Investing in small businesses is key to fueling local economies and creating opportunity. LISC supports emerging entrepreneurs other lenders may deem too risky and, in the process, helps open doors for economic development, wealth building, social connection and creativity in communities across the country. In celebration of Small Business Saturday (Nov. 25), we're taking a look at the big impact these investments make.
Starting a small business is often a risky proposition; starting a small business in a disinvested community, where blight and crime tamp down opportunity and chase away financing, might seem insurmountable.
But in underserved urban and rural areas across the country, entrepreneurs are putting down roots and growing their businesses. They are creating jobs, improving safety, delivering new goods and services to residents and proving the value of investing in places that traditional lenders often overlook.
Steve Hall, vice president for LISC Small Business, a nonprofit lender, said Small Business Saturday (Nov. 25) is one of the few times all year that businesses like these get the broader public attention they deserve. “Small Business Saturday was started to really push these mom and pop stores,” Hall said. “These businesses need local support to survive.”
LISC Small Business is a program of the Local Initiatives Support Corporation (LISC), a national nonprofit that has invested more than $17 billion to expand economic opportunity and revitalize disadvantaged urban and rural communities. This year, LISC Small Business has financed more than 30 small businesses in low-to-moderate income areas, providing both capital and technical assistance to help entrepreneurs succeed and grow. That number is expected to double by the end of next year, with a total of some $15 million invested.
LISC Small Business focuses on start-ups and small loans that banks typically aren’t able to finance. The investments are part of LISC’s broad economic development strategy to help raise standards of living through support for good housing, health, education, safety, financial literacy, businesses and jobs.
The result, Hall said, are enterprises that often become bedrocks of their communities, like a new restaurant in Chicago’s Washington Park neighborhood called Evelyn’s Food Love. Evelyn Shelton opened her restaurant earlier this year in an area that has struggled with crime, vacant lots and poverty, and since then has seen residents and others quickly embrace it. It has emerged as a community-gathering space, with neighbors stopping by for local news and conversation, along side roasted chicken, fresh salads and triple-chocolate-chip pancakes.
“Residents are very, very happy that we are here,” Shelton said, “and we are happy to be a part of the positive change that we think is inevitable for this neighborhood.”
Shelton might not be an obvious business customer for most financial institutions. As Hall noted, her $147,000 loan from LISC would be too small for many lenders, and her location would seem too risky. But, she represents precisely the kind of customer LISC Small Business serves: people of color, women, veterans and people who live in low-to-moderate income areas.
“Many of our customers depend on technical assistance from us, and, without that assistance, they wouldn’t qualify for a loan anywhere except from predatory lenders,” he said.
Despite what some might see as precarious investments, nearly all of the businesses that LISC Small Business has financed in recent years are still up and running. That’s unusual; while the nation’s 28 million small businesses are a crucial part of the U.S. economy, representing half of all private-sector employment, just 67 percent survive two years and less than half make it through at least five years.
Hall said LISC’s experience is different because it has developed sound models for success, having invested in the organizations, businesses and institutions that serve low-to-moderate income communities for nearly 40 years. “When done right, these can be good investments, both in terms of their financial performance and their economic impact,” said the former business banker.
Part of the challenge is promoting new shops and restaurants to people who aren’t aware of their value, Hall said. In response, LISC has become a critical partner in major Small Business Saturday events in cities like Indianapolis, where the Riley Area Development Corporation (RADC) is working with dozens of boutique clothing stores, independent coffee shops and restaurants along Mass Ave, northeast of the city’s center.
“Most of our retailers tell us they have up to a month’s worth of sales on Small Business Saturday,” said Eric Strickland of the RADC. “LISC has helped us develop a strategy to demonstrate the value of the neighborhood’s economy and how it bolsters the region’s economics. Small Business Saturday brings that all together: It provides a national platform to show what happens with neighborhood businesses.”
In midtown Phoenix, business owner Jenny Poon is thankful every day for the chance to expand her thriving co-working space, CO+HOOTS, with more than $1.3 million in loans from LISC that she used to purchase a 14,000-square-foot building. CO+HOOTS currently houses more than 250 entrepreneurs, and demand is so high that Poon plans to expand the venture to two more facilities in the Phoenix metro area in the next few years.
“We had been working with a lot of different banks, and it’s generally a frustrating process,” said Poon, who said CO+HOOTS is running a pop-up co-working day on Small Business Saturday. “We were just fortunate that LISC was there.”
According to Hall, when businesses like these succeed, they inspire others to open their own small businesses and attract additional investments to communities. “If you see it, you can believe it,” he said.
For more information on LISC Small Business, visit liscsmallbusiness.org.
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