, Tuolome, and Mariposa counties as well as a handful of cities. They share resources and provide classes. This year their main goals will be to expand broadband connectivity outside the towns and expand support to microbusinesses.

IMG_1825In another effort, Larry and his team marshaled resources and leveraged relationships to open the InnovationLab in September 2014.  They partnered with UC Merced and others, raised just $35,000, negotiated very cheap rent with the county, and cut the ribbon on a collective space that includes a networking/co-working space, a computer lab, an electronics lab, a hard tool workspace, a 3-D printing lab and more. They should break even in six months and after two months are well on their way.

Before Larry started, the county’s economic development strategy was based on chasing smoke stacks, or business attraction.  The idea of business attraction needs to be reformed, and alternative incentives need to be developed. Cash and tax give-aways aren’t the only thing.  Larry and his team are using free rent in vacant government properties and connecting potential businesses with local investors. They’re beefing up the STEM curriculum in the high school and community college. Attraction at any cost has to go” says Larry.  “We need to think of the types of businesses that would provide sustainable, long term economic growth for the community.”

The type of businesses Larry and his team try to attract to Sonora are small technology companies and family-based businesses that are squeezed out of the Bay Area. Family-based businesses aren’t worried about shareholder value; they have a stake in their community and have an expanded sense of what it means to be successful. If a business is all about the bottom line, then at some point or another, that business is bound to leave.

IMG_1831It’s not all about hi-tech. Larry helped Mountain People Organics, an organics buying club, find space in the old National Guard building for 20 cents a square foot. Two days a week, the space holds MPO’s buying club, as well as a farmer’s market with organic food producers and craftspeople – collectively called The Farmory. Larry and his team connect the microbusiness owners with the resources the county and city have to offer. I couldn’t resist supporting at least a couple of the local businesses.

Over lunch, I asked Larry how successful Tuolomne’s economic development strategy is in terms of jobs and businesses. After letting us know that the occupancy rate is 98%, he laughed and said “we know we’re doing a good job when the owner of the restaurant bakes you cookies.” All kidding aside, Larry says that the challenge is to develop metrics that truly reflect the improvements in business and the improved entrepreneurial ecosystem so that businesses are committed for the long haul.

The Bottom Line: Investing for Impact on Inequality in the U.S.

bottomlinecoverThe Bottom Line: Investing for Impact on Inequality in the U.S.
by The Aspen Institute

published on December 17, 2014

The Bottom Line: Investing for Impact on Economic Mobility in the U.S. recognizes the importance of learning from all sectors in tackling any challenge. Specifically, it builds on opportunities in the growing impact investment field. The report draws on the lessons from market-based approaches to identify tools and strategies that can help move the needle on family economic security. In this report, you will find the following:

  • „„Case studies – An opportunity to go under the hood on deals with the Bank of America, W.K. Kellogg Foundation, Acelero Learning, and others;
  • Point of view essays – Insights and lessons from leaders in the field;
  • Deals at a glance – Snapshots of impact investors and what they have learned, including the Kresge Foundation, Living Cities, and the MacArthur Foundation; and
  • Survey results and lessons learned – Trends among active and emerging players in the U.S. impact investment field and the lessons that can be applied to economic mobility in the U.S.

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