Making a Difference : ONE LENDER’S APPROACH: Teach Business Basics, Then Loan Money
The non-profit Coalition for Women’s Economic Development has a record any bank would envy: a near-zero default rate on its loans. Yet it makes loans that no bank would touch--a few hundred dollars to untested individuals, often single parents, starting very small businesses. Their secret is thorough, subsidized business training.
“They gave me confidence. When I had questions, they had answers, plus all the support. You can be very creative and have all these ideas, but if you don’t make money at it, it’s just a hobby.”
One person’s experience:
Pam Jorgensen of Long Beach heard about the Coalition for Women’s Economic Development through her local chamber of commerce. An artist who does menu designs for restaurants, murals on homes and renderings for real estate companies, Jorgensen was constantly running to the copy shop. Her $1,000 loan to buy a copier constitutes an achievement not only because she got the money, but because she “earned” her loan by attending CWED seminars on running a business. She continues to receive technical assistance
HOW IT WORKED:
Though she could have waited and taken a seminar series closer to home, Jorgensen was so anxious to get started she drove to downtown Los Angeles in her aging car once a week for six weeks to begin training to qualify for her loan.
BRAINSTORMING:
“Everyone had to have an idea of what they were going to do. Some of these people wanted to have a basket store. (But) you need something that’s going to be unusual. If you don’t have an idea, they’ll help you. It’s very energizing.
“They really work with you. They teach you how to run a business. They don’t just give you the money and that’s it.”
The session was followed by a graduation ceremony and progression to the next stage, a 12-week program leading to a final decision on the loan:
BUSINESS PLAN:
“Everyone had to have already been in business. We talked about our business in a five-minute presentation. We had to find out about other businesses in surrounding areas. Most of the women were very easy to get along with and everybody has different ideas and approaches and we usually get our ideas from a series of things.”
(CWED) gave us a book and in that book are different sections. I had to really push myself. (But) you come home and everything you need to know is in that book.”
PRESENTATION OF PLAN:
“I gave it to (CWED official) Isabel Duran. After they reviewed that, I had to go to Los Angeles and talk to (officials at) CWED. (I got) to know them and talk to them.
“They believe you. It helps your self esteem and it gives you more confidence. You have a responsibility. You don’t want to let them down. I have to deliver things on time. You have to pay back loans on time.”
LOAN COMMITTEE DECISION:
Yes, in Jorgensen’s case.
LOAN ISSUED:
“I went and got my Xerox that day. I went to Office Depot and I bought a couple of reams of paper. I Xeroxed the Xerox book. I just wanted to see how the Xerox looked.”
WHY IT WORKS:
Jon P. Goodman, director of the entrepreneur program at USC:
They provide management or entrepreneurial training as well as access to capital. All the research shows us very clearly that businesses don’t fail because of lack of capital. It’s lack of knowledge. There’s lots of theoretical information. There are all sorts of texts and trade books. But one of the first rules of the game is that no one tells you the rules of the game. You need someone out there who’s been digging in the trenches with a teaspoon. They literally empower people through training and education.
Ted Berkowitz, manager of industrial development for the City of Los Angeles:
Entrepreneurial training and loan programs are the most difficult to put together because there aren’t any lenders willing to put together start-up loans. One of CWED’s programs was patterned after a program in Bangladesh. They’re the only group that uses the support group concept. That has made them the best provider for the microbusiness.
