COVID-19 Economic Response and Recovery
Retool Incentives to Support Small Businesses
Action:
Retool existing incentive programs to (1) include small businesses and (2) support the hiring of local residents, particularly those with barriers to employment.
Why:
Small businesses are being disproportionately impacted by this crisis and often do not qualify for incentive programs, due to minimum requirements on investment and jobs created. By opening incentive programs to smaller firms, cities can support local businesses through the recession and advance other policy goals (e.g. workforce, equity, living wage, etc.).
Case Study
Business Expansion Incentive Program – Austin, TX
The City of Austin has experienced two decades of rapid growth and expansion, which has led to challenges around equity and inclusion. In 2018, the City adopted new guiding principles, which put “equitable prosperity, opportunity, and affordability” at the center of the City’s economic development policy. The City retooled its incentive programs to align with this policy, prioritizing small and local businesses, hiring residents with barriers to employment, and paying a living wage.
Austin’s Business Expansion Incentive Program offers three types of assistance:
- Local Austin Business: Offers up to 3% wage reimbursement per job/per year maxing out at $1,800, and up to 50% property tax reimbursement. The incentive is available to all registered Austin businesses, which pay Austin’s living wage.
- Targeted Hiring: Provides $3,000 per target job/per year and up to 50% property tax reimbursement for the creation of 1 job in targeted populations or for residents who have barriers to employment, and pay Austin’s living wage.
- Relocating: Offers a 3% wage reimbursement per job/per year maxing out at $1,800, and up to 50% property tax reimbursement for businesses new to the city and creating 75+ jobs over 10 year paying Austin’s living wage.
While still open to larger and relocating employers, typical of most incentive programs, the City’s Local Austin Business and Targeted Hiring programs have eligibility criteria designed to allow smaller, local businesses to qualify for these incentives. Program elements include:
- All incentive projects are evaluated by staff using a cost benefit analysis to determine fiscal impact. Importantly, to ensure smaller local firms can qualify, the City does not require the project to have a net revenue positive impact for the City, but it must be revenue neutral.
- Austin uses a return on investment calculus, which includes a broad definition of community benefits such as development and hiring underrepresented groups; demonstrating diversity, inclusion, and equity practices and policies; neighborhood connection; local partnerships; sustainable business practices; and civic engagement.
- The City provides bonus qualifiers for small businesses, cooperatively owned businesses, businesses, which engage local music and arts community, and businesses that provide on-site day care.
- All three incentives require that qualifying jobs must pay the Austin living wage of $15 per hour.
- All grants are performance based and quality controls include a third-party audit system.
- While most incentive projects must be approved by the City Council, the Economic Development Department is able to negotiate and award incentive deals up to $61,000 per project for a total up to $5 million per year.
Small businesses and MWBEs have benefited from the City’s new individualized focus on smaller incentive deals.
For example, a local minority-owned restaurant, L’Oca d’Oro, agreed to retain 20 individuals over 5 years from the program’s targeted population, and make 10 new hires. In return, the restaurant receives $2,000 annually on a declining basis for each retained employee and $220 per year for each new hire.
Another minority-owned firm, AllPro Hospitality Staffing, committed to creating 10 new jobs under the targeted hiring incentive.
How to Adapt This Approach:
- Review past outcome data to assess the effectiveness of current incentives in advancing inclusive goals
- Engage a diverse set of local business groups, merchant associations, chambers of commerce, and other community stakeholders to determine potential changes to current incentive offerings or identify the need for a new incentive program
- Develop proposed modifications to existing incentive programs, which align with the City’s broader equitable economic development strategy/recovery plan. These modifications could include:
– Opening existing programs to local small businesses
– Targeting incentives to businesses located in LMI neighborhoods
– Incentivizing the hiring of residents with barriers to employment
– Supporting businesses investing in upskilling of existing employees - Revise eligibility requirements to align with these modifications (e.g., reducing new job creation/ retention minimums, reducing investment requirements, reducing the complexity/legislative requirements for incentive approval, setting a neutral fiscal impact standard, including a broader set of community benefits in return on investment analysis, etc.)
- Conduct analysis to model the potential uptake of the modified incentives and assess potential fiscal impact
- Share proposal with stakeholders and incorporate feedback
- Articulate policy case for the proposal to policy makers and secure approval
- Partner with merchant associations, local/ethnic chambers, and other community groups which are trusted partners in the communities, to drive outreach and promote the modified incentives.
- Track and publish KPIs on a regular basis. Include impact, demographic and neighborhood data on each incentive project. (See KPIs section)
Learn more about the Tactical Guide
COVID-19 Economic Response and Recovery
Provide Technical Assistance to Small Businesses
Action:
Create strategies and partnerships that will make your destination more sustainable and inclusive. And tell that story to visitors
Why:
Since COVID-19, travelers, particularly younger travelers, have a heightened awareness of environmental sustainability and social and racial equity. As a result, they are more likely to look for evidence that destinations are taking steps to address these issues.
Background:
Numerous reports and studies have found that the pandemic has reinforced, even accelerated, people’s views on sustainability, with more consumers focused on helping to create a better, healthier world.
For example, 60% of travelers say that their future booking decisions would be influenced by sustainable initiatives at the property, even if it meant spending a modest premium.
Travelers’ behavior, loyalty, and values are also being redefined by the economic downturn, restrictions in day-to-day living caused by COVID-19, and flashpoint events highlighting systemic racism within our communities.
It is widely expected that the pandemic will accelerate the trend of travelers seeking “travel with a purpose,” with 67% of recently polled travelers saying they want their bookings to make a positive difference for communities affected by the pandemic.
Travelers are also now placing greater importance on pre-trip planning.
Destinations can respond to these trends by developing a shared understanding of what it means to be a sustainable destination.
For example, Sedona, AZ engaged the Global Sustainable Tourism Council to conduct a sustainability assessment of its tourism economy.
The goal was to enable the destination to design and target policies, programs, and campaigns which demonstrate sustainable destination management, maximize economic benefits to the host community, and minimize negative impacts on the environment.
Programs could include:
- Sector-wide sustainable guidelines.
- Technical assistance to small businesses to help them adopt more sustainable practices (e.g., relating to energy and water use, single use plastics and recycling, food procurement, laundry operations, and reporting).
- Destination management tools to “nudge” visitors around the city, to manage crowds, and/or to help tourists engage local communities.
- Investments in green infrastructure.
- Communicating the destination’s commitments to travelers.
Case Study
City of Boston
In 2020, the City of Boston drew down $2.5M of CARES Act Federal relief funding to launch a marketing campaign to market the city to Black and Brown residents and visitors.
The campaign’s goals were to “build Boston’s brand as a travel destination, increase awareness and active promotion, and drive visits to Boston from diverse local and regional visitors.“ It was part of the city’s strategy to build back a stronger and more equitable economy.
In particular, the campaign sought to “examine the ways in which Boston communicates about the offerings of the city, and highlight attractions and events that speak to the experiences of people of color.”
The Greater Boston Convention & Visitors Bureau selected two award-winning agencies with deep roots in the city. One was Boston’s oldest, minorityowned and operated marketing communications agency. The other was a Boston-based, minority owned, award-winning creative branding, design,
and advertising agency.
They soon discovered that the city had allowed others to create a narrative of Boston as an all white, masculine, sports- and alcohol- dominated city. Visitors and some residents had low awareness of the city’s vibrant Black neighborhoods, and the contributions of Black and Brown residents to the city.
The campaign featured different Boston neighborhoods with neighborhood maps and guides and short-form videos, as well as social media influencers from some of the city’s oldest Black neighborhoods. It also celebrated Black and Brownowned businesses in local and national media, in order to drive local spend.
Like many campaigns during the pandemic, its primary audience was local residents. However, as travel becomes safer, the city plans to continue its efforts to encourage a wider audience to change their perceptions and, ultimately, actions.
Learn more about the Toolkit
Action:
Leverage the expertise, resources and networks of Community Development Financial Institutions (CDFIs) to support LMI neighborhoods and MWBEs.
Why:
By partnering with CDFIs, banks, and philanthropy to develop tailored loan programs, you can extend your impact, even during a time of austerity.
Case Study
New York Forward Loan Fund (NYFLF) – New York
NYFLF is a new $100M loan program to help small businesses, nonprofits, and small landlords in the state reopen following COVID-19 closures. Loans are focused primarily on small MWBEs and can cover reopening costs (e.g. cleaning supplies, inventory, refitting for social distancing protocol).
Eligible small businesses must have annual gross revenues of less than $3M, fewer than 20 employees, and have not received other SBA COVID-19 relief (PPP, EIDL). Loans must be repaid over a 5-year term with interest.
The fund is administered by LISC New York and loans are made by five CDFIs: Accion East, Community Preservation Corporation, National Development Council, Pursuit, and TruFund Financial Services. The CDFI partners also offer technical assistance for loan recipients.
Since the fund was designed to help small businesses with the costs of reopening, the fund prioritized deploying capital to industries and regions based on their designated reopening dates.
So far, just over $2 million has been awarded to 61 businesses and small landlords. Of these recipients, 54 were MWBEs, and two were veteran-owned businesses. The loan fund continues to accept and process applications, with 60% coming from MWBEs.
How to Adapt This Approach:
- Support the creation of a targeted loan fund by bringing together an investor collaborative poised for rapid deployment. Likely members often comprise CDFIs, banks, high networth individuals, public finance bodies and philanthropic institutions
- Prioritize MWBEs and LMI entrepreneurs in loan eligibility guidelines
- Work with CDFIs to craft and provide culturally relevant and geographically-specific technical assistance programming to MWBEs
- Prioritize low cost, flexible capital products that include offerings for permanent working capital, leasehold improvements, equipment, construction, acquisition and debt refinancing
- Support community-based organizations to help connect MWBEs in their networks to loan opportunities and provide assistance with applications
Learn more about the Tactical Guide
Problem:
Microfinancing is an important tool to assist small businesses with a documented history of success. When businesses are first starting out, they often are unable to get access to capital. And yet, the costs to start a microbusiness can be quite low with some estimates at a few thousand dollars. In some cases, a larger loan may be detrimental if a recipient is not ready to expand the business quickly and will not have the necessary earnings. Through the Small Business Administration, small businesses have received almost $900M in a mix of grants and loans, and have gone on to create almost 250,000 jobs (as of 2017).
These small grants and loans can be critical to enabling businesses to start successfully and can provide an important lifeline to businesses looking to continue operations. New businesses are integral to the success of communities, accounting for high proportions of net new job creation. This funding can be particularly important for Black Americans who start businesses at a slower rate than other groups due to many barriers, chief among them access to funding. This inequality will only get worse with COVID-19.
Action:
Cities should work with local philanthropic partners and community leaders to launch a microgrant program that offers small grants (e.g., $1,000-$3,000) to individuals looking to start businesses. This can be done successfully with minimal city investment; instead, city officials should use their bully pulpit powers to convene local leaders and galvanize support.
Cities should consider leveraging CARES Act funding to jumpstart this action if they have not already allocated funds by the end of 2020. As the economy starts to recover, many people will think about starting a business, as happened after other recessions. Additionally, this action will be more effective if combined with developing an entrepreneurial ecosystem.
Case Study
Minneapolis, MN: Microgrants
Microgrants was launched in Minneapolis by a private philanthropist over 15 years ago as part of an effort to help individuals achieve financial stability. Microgrants awards grants of around $1,000 to jumpstart businesses and cover expenses that would not typically be allowed for traditional loans.
The program, which focuses on Minnesota, awarded $1,200 grants in 2019 to 250 entrepreneurs and small businesses that needed supplies to start or conduct business. An example of a supported business was an entrepreneurial photographer, who booked up within weeks of getting funding to purchase camera equipment. The program partners with local community organizations to develop business plans for entrepreneurs who receive funding and establish clear goals and metrics related to the funding.
One of the main challenges the program has encountered is how to locate and vet applicants. To accomplish this, the team empowered 52 partner agencies that have close ties to the community. These organizations share proposals from residents and help manage the workload, making it easier to facilitate grants for those who can benefit the most.
This model may be suitable for cities that want to launch a microgrants program. With a small initial investment and staff, a team could similarly leverage community organizations.
How To Adapt this Approach:
- Identify local non-profits and philanthropic organizations which could fund and administer the program. The city can help facilitate the creation and initial projects while serving as an integral partner throughout.
- This can be a small pot of money as a pilot program (e.g., $50K, $1K per grant, to offer to 50 individuals)
If possible, partner with a non-profit which already has expertise. - Cities should also consider high net worth individuals and successful entrepreneurs within their communities, who may be willing to sponsor this effort.
- This can be a small pot of money as a pilot program (e.g., $50K, $1K per grant, to offer to 50 individuals)
- Determine which industries are underrepresented in your community and are positioned to grow during the recovery. Direct microgrants to new businesses in these sectors. Kauffman’s “My Sidewalk” program can help with identifying existing resources and which industries have opportunities for growth, as well as speaking with stakeholders in the community to understand gaps
- Secure funding from a philanthropic or corporate partner. Develop and launch the microgrant program.
- Create a marketing and outreach campaign to relevant entrepreneurship support groups. Ensure that explicit outreach is done to groups working with disadvantaged communities and communities of color.
- Track progress from the first cohort and provide technical assistance and support to those individuals (See template in resources section)
Benefits:
- Provides support for entrepreneurs looking to start businesses
- Supports local entrepreneurial ecosystem growth by establishing cohorts and facilitating access to technical assistance
- Low-cost action
Risks:
- Can be poorly targeted and, without structured business planning and support, many supported businesses will not succeed
Impact: Medium
Implementation time: Slow
Cost: Low This can be launched at a very low cost, since it requires a small allocation (e.g., around $50K-$100K) and can leverage partner organizations to handle vetting.
Learn more about the Toolkit
COVID-19 Economic Response and Recovery
Issue Municipal Bonds to Offer Community Loans
Background:
Access to capital is one of the biggest challenges facing low-income people and communities of color. This problem is particularly acute for minority-owned businesses, which face greater challenges accessing capital than white-owned businesses. It also is a problem for people of color looking to obtain mortgages and grow wealth. Black Americans are denied loans at a disproportionately higher rate with some research showing they are denied at twice the rate of white Americans.
Current criteria for issuing loans include determining if people in the applicant’s social networks pay back loans on-time. Even when people of color are granted mortgages, they often end up paying more than their white peers. This impacts their ability to start businesses and obtain mortgages to buy homes and build wealth. And banks are hesitant to issue loans to small businesses without capital and individuals without an established credit history.
Action:
Cities should consider issuing bonds for the explicit purpose of backing and facilitating access loans for local businesses and mortgages for people who would otherwise not have access to financing. By issuing municipal bonds, cities could bring significant capital to be deployed directly to residents and businesses, using objective scoring driven by the city’s policy goals.
While cities are under enormous financial pressure which makes the issuance of additional bonds challenging, research has shown that increased spending during a recession is the most effective way to rebound.
Cities can either issue the loans directly or work with small local banks or CDFIs to do so. Cities will have to be cautious with implementation. Financial counseling will be necessary to ensure that accessing additional funds is right based on each individual’s circumstances, and a city may not have the requisite financial expertise to implement the program.
How To Adapt this Action:
Although a model doesn’t yet exist for this program, this action draws on a proposal for A Homestead Act for the 21st Century by Professor Mehrsa Baradaran from University California at Irvine.
Based on this proposal, cities should follow the steps below:
- Evaluate needs in disinvested communities
- Host community forums and survey people who would want to start a business with available funding
- This outreach must focus on low-income and communities of color.
- Determine how to issue loans to companies
- Cities can directly issue the loans, but this will require significant financial expertise.
- Alternatively, cities can work with local banks and financial institutions (e.g., Black-owned banks, credit unions) and provide backing for loans to be issued to low-income and communities of color based on relevant criteria.
- Neither model means that cities or banks should issue risky loans. Instead, they can prioritize criteria that are indicators of success (e.g., sound business plan, identified service gaps in communities), over ones that often cause Black and other minority-owned businesses to be rejected for funding at higher rates (e.g., lack of credit history).
- Explore potential partners for action to maximize impact and minimize risk
- Many philanthropic partners are dedicated to increasing access to capital for minority-owned businesses. Some may be willing to match funds.
- Minimize risk by seeing if local non-profits, education institutions, community leaders, and businesses will serve as guarantors on loans.
- Determine criteria for issuing loans to businesses and individuals
- Do not use an applicant’s social network to determine loan eligibility. Instead, focus on non-discriminatory factors (e.g., history of paying bills on-time, strength of business plan).
- Engage non-profits, CDFIs, and other community-based organizations to identify gaps in traditional lending sources.
- Launch pilot with alternative funding source (e.g., not municipal bond) to demonstrate effectiveness of loan offerings
- Given the unique nature of offering loans based on a separate set of criteria, a city should launch a smaller pilot (e.g., loans to 5-10 businesses based on the new scoring criteria) to demonstrate success.
- Consider type of bond issuance
- Although revenue bonds, tied to businesses’ potential revenue, may make sense given the bond’s purpose, cities should decide what type of bond issuance (e.g., general obligation bond) makes the most sense given their unique financial circumstances.
- Review and follow the rules set out by the Municipal Securities Rulemaking Board.
- Note: these rules are relevant for all municipal bond issuances.
- Work with city council to obtain approval for bond issuance
- It will be critical to get your city council’s backing for this project. Using researched alternative criteria should not lead to a lower default rate, but there is always inherent risk when issuing loans. Having the support of your city council and Mayor for this will ensure that you are not criticized in the short-term if there are loan repayment issues.
- Leverage pilot findings to show the potential impact of the full bond issuance.
- This bond issuance can help facilitate access to funding for several populations, including:
- Low-income, Black, and other residents of color who need homeowner loans
- Mid-size business support loans (as proposed in this toolkit)
- Note: local circumstances will dictate how loans can be issued. Given states often prevent cities from explicitly considering race, many will want to prioritize residents based on income tracts, or other relevant measures (e.g., access to capital) that will help the city’s most vulnerable residents.
- Issue bonds and launch a marketing campaign to make communities aware of the program and garner interest, with a particular focus on low-income and communities of color.
- Leverage community partners, nonprofits active in these communities, and other relevant community organizations.
- Offer information on this program at community gatherings (e.g., entrepreneurship meetups, financial empowerment center 1-1 meetings)
- Track progress and revise program as necessary.
Benefits:
- Provides capital to people who may not be able to receive it (and at lower rates)
- Stimulates demand in the local economy (e.g., providing capital to residents to purchase homes)
Risks:
- Requires financial expertise to implement
- Assumes additional financial risk during a period of economic crisis
Impact: High
Implementation time: Low
Cost: High. Issuing the loans will require money to be set aside for the program, although repayment should enable the city to recapture investment. Some FTE will need to run the program, though vetting of loans should be done by professionals.
Learn more about the Toolkit
Action:
Help small businesses to pivot, adapt, and capitalize on new opportunities in a COVID-19 world.
Why:
Keeping spending local is critical for economic recovery. By helping businesses meet the needs of surging resilient sectors, develop new sales channels, or create new lines of business; you are creating longer term revenue solutions than subsidies and loans.
Case Study #1
Personal Protective Equipment (PPE) Grant and Procurement Fund – Baltimore, MD
In April 2020, the Baltimore Development Corporation (BDC) established two funds to help Baltimore manufacturers meet local demand for PPE by frontline workers and residents.
BDC created a $150,000 PPE Grant Fund to help manufacturers off-set costs to convert operations to PPE production. The fund awarded grants of up to $15,000 to fund equipment modifications, materials, and labor associated with the manufacturing of specific PPE needs identified by public health officials.
BDC’s ability to engage local manufacturers rapidly was aided by the Made In Baltimore program, which had built communication channels and trusted relationships prior to the pandemic. The program helped to identify and vet which businesses would be able to handle a rapid emergency pivot and response.
Critically, the City allocated $400,000 for a Local Procurement Fund to purchase locally made PPE for frontline City workers. The fund was administered by BDC, which streamlined the procurement process, thereby creating immediate demand for makers and kept City procurement dollars local.
In terms of impact:
- The grant fund supported 15 businesses, 53% of which were women-owned and 33% minority owned. It supported the production of 84,000 masks, 30,000 face shields, and 33,000 gallons of sanitizer.
- The procurement fund contracted 6 businesses, 50% of which were minority-owned or led. It procured 45,000 face masks, 2,500 face shields, and 16,200 isolation gowns.
Case Study#2
Resurgence Small Business Fund – Atlanta, GA
In August 2020, Invest Atlanta, the City’s economic development authority, launched a $17 million fund providing grants to small businesses trying to safely reopen and adapt to the COVID-19 environment.
Eligible applicants can be awarded up to $40,000 and an additional $10,000 for technical assistance in finance, legal, workforce, and technology from 13 business support organizations contracted by the City.
The Resurgence Small Business Fund is weighted towards businesses that are in lower-income communities, MWBEs, long-term growth sectors, longevity of business in Atlanta, those that have not received other COVID-19 relief, and businesses who have demonstrated planning for reopening and adaptation to COVID-19.
It is funded through the CARES Act, and grants are provided on a reimbursable basis.
How to Adapt This Approach:
- Assess the needs of small businesses in the community with a particular focus on which groups of small businesses and neighborhoods are facing the greatest challenges
- Identify the adaptation need/opportunity (e.g., setting up an e-commerce website, retooling equipment to produce PPE, adapting outdoor seating for winter months, etc.)
- Identify which small businesses the program will be designed for. Determine if the fund will focus on supporting all MWBEs; businesses located in LMI areas; a specific sector or business type or some other criteria of need
- Identify and develop philanthropic and/or corporate partners to financially support the program. Leverage City funds to draw in this outside match
- Work with a local CDFI or other nonprofit partner to administer the program, or manage the program directly
Create the program parameters (loans, grants, size, use, terms, eligibility criteria, etc.) based on the City’s policy goals, input from program partners and local stakeholders. Examples of program parameters: Baltimore PPE Fund, Atlanta Resurgence Fund - If applicable, leverage the City’s procurement powers to purchase goods and services from businesses who receive support from the program
- Partner with trade groups, local/ethnic chambers, and other business organizations, which are trusted partners in the communities where the program is focused, to lead outreach, and promote it
- Leverage technical assistance partners to help targeted small businesses apply to the fund
- Maintain a reasonable (e.g. 3+ weeks, include pre-noticing, not first come first serve) window for application submission. Assemble an inclusive application review committee to make award decisions.
- Evaluation criteria could include:
– MWBEs
– Businesses that did not receive CARES Act or other COVID-19 relief funding
– Businesses located in LMI communities
– Businesses with a plan to reopen or adapt to the post-COVID environment
– Length of time operating in the city
– Sector - Add all applicants into a centralized business support database/client relationship management tool (CRM) to coordinate future support
- Provide wrap around technical assistance to businesses who receive funds as well as those who do not
- Track and publish KPIs on a regular basis. Include aggregated demographic and neighborhood data on applications and awards. (See KPIs section)
- Keep partners, particularly neighborhood stakeholders and local business groups updated on progress and any challenges
- Track lessons learned and incorporate into future programming
Learn more about the Tactical Guide
COVID-19 Economic Response and Recovery
Establish a Midsize Business Support Program (e.g., up to $250k loan)
Problem:
Many communities offer programs to start businesses, but less support is given to businesses looking to expand. Access to credit can be difficult, and many large contracts require surety bonds or other guarantees. Yet, businesses with 5-99 employees are critical to the US economy. They account for 29% of all jobs and are often the bedrock of US cities. Supporting these businesses enables them to scale and meet more of the community’s needs. In turn, this expansion creates more jobs and keeps more spending local. Given the growing concerns of the plight of small businesses and the associated economic and employment risks, providing support to help them maintain and expand operations will be critical. This will also help address unemployment and should be done in conjunction with reskilling programs.
Action:
Cities should provide loans through a government-backed fund to help midsize businesses expand and be able to compete for larger government and enterprise contracts. Additional access to capital should be provided as part of a broader program that offers guidance for businesses (e.g., through an entrepreneurial ecosystem).
Case Study
San Francisco, CA: Surety Bonds Program
San Francisco created a surety bond program to enable local businesses to compete effectively for government contracts. For local businesses that need funds to compete for government contracts, the city government will guarantee up to 40 percent of the face amount of the bond, or $750,000. Launched in the mid-1990s, the city started the surety bond program as a pilot program for their international airport expansion project. Based on the positive feedback and success from the pilot, the city established the broader surety bonds program.
The Surety Bonds program was established as a complement to the local business preference program and enables small businesses to compete for government contracts. As long as a business has been deemed eligible, they can apply for the surety bond. All city departments contribute a certain amount of their contracting budget to provide the guarantee for the bonds. Despite concerns about the potential cost of the government having to guarantee loans, only 2 projects with a surety bond have defaulted in the 20+ year history of the program.
Part of this success is due to the associated technical assistance. Most businesses that are receiving support are required to attend the bonding assistance training program. This programming includes assistance for completing bond applications and the pre-bond surety profile, help developing financial statements and establishing internal financial control systems, and how to implement accurate financial reporting tools.
Note: Although the program does not have defined metrics, the attached document highlights what should be considered with implementation. This includes tracking the # of businesses that apply for the program, the number of businesses awarded surety bonds, how many successfully win contracts, and long-term benefits (e.g., if a business is able to compete for other large contracts in the future).
While the San Francisco program focuses on city procurement and government contracting, cities should design programs that assist businesses in contracts with anchor institutions and other large corporations based in your city. Programs can be launched with a focus on government contracting – which may be easier to set parameters for – but with a goal of expanding for all larger contracts in the community.
How To Adapt this Approach:
- Meet with local businesses to understand the existing markets and landscape, and identify opportunities for growth.
- Discuss barriers to growth (e.g., why they are not competing for larger contracts, what they would need to be successful)
- Design program parameters (e.g., maximum loan amount, whether for all government contracts, etc.)
- The program design will vary by local circumstances. Elements to consider include:
- Maximum loan amount: in some cities, a $50K loan cap will be sufficient to enable businesses to expand and compete for larger contracts. For other places, this may be closer to $250K. During discussions with local businesses, review what would be necessary. Loan terms should be long-term, with low-interest (e.g., 2% over 10+ years)
- Government vs. private sector contracts: it may be easier to start with government contracting, but ideally this program would also help the businesses to compete for private-sector contracts.
- Determine the eligibility of businesses (easier if linked to a small business preference program)
- Raise funds to cover surety bond guarantees (for public sector contracts). Surety bonds are often required for public sector projects as a promise that the work will be performed. Getting a bond can be challenging for growing or newer companies as it is often contingent on previously performing projects of a similar size. Cities can raise funds for surety bond guarantees by requiring a certain percentage of each department’s contracting budget to go towards this.
- The program design will vary by local circumstances. Elements to consider include:
- Build oversight and technical assistance capacity (which can be added on to existing technical assistance services). As businesses take out loans, it will be necessary to support them, while ensuring the funds are being used correctly.
- Some businesses may not have applied for any significant loan or financing before. Walking them through this process, and ensuring compliance, will be key.
- This office should also help with bond applications, basic financial controls, and reporting requirements.
- This office does not need to be housed within your city’s economic development agency. It may be better housed within an existing city department.
- Draft program language and propose it to city council and other key stakeholders. (See template in resources section)
- Pilot a small version of the program. The full program could be expensive and will require considerable oversight.
- Collect learnings from the pilot and launch the broader program.
- Ensure that businesses are paid on-time and that there is sufficient oversight. Some cities require local businesses to be paid within 30 days of contracts.
- Track action progress and success, and revise as necessary. (See template in resources section)
Benefits:
- Enables local businesses to access funds and expand faster
- Offers flexibility for businesses, particularly if they are applying for larger government or commercial contracts
- Investments in growing local businesses can provide significant job growth for local communities
Risks:
- Assume financial risk of supporting loans
- Can be problematic if offered without support programs (e.g., financial counseling, entrepreneurial culture)
Impact: High
Implementation time: Medium (pilot), Low (full program)
Cost: High. Although the actual cost of the program may be lower (e.g., issuing loans and receiving payback) it will seem high because it requires expenditures each year, even though it will be repaid. If offering loans between $50K – $250K, and assuming several FTE to run the program, it could cost over a million a year even for a smaller program.
Learn more about the Toolkit
Action:
Work with partners to launch a small (i.e. $1k-$15k) financing product for individuals looking to start or expand their businesses.
Why:
These small grants and loans can be critical to enabling businesses — particularly MWBEs — to start or expand operations and can be done successfully with minimal City investment.
Case Study #1
LISC + Kiva Matching Fund – Indianapolis, IN
In April 2020 LISC Indianapolis established a $75,000 matching microloan program for MWBEs raising money through Kiva, the online crowdfunded microloan platform, which offers zero-percent interest loans up to $15,000, with no fees.
LISC partnered with local community development organizations (CDCs), incubators, and technical assistance providers to act as Kiva trustees. Trustees provide one-to-one support during the application and crowdfunding process, as well as business planning, financial coaching, marketing, and other services to help grow and stabilize the business.
When the trustee endorses the business’s loan, LISC matches dollar-for-dollar the incremental contributions made through the Kiva platform. The full campaign goal must be reached for the business to access the loan funds.
This program allows small businesses to meet their fundraising goal faster while also receiving additional marketing support for their Kiva campaigns and businesses through LISC social media and newsletters.
LISC prioritized MWBEs located in specific geographic areas — primarily LMI neighborhoods.
While this program is still new, LISC and Kiva have collaborated to help over 300 businesses access approximately $1.7 million in zero-interest microloans nationwide since 2015.
Case Study #2
MicroGrants – Minneapolis, MN
MicroGrants was launched in Minneapolis by a private philanthropist over 15 years ago as part of an effort to help individuals achieve financial stability. The program awards grants of around $1,000 to jumpstart businesses, which cover expenses that would not typically be allowed. The program partners with local community organizations to develop business plans for entrepreneurs who receive funding and establish clear goals and metrics related to the funding.
In 2019, the Minnesota focused program awarded $1,200 grants to 250 entrepreneurs and small businesses that needed necessary supplies to start or conduct business.
How to Adapt This Approach:
- Assess the capital needs of small businesses in the community with a particular focus on which groups of small businesses and neighborhoods face the greatest challenges.
- Identify local nonprofits, CDFIs, and philanthropic organizations, which could fund and administer the program. The City can help facilitate the creation and initial projects while serving as an integral partner throughout. In particular, it can:
– Identify a small pot of money as a pilot program
– Leverage existing platforms like Kiva
– Partner with a nonprofit that already has expertise
– Determine eligibility requirements and ensure the microgrant program is explicitly focused on supporting minority, women, and other LMI businesses owners - Secure funding from a philanthropic or corporate partner. Cities should also consider high net worth individuals and successful entrepreneurs within their communities, who may be willing to sponsor this effort
- Partner with relevant small business support groups on a marketing and outreach campaign to MWBEs and LMI communities (e.g., through local/ethnic chambers of commerce, merchant associations, marketing campaign language appropriate channels, using community ambassadors, etc.)
- Track progress of microloan recipients and provide technical assistance and support to those individuals
Learn more about the Tactical Guide
Action:
Invest in financial coaching programs designed specifically for small businesses with a particular focus on serving minority, female and LMI entrepreneurs.
Why:
Businesses need financial coaching to secure grants and affordable loans and to keep their businesses and their personal lives financially healthy. By adding financial coaching to other business support services, Cities are improving outcomes.
Case Study #1
LISC + Ally Financial Coaching Program – Detroit, MI and Jacksonville, FL
In October of 2019, LISC and Ally Financial launched a $3 million program to provide financial coaching services to micro-entrepreneurs and aspiring homeowners. The micro-entrepreneurship program supports 500 minority and LMI microenterprises in Detroit, MI and Jacksonville, FL.
The program expands on LISC’s Financial Opportunity Center network, which includes more than 100 centers in cities across the US. These centers are operated by community-based organizations and help individuals find jobs, build credit, and improve overall financial health.
This program provides funding to hire financial coaches specializing in coaching microenterprises and entrepreneurs through the LISC Financial Opportunity Centers or micro-enterprise development community organizations.
The coaches integrate financial education into existing small business programming (e.g., business planning, accessing capital, marketing, etc.).
They offer one-on-one assistance for entrepreneurs as they navigate their personal and business finances, which are linked for many new entrepreneurs.
The coaching offered in each center is tailored to the needs of each community. In Detroit the program focuses on very early stage entrepreneurs and businesses. In Jacksonville, the coaching serves microenterprises that have been operating for some time with a few employees, but need assistance with their financial goals and planning to scale.
LISC estimates that it will support over 500 entrepreneurs across the two target cities, and anticipates that more than 50 percent will be women of color.
Case Study #2
Financial Empowerment Center – Nashville, TN
The Nashville Financial Empowerment Center (FEC) operates under a simple premise: that an “increase in the economic well-being of any Nashvillian improves the overall economic climate of the whole city.”
Founded in 2013, the Nashville FEC is a free one-on-one counseling program for all residents in Nashville. It is run by the United Way and funded by a $250,000 annual City grant.
Counselors help with a variety of personal finance issues, such as how to negotiate debt, navigating loan options, and general financial literacy.
Since 2013, the FEC has helped 7,700 clients reduce their debt by $14.2 million and increase their savings by $2.9 million. It has made a concerted effort to serve low-income residents and people of color, with 54% of FEC clients identifying as African American/ Black and 21% identifying as Latinx.
How to Adapt This Approach:
- Work with partners (e.g., local/ethnic chambers, technical assistance providers, merchant groups) to assess the financial education needs of local businesses, particularly MWBEs. Conduct a survey, hold focus groups and interviews with entrepreneurs to identify gaps and existing resources
- Build a coalition of partners (e.g., education institutions, technical assistance providers, CDFIs, local/ethnic chambers etc.) that are trusted and located in target neighborhoods and have experience offering business support services to local entrepreneurs. Utilize these individuals to help design curriculum for small business financial coaching
- Work with the coalition to develop a proposal for expanding financial coaching. The proposal should include the goal, the need/opportunity, the coalition of partners, the program design, location, staffing, budget, metrics, timeline/next steps
- Determine where the program will be housed, which will depend on the lead partners involved. Cities may want to house the program at the City or have a nonprofit take the lead and the City provide funding and support
- Use the proposal to raise funds to launch the program. Pitch local banks, philanthropic partners, and corporations (especially those serving low-income and communities of color) on contributing financially, providing in-kind support or advising the program. Partners will also be necessary to help train counselors, promote the service, etc.
- Hire staff. Number of FTEs depends on how many locations financial coaching for entrepreneurs will be offered, or if the whole program will operate out of one location. If partnering with multiple community organizations, there should be at least 1 FTE per location. If housing in one primary location, consider hiring 2-3 FTEs and scaling as needed. Ensure staffing is representative of the community being served
– Staff must be trained professionals with experience in financial coaching for small businesses and entrepreneurs. Make sure to have clear training standards for counselors
– Offer 1-1 appointments and have call/email options. A group class is much less effective, as people are hesitant to discuss personal financial circumstances in this format - Launch program with active outreach and media campaigns. Leverage partners in the community to reach business owners (e.g., merchant associations, local/ethnic chambers, community groups, etc.). Ensure that banks and financial institutions provide information about the service
- Track and publish KPIs on a regular basis. Include aggregated demographic and neighborhood data on entrepreneurs being served, services provided, outcomes, etc. (See KPIs section)
Learn more about the Tactical Guide
Action:
Work with partners to create a loan or grant product focused on MWBEs and LMI small businesses.
Why:
By designing financial support programs with and for targeted communities, you can maximize the impact on high-need groups.
Case Study
African American Business Revolving Loan Fund & SF HELP – San Francisco, CA
In the summer of 2020, the San Francisco Office of Economic and Workforce Development launched two loan programs focused on MWBEs impacted by COVID-19: the San Francisco Hardship Emergency Loan Program (SF HELP) and the African American Revolving Loan Fund.
The African American Revolving Loan Fund was specifically designed to address the structural inequities facing Black-owned small businesses and microenterprises.
The $3.2M fund offers loans up to $50,000; 0% interest; up to 6 year term; no collateral; flexible repayment options as well as technical assistance.
While any business regardless of race can apply to the fund, the City intentionally named it the “African American” loan fund. Outreach and marketing focused on Black small business owners, and was done by trusted Black community partners, such as the San Francisco African American Chamber of Commerce.
The City used a scoring system, which prioritized businesses located in historically Black neighborhoods, the length of the tenure in the city, and businesses that culturally contribute to the African American community.
The program is funded entirely through philanthropic or partner support and is administered by Main Street Launch (a local CDFI) and is expected to help 80 small businesses.
The second program is SF HELP.
The $8.5 million fund supports small businesses in high-need neighborhoods, particularly those directly serving the public and/or employing lowerwage workers.
Loans are up to $50,000; 0% interest; up to 6 year term; no collateral; with payments deferred until January 2021. Businesses must have a 25% drop in revenue due to COVID-19 and have not received a PPP loan.
The City awarded over $3.5 million to 108 total small businesses (71% minority-owned, 51% womenowned); retained 443 jobs with 50% of funding going to business in LMI neighborhoods.
The program is funded through $3.5M from the City general fund, $1M in philanthropic support, and $4M in leveraged capital, and is administered by Main Street Launch and the Mission Economic Development Agency
How to Adapt This Approach:
- Assess the capital needs of small businesses in the community with a particular focus on which groups of small businesses and neighborhoods face the greatest challenges
- Identify which small businesses the fund will be designed for. Determine if the fund will focus on supporting all MWBEs; businesses located in LMI areas or some other criteria of need
- Identify and develop philanthropic and/or corporate partners to financially support the fund. Leverage City funds to draw in this outside match
- Work with a local CDFI, or other nonprofit partner, to administer the program and draw in their own sources of capital
- Create the program parameters (loans, grants, size, use, terms, eligibility criteria, etc) based on the City’s policy goals, input from program partners and local stakeholders. Examples of program parameters: SF HELP, SF African American Loan Fund, Atlanta Resurgence Fund, Houston Small Business Economic Relief Program, Portland Small Business Relief Fund, Silicon Valley Strong Small Business Grant.
- Incorporate technical assistance partners to provide business support
- Partner with merchant associations, local/ethnic chambers, and other community groups who are trusted partners in the communities where the fund is focused, to lead outreach, and promote the fund
- Leverage technical assistance partners to help targeted small businesses apply to the fund
- Maintain a reasonable (e.g. 3+ weeks, include pre-noticing, not first come first serve) window for application submission. Assemble an inclusive application review committee to make award decisions. Evaluation criteria could include:
- MWBEs
- Businesses that did not receive CAREs Act or other COVID-19 relief funding
- Businesses located in LMI communities
- Businesses with a plan to reopen or adapt to the post-COVID environment
- Length of time operating in the city
- Sector
- Add all applicants into a centralized business support database/client relationship management tool (CRM) to coordinate future support
- Provide wrap-around technical assistance to businesses who receive funds as well as those who do not
- Track and publish KPIs on a regular basis. Include aggregated demographic and neighborhood data on applications and awards. (See KPIs section)
- Keep partners, particularly neighborhood stakeholders and local business groups, updated on progress and any challenges
- Track lessons learned and incorporate into future programming
Learn more about the Tactical Guide