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ACA Enrollment Starts November 15

The second year of Affordable Care Act insurance exchanges begins November 15th. That day will be the beginning of open enrollment allowing millions of Americans to sign up for health insurance for 2015. Californians can shop for 2015 insurance policies on Covered California.

Key dates:

  • November 15, 2014: Open Enrollment begins.
  • December 15, 2014: Deadline to enroll in health insurance plan for January 1 start date.
  • December 31, 2014: Coverage from ANY 2014 plan ends.
  • January 1, 2015: 2015 coverage begins for anyone enrolled prior to December 15, 2014.
  • February 15, 2015: Open Enrollment closes for 2015 coverage. Only those qualifying for ‘special enrollment’ will still be able to apply. Special enrollment requires one of the following events: marriage, birth/adoption, loss of coverage (including changing jobs). Medicaid/CHIP applicants, as well as any SHOP applicants, can enroll at any time throughout the year.

$$$: Penalties/Fees/Taxes

  • Beginning in 2014, Americans without health insurance are required to pay a penalty on the following years taxes. In 2014, the penalty was the greater of 1% of income or $95. This penalty should be paid on your 2014 tax return, most often filed in spring 2015.
  • In 2015, the penalty for not having coverage increase to 2% of income or $325, whichever is higher. This would be paid on your 2015 tax return, most often filed in spring 2016.
  • Tax Credit: Available to small businesses that purchase insurance through the SHOP exchange. This is retroactive (meaning you can claim if you paid for employee premiums).

More information on 2015 ACA  is available.

MMS Year End Report

We’ve come to the end of our first MMS program year and want to share the outcomes. We appreciate everyone’s participation in the program and look forward to working together in the coming year to further build success. Three organizations participated in the pilot — CDC Small Business Finance in San Diego, Women’s Economic Ventures in Santa Barbara and Ventura Counties, and Working Solutions in the Bay Area.

Loan-Volume

In this first year all our participating organizations have:

  • Seen their lending activity increase, with one organization almost doubling the number of loans made over the 2012 program year.
  • Become proficient using the MMS program, including the Auto Review, Required Document List and communication with Accion Texas underwriting
  • Learned the MMS underwriting parameters, and have begun to identify modifications they may want to make to customize the underwriting criteria.

As a cohort, the three members of the program now constitute the fourth largest microlender in the CAMEO network with 85 loans funded. On average, lending by the cohort has increased 150% in first year of this pilot. A fourth organization, Opening Doors in Sacramento, has joined the cohort.  We can’t wait to see what they do!

Download the Executive Summary for more information.

 

Micro Lending Academy: Profit and Loss Statements

Micro Lending Academy: Profit and Loss Statements

The Profit & Loss statement is a fundamental business management tool for your clients. What does a lender look for? Susan Brown shows how to view the P&L through a lender’s eyes to help you work more effectively to prepare clients for a loan application.

Download the slidedeck here and listen to the webinar below:

About the Presenter

susan-brownSusan Brown‘s job is to provide you with facilitation, guidance, information, support and collaboration to make your work effective, connected to your values and aligned with your goals. Economic justice and values-driven economic development have been her primary focus during her entire professional life.  She brings these long-standing passions to her work along with an eclectic set of life experiences to provide a mature, in-depth perspective to individual and organizational change and growth.

CAMEO, Opportunity Fund Receive PRIME Grants

The U.S. Small Business Administration has released its list of PRIME grantees, and CAMEO, Opportunity Fund and PACE have received grant funds.  “PRIME grants are an important vehicle for the SBA to provide ladders of opportunity to underserved, economically disadvantaged small business communities. These micro-loans have a macro-impact by spurring economic growth, creating jobs, and propelling small businesses forward,” said SBA Administrator Maria Contreras-Sweet.

“PRIME funding is crucial to building the infrastructure that helps our small and microbusinesses start, grow and thrive,” Claudia Viek, CAMEO’s Chief Executive Officer, said of the program. “When businesses receive assistance from CAMEO members, they have an 80% success rate and create 2 additional jobs over 3 to 5 years.”

Full text of the press release below.

SBA Awards PRIME Grants to CAMEO and Opportunity Fund

Grants to aid organizations that help disadvantaged small businesses in Northern California

SAN FRANCISCO - The U.S. Small Business Administration (SBA) announced the recipients of SBA’s Program for Investment in Micro Entrepreneurs Act (PRIME) grant awards, including funds for California Association for Micro Enterprise Opportunity (CAMEO) to build capacity amongst local Micro-Development Organizations (MDOs) and Opportunity Fund to bolster its alternative loan program.

“PRIME grants are an important vehicle for the SBA to provide ladders of opportunity to underserved, economically disadvantaged small business communities. These micro-loans have a macro-impact by spurring economic growth, creating jobs, and propelling small businesses forward,” said SBA Administrator Maria Contreras-Sweet.

PRIME grants are intended to help qualified community-based organizations provide training to small businesses with five or fewer employees that are economically disadvantaged, and businesses owned by low-income individuals, including those who live on Indian reservations and tribal lands.

Twenty-four nonprofit organizations from 16 states and the District of Columbia were named this year. Grant awards ranged from $94,000 to $250,000 and totaled $3.5 million. The grants require a 50 percent matching funds contribution by each recipient organization.  CAMEO received a grant for $175,000 and Opportunity Fund received a grant for $150,000.

CAMEO is California’s statewide micro-business network made up of over 170 organizations, agencies, and individuals dedicated to furthering Micro-Business development in California. They expand resources and build capacity for their member organizations, which provide micro-entrepreneurs with financing such as loans and credit, technical assistance and business management training.

CAMEO was one of only four organizations selected for Track II PRIME funding, which concentrates on assisting qualified MDOs to build capacity by applying new technology.  CAMEO’s program will target 50 MDOs in California – to teach and support adoption of a business planning phone app and ACCION Texas’ Microloan Management Services platform. The goal is to increase organizational efficiency and decrease costs.

“PRIME funding is crucial to building the infrastructure that helps our small and microbusinesses start, grow and thrive,” Claudia Viek, CAMEO’s Chief Executive Officer, said of the program. “When businesses receive assistance from CAMEO members, they have an 80% success rate and create 2 additional jobs over 3 to 5 years.”

Opportunity Fund is an SBA-approved Micro-lender and provides direct financing and technical assistance services to entrepreneurs throughout Northern California.  A not-for-profit financial institution, Opportunity Fund advances the economic well-being of working families by helping them earn, save, and invest in the future.

Opportunity Fund will use its PRIME grant to bolster its EasyPay loan program. The EasyPay program is an innovative alternative loan product that enables underserved small business owners access to technical assistance and capital, ranging from $5,000 to $100,000.  Loan payments are automatically deducted from their daily credit/debit card sales of the small businesses. Instead of making monthly installment payments, EasyPay borrowers base their loan repayment on their actual credit/debit card revenue by “splitting” a small, fixed percentage of each card transaction toward loan payments. Offered at low or fixed interest rates, EasyPay provides a convenient and efficient way to meet the capital and technical assistance needs of small businesses while helping these borrowers build a bankable credit history.

“EasyPay is designed to bring fair, transparent advice and capital to small business owners besieged by a growing number of high-cost, unregulated ‘alternative lenders,’” said Eric Weaver, Opportunity Fund’s Chief Executive Officer. “This grant will help us continue to expand access to affordable capital and the advice entrepreneurs in California need to invest in their businesses, create jobs, and stimulate the local economy.”

For more information on PRIME grants and a list of this year’s awardees, visit http://www.sba.gov/content/prime-grantees.

CAMEO Members Host Etsy Classes in Santa Cruz

The Santa Cruz Sentinel featured a front-page story this morning on the Etsy classes offered by Santa Cruz County, and several CAMEO members were mentioned as supporting the event! There are over 400 Etsy sellers in Santa Cruz County, and more than 90 county residents signed up to take the classes.

Barbara Mason, Santa Cruz County’s economic coordinator, contacted Etsy after learning Santa Cruz County has 400 active Etsy sellers. She didn’t expect a call back from Chief Executive Officer Chad Dickerson. Bottom line: Santa Cruz County is the fourth in the nation to offer craft entrepreneurship classes.

About a dozen organizations including the Central Coast Small Business Development Center contributed funding or time to make the classes possible. … Pricing will be covered this week along with resources such as El Pajaro Community Development Corp., an incubator, Opportunity Fund, which makes loans of up to $5,000, and micro-lenders associated with the California Association for Micro Enterprise Opportunity.

(read more)

 

Women’s Small Business Ownership Act

Senator Maria Cantwell (D-WA) has introduced the Women’s Small Business Ownership Act of 2014. The bill nearly doubles funding for Women’s Business Centers, increases federal contracting opportunities for women-owned small businesses, and increases microlending.

From the bill summary:

Women’s Small Business Counseling:Currently, there are 107 local non-profit organizations that host the Women’s Business Centers located throughout most of the U.S., which help more than 150,000 clients annually and is overseen by the SBA Office of Women Ownership. This legislation would reauthorize the Women’s Business Center program through fiscal year 2019 and nearly doubles funding authorization from $14.5 million a year to $26.75 million a year, while establishing clear rules and metrics to evaluate the success of each center.

Women’s Small Business Contracting:This legislation would authorize sole source awards to women-owned small businesses, creating parity for the Women-Owned Small Business program in terms of federal contracting opportunities. Under current law, women-owned small businesses are not eligible for sole-source contracts from the federal government. The federal government has a goal of awarding 5% of federal contracts to women-owned small businesses. This goal has never been reached and this bill will help the federal government meet that target. Had the goal been achieved, is it estimated women-owned companies would receive another $4 billion in federal contracts each year.

Access to Capital: The legislation would allow lenders in the SBA Microloan to increase overall lending capacity from $5 million to $7 million and improve the program to better meet the needs of borrowers through offering more flexible loan terms, improved technical assistance, and reallocation of resources to high performing lenders. The SBA Microloan program allows intermediaries to issue loans up to $50,000. Current law limits micro lenders from spending more than 25% of the technical assistance on a potential borrower. This provision was originally included in the pilot program legislation to make sure intermediaries did not use all of their technical assistance funds to assist businesses that did not have the potential to become borrowers. Your legislation eliminates this requirement to better assist prospective borrowers and provides lenders with more flexibility.

You can help support the bill by following the Senate Small Business Committee on Facebook and Twitter.

Barriers to Women’s Entrepreneurship

Barriers-to-Women's-Entrepreneurship21st Century Barriers to Women’s Entrepreneurship
Majority Report of the U.S. Senate Committee on Small Business and Entrepreneurship
Maria Cantwell, Chairwoman

Published 23 July 2014
Key findings from the report include:

Women entrepreneurs still face challenges getting fair access to capital. Only 4 percent of the total dollar value of all small business loans goes to women entrepreneurs. The report proposes expanding microloans and makes SBA’s Intermediary Loan Program permanent to provide more capital to women entrepreneurs.

Women entrepreneurs still face challenges getting equal access to federal contracts. The U.S. Government has never met its goal of awarding 5 percent of federal contracts to women-owned business. If they did, women-owned businesses would have access to marketplace opportunities worth at least $4 billion each year. The report proposes changing federal law giving women-owned businesses the opportunity to win sole source federal contracts.

Women entrepreneurs still face challenges getting relevant business training and counseling. Although Women Business Centers are in nearly all 50 states and they successfully provide specialized counseling and training to women business owners, these centers have not been re-authorized since the 1990s and funding has remained flat for the same time period. The report proposes reauthorizing and funding the centers to provide adequate training and business counseling to women entrepreneurs, especially low income women.

Read the report.

The report was the focus of a Senate hearing also held on July 23, 2014 – Empowering Women Entrepreneurs.

Women’s Economic Priorities

Women's-Economic-PrioritiesWomen’s Economic Priorities
U.S. Women’s Chamber of Commerce

Published July 2014

Women are an important force in America who have, for too long, been undervalued and underrepresented in political leadership and policy making.

Our multi-decade march into the American workforce, business ownership, household leadership and consumer spending has elevated women into true leadership of the American economy. And now, we are also The Majority Vote.

However, even with our sizeable contributions to and influence on the American economy, we recognize there is much left to do to support women’s economic opportunities, independence, security, values and family well-being.

The purpose of this report is to highlight the contributions of women to America, outline our current economic condition and state clearly the types of federal budget and policies that are vital to support Women’s Economic Priorities.

The new role for women’s economic and political leadership has begun as we focus or influence, detail specifically our contributions to America, our views and needs and strongly assert our influence through aligning our votes with those who support us. We call upon America’s political leaders to answer our call.

We are students, workers, mothers, business owners, retirees, consumers and The Majority Vote.

We are the New American Leadership.

(read more)

Growth of Microlending: Disruption, Adoption

This newsletter is chock-a-block with articles, resources, technology, success stories, interviews, and big picture ideas on all Lending Academy features. This edition revolves around the disruptive changes that are popping up on a regular basis and providing challenges and opportunities for our sector.

In this Issue…

  • State of Microlending, June 18 Meeting with CDFIs
  • News: Alternative Lenders Abound
  • MMS Update: Working Solutions Adoption and Growth
  • Dealing With Disruption:  Revenue-based Lenders
  • Best Practices:  Small Dollar Credit Tool
  • Success Story: Pedro Zerpa, Fusion Peruvian Grill
  • Training Opportunities

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State of Microlending, CDFI Meeting June 18

Wells Fargo, CAMEO and number of California CDFIs gathered in Sacramento on June 18th for a dynamic conversation about the state of microlending in the Golden State. Hosted by Wells Fargo’s Community Development Manager Tim Rios and co-sponsored by CAMEO, the goal was to identify challenges and solutions to expanding CDFI lending activity.  CAMEO and the Wells Fargo Community Development team were there to ask questions, listen and gain understanding of the needs of California’s CDFI community.

News

Technology: MMS Update -

Disruption Necessitates Change

Working Solutions understood early that the onslaught of new online lenders meant that they’d need to do something to compete.  So they joined CAMEO’s Microlending Management System (MMS) last year and are on track to double their number of deals this year.

Susan Brown talked to the organization’s executive director, Emily Gasner, and reports that Working Solutions gets a gold star in adopting MMS, but there were some bumps in the road that they had to overcome.

To learn more about how MMS can help make you more competitive with new online players, contact Susan Brown!

CAMEO thanks Rabobank for understanding that microlenders face challenges and competition from new industry players.  Rabobank supported us in the rollout of our MMS program.

Dealing with Disruption: Revenue-based Lending

The combination of online technology and investors who seek higher returns has created a flood of online business lending companies.  Navigating the space is challenging, even for an experienced borrower.  Rates, loan structures, fees, terms, etc can be hard to discern from the websites.  To that end, we will try to keep members up-to-date with current trends.  CAMEO wants to provide you – our business development and training professionals – with this information so you can help your clients determine which funding opportunities are most appropriate.

This month Shufina took a look at revenue-based lenders – those lenders whose repayment structure depends on revenues and receipts – one subset of small-capital, short-term lending that takes careful analysis to understand.

Best Practices:  Small Dollar Capital

The Center for Financial Services Innovation published a new guide – The Compass Guide to Small Dollar Credit.

  CFSI convened a network of expert advisors to develop a set of guidelines and best practices for high-quality small-dollar credit as part of their Compass Principles program.  The Compass Principles are aspirational guidelines to assure quality innovation and execution in financial services – services that enable people to transact, borrow, save and plan in ways that are beneficial to the consumer and profitable for industry.

Even though these guidelines are for consumer credit, the recommendations apply to small-dollar business credit.  The guide can be used as a framework for assessing your product and as a tool for training your staff and clients.

Success Story: Pedro Zerpa, Fusion Peruvian Grill

Pedro Zerpa ran his restaurant, Fusion Peruvian Grill, for three years, when he realized that he could increase his bottom line by adding a bar. He obtained the liquor license, but needed money to build out a bar area. Due to some past credit problems, Pedro was not eligible for a bank loan. He had his loan check in hand nine days after Working Solutions’ MMS loan system approved him.

Training Opportunities: 10,000 Small Businesses Financing Initiative

microbusiness trainingOFN and Goldman Sachs have committed to helping mission-driven small business lenders grow to better serve small businesses by launching the Goldman Sachs 10,000 Small Businesses Financing Initiative. This program kicks off with three identical workshops offered by OFN across the country, starting in late July.

The curriculum combines innovative approaches to marketing, culture, technology, operations, and leadership with elements of the Goldman Sachs 10,000 Small Businesses program for entrepreneurs adapted for small business lenders.  We here they might waiting-list only.

CAMEO’s Individualized Learning Program for Trainings and Professional Development can be used to partially defray trainings, workshops and events that help develop leadership and improve operations of our member organizations.  Learn more on how to access this member benefit as well as other training opportunities.

Revenue-based Lending

Written by Shufina English

The combination of online technology and investors who seek higher returns has created a flood of online business lending companies.  Where there once was  a handful, there now are dozens, hundreds maybe.  Navigating the space is challenging, even for an experienced borrower. Rates, loan structures, fees, terms, etc can be hard to discern from the websites. CAMEO want to make sure that you – our business development and training professionals – keep up with this proliferation and help your clients determine which funding opportunities is most appropriate. To that end, we will try to keep members up-to-date with current trends.

For our first look into the this very vast arena, we look at a subset of business lenders whose loans are based on revenues and receipts. They offer small-capital, short-term loans.

Today, we look a four such lenders, including CAMEO member Opportunity Fund.  And while there may be other lenders, the same methodology can be used to analyze them. The chart below shows how much money it would cost a business owner to borrow funds from these lenders.  For comparison, we assume a $10,000 business loan for 12 months, and the borrower pays the average fees.

When reviewing the costs of short-term funding, we mostly talk about fees, not interest rates. The inconsistent terms can be confusing, even deceptive in some cases. But nevertheless, for our borrowers protection, we need to calculate the actual amount that the borrower will need to pay back over the time of the loan and need to do so in annualized terms, so that borrowers and their business counselors can compare it to the business’ margins, which is an annual calculation. Without that apples-to-apples comparison, a business owner can’t make an informed and productive borrowing choice. Borrowing at a annual rate that exceeds a business’ margins, will sink a business and rob it of its profits.

In the case of both On Deck Capital and Kabbage, a typical borrower can expect to pay back the principal (amount borrowed) + 15% of the amount borrowed. Based on these numbers, borrowing $10,000 will cost $11,500. However, the interest rate is not 15%. In fact, the effective annual interest on these loans can be up to 60% depending on terms!

The inconsistent terms can be confusing, even deceptive in some cases. But nevertheless, for our borrowers protection, we need to calculate the cost of capital (whatever its called) in annualized terms, so that borrowers and their business counselors can compare it to the business’ margins — which is an annual calculation. Without that apples-to-apples comparison, a business owner can’t make an informed and productive borrowing choice. Borrowing at a annual rate that exceeds a business’ margins, will sink a business and rob it of its profits.
The difference between the amount paid back and the effective annual interest rate is primarily due to two factors.

  • The period for repayment in this example is six months, and not a year.
  • The borrower is paying back the principal throughout the term of the loan / merchant cash advance.

In other words, if you average out the amount owed during the life of loan it’s about half of the original amount taken. Problems arise for borrowers who do not effectively predict their receivable cash flow because the penalties for insufficient funds accumulate daily and are added to the principle.

Analysis

Kabbage is acceptable for the 1 or 2 person eBay, Amazon, or Etsy merchant, who has a CLEAR understanding of their cash flow and sales cycle, and ideally will qualify for a lower interest rate. Although Kabbage’s fees are higher than the others, they are approximately half the cost of a traditional merchant cash advance, and can be considered for the online business owner who needs cash immediately for a business growth opportunity.

Opportunity Fund’s Easy Pay is best short-term loan provider for small businesses in this category.  Opportunity Fund’s EasyPay product is appropriate for brick and mortar businesses and businesses that have trouble getting loans from traditional banks. A loan from Opportunity Fund is approximately half the cost of any national competitor, and approximately a quarter the cost of a traditional merchant cash advance.  Business owners will realize a lower cost of funds by taking a longer payment plan.

Paypal Working Capital offers the cheapest source of funds to small businesses.  However, the amount of available capital is tiny and requires the client receive lots of payments via Paypal.  The maximum amount one can borrow is 8% of annual Paypal collections.  For example, if the client does $15,000 in revenues per month or $180,000 per year through Paypal, the maximum amount available to borrow would be $14,400  ($180,000 x .08).

 

On Deck Capital Kabbage Paypal Working Capital Opportunity Fund
(Easy Pay)
Type of Business Online and Offline Online merchants that collect via PayPal or sell through eBay, Amazon, or Etsy Online merchants that collect via PayPal Offline
Value of loan $5,000-$250,000 (typically $30,000-$35,000) $500-$50,000 $1,000-$20,000; capping at a maximum of 8% of annual PayPal sales $5,000-$100,000
Length of Loan 3 to 18 months (typically, 6) 6 months 3 to 11 months, depending on the plan 12-48 months with no prepayment penalty
Origination Fee / Fee Deducted From Funds 2% None None  5%
Cost of Funds Typically 15% of the amount borrowed for a 6 month loan 8% – 24% of the amount being borrowed 3%-10% of the amount borrowed; the shorter repayment term, the lower the rate 8.5% – 15%
Collection Process Deduct fixed amount from bank account on a daily basis 6 monthly payments with the first two being a greater amount A fixed percentage from 10% – 30% of funds deposited into your PayPal account A fixed percentage of credit and debit sales, no more than 10% of overall sales
Credit Building Opportunity Yes.  You build your credit score. No No Yes.  You build your credit score.
Cost of Funds for $10,000 loan for 12 months  $3,460 $3,200 $1,300 $1,760
Notes Assumes 2 six- month loans @ 15% with 2% fee Assumes 2 six-month loans @ 16% (average between 8-24%) Assumes 1 eleven-month loan at 10% and 1 one-month loan at 3% Assumes 1 twelve-month loan @ 12% (average between 8.5 – 15%)