Telework ForumMay 15 & 16, 2009

Conference Presenters:

Kathy GilmanWashington Assistive Technology Foundation

Patti LindThe Abilities Fund

Welthy Soni-MyersVirginia Microenterprise Network

Overview of Microenterprise Organizations

Kathy Gilman

Defining Microenterprise

Range of Services

– Microenterprise Development Organizations (MDOs) provide a range of services, depending upon their mission, philosophy, and funding

– Core services may include Training, Technical Assistance (TA), and Credit

Range of Training Services

Training services include personal effectiveness, economic literacy, and business training

Delivery includes classes and group work, one-on-one, webinars, and self-study

Services may be provided in house or through partner organizations

Range of TA Services

Provided to individuals or groups by staff, consultants and mentors

Based upon the needs of the business

Can be basic or specializedBefore and/or after loan

disbursement

Credit Service Range

Loan Size ranges from $500 - $35,000

Delivery Methods include peer lending, individual loans, credit builder loans, and lines of credit

Underwriting requirements vary depending upon policies and loan size

Range of Client Demographics

Entrepreneurial Demographics – startup vs. existing businesses, income level (TANF recipients, low/mod income, working poor), minorities, women, youth, people with disabilities, immigrants

Geographic Regions – urban, suburban, rural, inner-city, state-wide, economically depressed areas– Community Development Financial

Institutions (CDFIs) Business Sectors – child care, food

sector, etc.

Program Operations

Some MDOs are independent non-profits

Some MDOs are housed within another organization that serves their demographic – Community Action Programs (CAPs),

YWCA’s, and Economic Development agencies

Program Operations

Networking and Partnerships– Networking is essential in recruiting

volunteers, recruiting participants, providing comprehensive services, and obtaining the necessary funds to run the program

Partnership examples

Program Operations

MIS SystemsFinancialOutcomes TrackingLoan Servicing/TrackingNeeds vary depending upon

partnerships and services provided in house

Program Operations

Funding PlanPublic Sector funding comes from all

levels of government - federal, state, county, and local. Examples include CDFI, CDBG, JOLI, SBA

Private sector funding is obtained from individuals, foundations, and corporations

MDO supports

AEO www.microenterpriseworks.org

State Microenterpise Associations

FIELD (Aspen Institute) www.fieldus.org

Key Success Factors A focus on the specific needs of the

customer/community

Organizational capacity, including qualified staff

Commitment to entrepreneurship, excellence, efficiency, responsiveness, and assessment

Comparative Profiles

Rural Pennsylvania

Gulf Coast of Mississippi

Washington Assistive Technology Foundation

Training & Technical

Assistance Led MDOs

Welthy Soni-Myers

Defining Training & Technical Assistance

Why Training and TA?

What are key differences?

What kind of delivery system?

Why Training and Technical Assistance?

Driven by demand and necessityHome based businesses often

isolatedSelf-confidence importantBasic business knowledge How to access networks and

technologies

Key Differences: Training and Technical

AssistanceTraining most often in group settingDeals with business basicsUsually delivered prior to business

start-up or in early stage of businessTechnical Assistance individualDeals with problems specific to

individual business

Business Training Usually a pre-requisite to receiving a loan – not

always

Training varies widely in terms of hours, subject matter, ‘homework’ requirements, etc

Group setting most desirable

Some organizations trying distance learning

Core Curriculum

Broadly addresses three subject areas:– Personal Effectiveness– Economic Literacy– Business Training

Personal Effectiveness

Self-confidenceCommitmentFlexibilityCommunication skillsSelf-disciplineProblem solvingPlanning and goal setting

Economic Literacy

Extremely important!De-mystifying the ‘language of

money’Greatest pitfall if start up businesses

– and big corporations as well (as recent history illustrates)

Business Training

A written business plan often the goal of training

Many curriculums availableCurriculum should take into account

each individual’s needs, readiness to learn, learning styles

Group setting most productive

Business Training

Basic elements very similar:– Vision and mission– Well defined product or service– Target market– Competition– Pricing strategy– Marketing strategy

Business Training: Financial

Record KeepingBusiness Costs and PricingThe Profit and Loss ProjectionsCash Flow ProjectionsBreak-even AnalysisUnderstanding Basic Financial

Statements

Training Delivery

Highly individualized from program to program:– In House Staff or Consultants– Partner Organizations– Local Community Colleges– Distance Learning-

webinars/teleconference– Self-paced Electronic Models

Technical Assistance

Always provided individuallyUsually specific issues related to

specific businessDelivery variesBased on needs of individual

business

Management Trinity

Principles developed by Ernesto Sirolli – Ripples From the Zambezi– Technical Skills– Marketing Skills– Financial Management Skills

Business Mentors

MicroMentor – National program– Connects emerging entrepreneurs with

volunteers in mentoring relationships– www.micromentor.org

Model possible for other organizations

Specialized TA

Access to Markets– Many Variations– Marketing Assistance– Program Becomes Sales Rep.– Program Helps Entrepreneurs Work

Together to Find Markets

Specialized TA

E-marketing and e-commerce

“Guerilla” marketing techniques

Designing ‘social’ cause marketing

Niche business TA

Delivery Methods

Periodic personal contactPeer/affinity groups meet with

expertsWeb-based

consultations/Commerce Café’sEmail, fax, mailVideo training

Key Success Factors: Training

Entrepreneur must be motivated and want to build a business

Training is critical, can be delivered in small groups

Training helps entrepreneur think through all elements of business

Key Success Factors: TA

Technical Assistance provided individually or in very small affinity groups

TA provider must have basic knowledge of specific business field

Key Success Factors: Meeting Needs

Partners are critical

No program can meet all the needs of all the clients

Start identifying those partners now

Credit Led Organizations

Patti Lind

Micro-loansCulture Surrounding US Micro-lending

Defining Microloans– Roles of participants

Underwriting

Credit Products

37

Micro-credit

Grameen Bank model– Dr. Muhammad Yunus– Helping poor people achieve economic

independence with microcredit

“I made a list of people who needed just a little bit of money. And when the list was complete, there were 42 names. The total amount of money they needed was $27. I was shocked.”

Micro-creditMicrocredit Organizations Develop

– Individual loans

– Peer Group Lending

Creating a global economy of the most unlikely entrepreneurs

“Today, if you look at financial systems around the globe, more than half the population of the world - out of six billion people, more than three billion - do not qualify to take out a loan from a bank. This is a shame.”

US Micro-lending

Began in early 1980’s with the efforts of women’s organizations– Using business ownership to improve

economic situations – Training & TA based (training led orgs)

Need for capital typically accompanies business start-up– US Micro-lending models established

US Micro-lending Micro-loan size ranges from $500 -

$35,000

Delivery Methods/credit products include– Direct loans

• Grants to leverage direct loan = Equity Grant (VR)– Credit builder loans– Lines of credit– Peer lending– Guaranteed loans

Underwriting requirements vary depending upon policies and loan size

Micro-loans

Entrepreneur is often unable to fully capitalize business using traditional resources– Thin credit file or no credit– Poor credit

Business start-ups are always considered high risk

Roles of Participants in Micro-lending

MDO– Training, TA, Mentoring

MDO/Microlender– Capitalization– On-going capital infusions

Bank– SBA Guarantee to bank

VR– Equity grants to leverage financing

Microloans vs Consumer Loans

Microloans– Documentation

requires comprehensive business plan

– Underwriting includes review of BP but may not base repayment on it

– Character weighs heavy

• Business planning

Consumer Loans– Documentation

requires personal payment data

– Underwriting bases repayment on discretionary income/funds

– Character weighs somewhat into decisioning

UnderwritingPhilosophical Underwriting Tests –

Does the Loan:– Meet the organizational mission?– Provide benefit to the borrower?– Conform with funder requirements?– Meet risk guidelines?

Underwriting

Evaluating risk:– Current Financial Position

• Assets & Liabilities• Regular monthly income/inflow• Regular monthly expenses• Reflect monthly debt payments

– Debt:Income Ratio– Cash Flow: Monthly Discretionary Income

– Financial Assessment• Can individual make payments without

considering projected income?

Evaluating Business Risk

Is the plan logical– Individual is experienced/technically

sound– Adequately capitalized for start-up

Does Payment Rely on Business Performance– Timing

Management of Resources– PASS & Other Work Incentives– SSI, SSDI

Evaluating Business Risk

Collateral– Securing loans with critical equipment?

Adequate supports during loan repayment period?– Training & TA

Is our credit product well matched to the individual’s needs

Micro-loan Products

Individual/Direct Loans– Consumer loans made to individuals for

business purposes– Organization in control of lending

environment• Underwriting• Loan Terms

– Interest Rate

– Length of Amortization

– Technical Assistance

Micro-loan Products

Credit Builder Loans– Tight terms

• Short Amortization Period• Required Financial Counseling

Lines of Credit– Drawn down as needed

Peer Lending– Specific geographic areas

Guaranteed loans– The Abilities Fund

Integrating Microenterprise into

TeleworkProfiling an integrated Telework

Program

 Identifying further TA needs

 Sharing Resources