EDITOR'S NOTE: Luis Granados is the Executive Director of the Mission Economic Development Agency (MEDA) in San Francisco. MEDA is a community-based, economic development agency based in San Francisco with the mission of achieving economic justice, via asset development, for low- and moderate-income Latino families. In CFED’s recently released report and research brief, In Search of Solid Ground: Understanding the Financial Vulnerabilities of Microbusiness Owners, we found that 55% of respondents to our survey could cover only one month or less of business expenses including 30% with no savings at all. In this blog, Luis tells us what MEDA is doing to help microbusiness owners tackle savings and other financial issues that often weaken their capacity to survive and grow.
Plaza Adelante, the neighborhood center of the Mission Economic Development Agency (MEDA), welcomes financially challenged, budding entrepreneurs every day. There are two things these new clients have in common: a dream of starting their own business and the need of capital to make that dream a reality.
New Report on Personal Finances and Small-Business Ventures
The Corporation for Enterprise Development (CFED), an organization with the goal of expanding economic opportunity, has published a comprehensive analysis of the fiscal realities of starting and running a business.
Entitled “In Search of Solid Ground: Understanding the Financial Vulnerabilities of Microbusiness Owners,” this financial services report notes that microbusinesses account for approximately 92% of all U.S. businesses and 26 million jobs. The report also details how a microbusiness owner’s personal and business finances are closely intertwined and how a lack of savings can increase the vulnerability of microbusiness owners. In fact, the report states that 55% of survey respondents could only cover one month or less of business expenses including 30% who had no savings at all.
MEDA’s History Fostering Small-Business Creation
With 40 years of assisting financially challenged individuals with small-business issues, MEDA is up to the difficulties that come in this process. In 2013, MEDA helped clients create 36 new businesses, while 286 businesses were assisted in other capacities.
Edwin Rodriguez, MEDA’s Business Development Program Lead, has guided scores of deserving clients through the steps to open a small business. He understands that a poor credit score and paucity of personal savings can hinder this process.
“The free Business Development workshop at MEDA comprises five sessions. The third session’s focus is on the personal finances of the prospective entrepreneur. This covers credit, debt and savings, plus how to set goals to achieve personal financial security,” explains Rodriguez. “MEDA’s service integration model translates to there being a common thread of financial capability among all programs.”
Once the workshop has been attended, MEDA offers expert one-on-one coaching. Part of this coaching entails offering ideas on how to obtain needed funding for the business venture. MEDA also offers an Individual Development Account (IDA) program through our partner, EARN, which is one of the two largest providers of goal-based savings accounts in the U.S. MEDA helps its client determine the capital needed to start their venture and devises a savings strategy. Let’s say $5,000 is needed to start the business. The client then saves and deposits money into their IDA, with the funds matched by an amount determined by EARN.
In addition to encouraging microbusiness owners to save, MEDA has a number of relationships with partnering organizations to help microbusiness owners access affordable credit. Through our partnership with the Mission Asset Fund we assist borrowers in joining a lending circle that provides capital and an opportunity to increase their credit score. Our partnership with Kiva Zip gives us the opportunity to coach microbusiness owners who need small dollar loans to post their profile on Kiva’s web site to find social investors willing to lend to their business. For businesses that need loans up to $50,000 we partner with Valley Economic Development Center’s (VEDC) MicroEntrepreneur Fund and for loans up to $100,000 we partner with Opportunity Fund’s micro-lending program. Through all of these partnerships we are helping microbusinesses receive loans all across the credit spectrum which aids in the creation of hundreds of new jobs.
Client Success Story: Maria Alonso, Perfumes and Accessories Alonso
Maria Alonso, an Immigrant from Puebla, Mexico, came to MEDA with the dream of starting a fashion business. With assistance from MEDA’s Business Development team, Maria opened Perfumes and Accessories Alonso in 2013 in the heart of San Francisco’s Mission District.
How did MEDA help Maria overcome personal financial issues to start her own small business? MEDA combined a trio of MEDA’s partner services. First, Maria was advised to open an IDA account, where she saved $2,000 and received back a total of $6,000. Second, Maria participated in Lending Circles to increase her savings for her business. Finally, MEDA taught Maria how to apply for a business loan through Kiva Zip. Harnessing the power of MEDA’s partners, Maria found the necessary funds to start her small business.
In Conclusion
While the idea of starting your own business can be intriguing, the financial needs can be daunting. MEDA is about solutions, guiding its clients through the complex web of issues that create a hindrance to getting personal finances in order to be able to start a business. MEDA takes that client through the financial steps required to make their venture a success.
If you are interested in free business development workshops, please contact MEDA: (415) 282-3334 ext. 101; business@medasf.org.