"Today’s Entrepreneurs: New Financial, Old Logistical Challenges, Yet Reasons for Optimism"
(reprinted from San Jose State University's internal academic documents, from late May 2009.)
"Today’s [American] Entrepreneurs: New Financial, Old Logistical Challenges, Yet Reasons for Optimism"
- CRISTINA DEPTULA
Many Americans celebrate entrepreneurship as an alternate pathway to success for the especially innovative and talented. With the current economic downturn, though, more people, immigrants and native-born, are turning to entrepreneurship because they have trouble finding regular employment. For some, working for oneself becomes a survival strategy rather than a long-range dream.
Organizing and managing a business may prove harder for these new business owners, with less managerial experience and know-how, and often less money and lower credit scores, than the entrepreneurs of the past.
However, many experts who work with local organizations assisting small businesses believe entrepreneurship can still represent a viable way to earn a living and help rejuvenate our economy, even for the changing demographic of entrepreneurs.
Cristina Deptula is a freelance journalist based in the San Francisco Bay Area. She may be reached at cedeptula@sbcglobal.net and encourages everyone to try Paula Tejeda's Chile Lindo restaurant!
Immigrant entrepreneurs face the challenges inherent in doing business in a new country - the language barrier, new sets of laws and customs - on top of the recent economic struggles facing all new business creators.
Business and nonprofit leaders, and several immigrant entrepreneurs themselves, recommend policy changes to streamline regulations, lower fees and costs, make financing more accessible, and assist immigrants with professional networking and language skills to better harness the creativity and enterprise these people can bring to our economy.
Certainly, many immigrants have reached professional success and contributed to our economy through opening their own firms. One-quarter of the U.S. publicly traded, venture capital-backed companies started in the past 15 years were founded by immigrant entrepreneurs, according to American Made: The Impact of Immigrant Entrepreneurs and Professionals on U.S. Competitiveness, a 2006 national survey commissioned by the National Venture Capital Association, with 62 percent of the companies located in California.
Right here in Silicon Valley, immigrants founded more than half of our currently operating high tech and engineering startups, according to a 2007 UC Berkeley study. However, especially in recent years, these newly aspiring business owners face a variety of financial and logistical challenges.
Paula Tejeda, owner of Chile Lindo, a Peruvian restaurant in San Francisco’s Mission District, explained that many recent immigrants have very little capital and do not know the rules of American society.
“Even a parking ticket can be a problem for some people, who truly have nothing,” she said. “And the United States is a very structured society, while in Latin America we often survive through improvisation.”
Tejeda later said that some Americans feel immigrants do not want to play by the same rules as everyone else. Most of the newcomers to the United States she knew, however, were very decent, moral, religious people, who when they violated regulations did it out of ignorance.
She strongly believes immigrant entrepreneurs should first receive a comprehensive education concerning business and language skills, financial management, and U.S. laws and policies.
Pauline Pang, whose parents came from Shanghai a little over 10 years ago and who run Diamond Computer Repair in Berkeley, also described the business-related paperwork, and the immigration process, as confusing, even for skilled professionals.
Gwyneth Galbraith, Major Gifts Director with the Opportunity Fund, a San Jose-based nonprofit providing small loans and financial counseling for families and small businesses throughout the Bay Area, views language and cultural barriers, along with insufficient capital and weak credit histories, as challenges facing would-be immigrant entrepreneurs.
Also, she has witnessed a definite change in their clientele over the past year.
“We are now seeing clients, immigrant and native-born, who have lost their jobs, who are looking to small business as a way to patch up their income.”
Tejeda asserted that with the economic crunch, “native-born Americans are now feeling the squeeze and pressure to become resourceful to survive that new immigrants go through all the time.”
Immigrant small business owners now must face the credit crunch and weakening economy on top of the obstacles they already confront, and many are reaching out for professional advice.
Emily Gasner, executive director of Working Solutions, a nonprofit small business lending group managed by the TMC Development Corporation, describes how their “phones have been ringing off the hook” since last year’s slowdown.
“We’re now taking clients with personal financial issues, trouble paying their mortgages, and having to educate them about how to understand their personal finances before investing in a business.”
Bob Boedjin, volunteer with San Jose’s Service Corps of Retired Executives, a service initiative managed through the Small Business Administration where retired businesspeople meet with and advise currently active entrepreneurs, said that his organization has seen a definite increase in the number of clients requesting appointments since last fall.
“With the bad economy, more business owners need advice and help,” Boedjin said. “That goes for immigrants and the native-born.”
Gary Marshall, public relations officer with the San Francisco Chamber of Commerce, has also noticed a significant uptick in services requested through the city’s Small Business Development Center. He says this happens every time the economy takes a downturn, and that they hear from both emerging and established entrepreneurs.
This increasing interest in entrepreneurship among those with less managerial know-how, fewer assets, and less financial prowess has inspired organizations serving immigrant entrepreneurs to adapt their approaches.
Research institutes, nonprofits, and governmental organizations are finding that traditional ways of stimulating entrepreneurship and small business growth may help some but not work for everyone.
Tejeda praised the work of San Francisco’s Renaissance Center, a nonprofit center providing entrepreneurs with education and loans, for its comprehensive approach. To her, finding seed money is important, but learning how to manage all the aspects of a small business, including finances and cash flow, is critical to one’s success.
Rashmi Sinha, entrepreneur and owner of SlideShare, a binational social media firm, advises entrepreneurs to work out a full-fledged business plan and become as functional and profitable as possible before seeking loans or capital.
“Nowadays you don’t want to start with the money, you have to show you’ll succeed first.”
Stephen Camarota, Director of Research at the Center for Immigration Studies, a nonpartisan research organization and think tank in Washington, D.C., agrees with the concept of thinking creatively to best assist immigrant business owners, as well as viewing them as individuals rather than according to stereotypes.
His group produced a 2000 report based on U.S. Census data, and it suggests that Silicon Valley’s immigrants become entrepreneurs at about the same rates as native-born residents.
When asked for information on more current research, Camarota said recent findings appeared relatively similar and provided some insight into trends within the immigrant small-business owner community.
“It’s the more educated immigrants, from a variety of ethnic groups, who are more likely to start their own businesses,” Camarota explained. “One can’t simply lump all immigrants, or all natives, together into a group and say they all act one way or another. It depends on the person.”
Camarota also observed that many immigrant entrepreneurs tend to find resources and capital from family and others of the same ethnic group who speak the same language. Also, immigrants can be less likely to go to the Small Business Administration for financing. He suggested that simply increasing SBA funding in an effort to help entrepreneurs, as has been brought up during policy debates, won’t by itself automatically assist many immigrant business owners.
Boedjin of San Jose SBA’s Service Corps of Retired Executives (SCORE) program says he and his fellow volunteers do work with many immigrants, but he, along with several other nonprofit leaders, suggested language as a possible barrier to their receiving services.
“Plenty of people in this area speak Spanish as a first language,” he said, “and we’d love to provide the counseling they’d like, but realistically most of our volunteers speak only English.”
Other programs, such as San Francisco’s Small Business Development Center, do offer more services in other languages. Marshall said the place hosts over 400 workshops per year to assist small business owners, and that the workshops in Spanish have become much more popular over the last year.
Oakland’s C.E.O. Women, a program designed specifically to provide networking assistance and business administration training to low-income immigrant and refugee women, focuses on improving clients’ English skills along with giving business advice.
The organization could not be reached as of yet for an interview, but representatives on the phone expressed optimism and enthusiasm about their work. The group specifically integrated language instruction into their curriculum after identifying English communication skills as a need among immigrant business owners.
Manjiv Mansour, Pakistani immigrant and now-retired owner of a rug importing business, believes that despite the language challenge, many immigrants are uniquely suited to develop business enterprises within the United States.
“In many countries, including my own home country, people have to pay fines and jump through a lot of paperwork just to get normal things done,” he said. “So we come over here, and the procedure of starting your own business is not too hard compared to that. We’re experienced with dealing with authorities.”
However, other immigrant entrepreneurs do face difficulties with paperwork and procedures, depending on how different their home countries’ policies are from those in the U.S.
Boedjin pointed out that he counsels immigrants selling home-cooked food who are not used to the idea of applying for Health Department permits. Also, San Jose SCORE meets many immigrants who wish to operate import-export businesses but do not yet understand the legal and customs process and the work involved with developing a legitimate firm of that type.
Dennis Conaghan, director of San Francisco’s Center for Economic Development, described some similar challenges immigrant and other local small business owners face.
“People who start businesses tend to be specialized with their knowledge, and one has to be a real generalist in order to run a business well. There are lots of people who know their fields, but are not necessarily ‘business people.’ There’s a lot to learn about laws, real estate, permits, finances, etc.”
Conaghan suggested people turn to the Small Business Assistance Center for help with those kinds of questions.
Tejeda recommends the Bay Area’s municipalities consider re-evaluating and streamlining paperwork and the permitting process involved with small business incorporation, with an eye towards making things simpler for non-native English speakers with little cash.
Conaghan further cautioned that public services for entrepreneurs, such as those the Center for Economic Development provides, were not immune from budget cuts.
“So far we haven’t yet had to make cutbacks because of the economy, but it may happen in the future.”
The Opportunity Fund’s representatives mentioned that due to their organization’s hybrid business model (loan fees coupled with donations) which provides multiple funding streams, and their recruiting new donors to replace those who no longer sponsor them, they did not need to cut services at this point. However, they pointed out that other, smaller groups providing some similar resources were facing cutbacks.
Tejeda also suggests that groups working with immigrant entrepreneurs consider lowering the costs of the services for which they charge business owners, at least on a sliding scale basis. For example, La Cocina in San Francisco rents out kitchen space to small restaurants so they will have a Health Department-approved place to prepare food. As a nonprofit, they charge below market rate rents - yet the fees are still beyond the reach of some of the Mission’s smallest and newest food vendors. They also have limited space and must turn away many who seek a place to cook.
After 2008’s economic slowdown, lenders and venture capitalists now take more care with distributing their investment funds, and less cash is available for small businesses.
The MoneyTree Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters, describes the first quarter of 2009 as seeing “double digit declines in every major industry sector, mark[ing] the lowest venture investment level since 1997.”
Public and nonprofit sources are not necessarily filling the gap left by wary private investors, especially for today’s newer, poorer, and less-experienced entrepreneurs.
Many small business startups are finding it difficult to qualify for Small Business Administration and private nonprofit loans, Conaghan and other experts say, because they often lack the required capital and high credit scores.
Even while receiving the same level of funding from the Small Business Administration, many locally administered groups assisting small businesses are now making fewer loans due to changes in applicants’ perceived creditworthiness. Lending criteria often has not changed since before the economic downturn.
A January 2009 study by Fortune Magazine of 755 American small business owners reveals that 11% of the entrepreneurs applied for a loan from a public or private source since the recession’s onset, and six percent of the total surveyed business owners were denied financing.
Although the Opportunity Fund has not technically cut back services, it admits providing fewer loans to entrepreneurs, a drop of 15% from fiscal years 2007 to 2008. This stems from a significant drop in credit scores among its loan applicants, along with an increase in clients’ other debts.
C.E.O. Women, an Oakland-based organization specializing in educational and financial services for immigrant and refugee women entrepreneurs, has conducted a survey of recent graduates from its business education program (class of 2004-05) and found that access to capital served as one of the greatest barriers to the success of today’s entrepreneurs. The organization’s leaders cite the need to prepare modern business owners to develop a credit history which will enable them to apply for increasingly hard-to-get larger loans as one of the main reasons they operate their microfinance program, which offers loans of around $2,000 to female entrepreneurs.
Some nonprofit and governmental organizations working with small business owners have refocused their marketing efforts to emphasize services other than direct lending, such as educational offerings aimed at low to moderate-income clients.
The Opportunity Fund’s leaders recently refocused their efforts on financial counseling and business and homeowner advising, to emphasize to the public the educational services they can provide without incurring financial risk.
Galbraith said their group’s name change was intended to convey a broader focus on community services, rather than simply lending cash.
“We have also expanded the business advising we provide to small business owners, whether or not they go on to qualify for a loan. We decided to rename the organization in order to communicate all that we do.”
The Small Business Administration’s office in San Francisco also changed its focus to emphasize its educational, as opposed to financial, offerings.
They have combined their online education programs, community initiatives and youth outreach programs under its newly renamed Office of Entrepreneurship Education.
The office provides information on how to start and grow a business, as well as overall financial literacy. The office will "strengthen SBA's focus on improving the economies of underserved markets through small business ownership," said SBA Acting Administrator Jovita Carranza in an interview with the San Francisco Business Times.
This new demographic of entrepreneurs may find loans and credit harder to secure, at a time when those who turn to business ownership after long, unsuccessful job searches may need financing more than past business owners who had the opportunity to plan and save. However, many community leaders remained relatively optimistic about the prospects for small business owners and have taken steps to address the challenges entrepreneurs face.
San Francisco acknowledges the difficulty of obtaining small business financing and so has teamed up with Working Solutions to offer a microloan program for small businesses that hire low to moderate income city residents. Funds will be available starting April 2009, and the organization took part in a state conference on microcredit and small business funding, on May 28th at Stanford University. San Francisco also provides information on financial and educational resources during its annual Small Business Week, held mid-May.
Gasner of Working Solutions said that the organization has been able to secure a variety of new sources of funding so service cuts are not necessary. Also, they are actually making even more loans to applicants who demonstrate professional experience and can present a decent business plan, even those with slightly weaker credit.
“There is still seed money out there,“ Conaghan confirmed, citing the Japanese angel investor group Keiretsu, named for a concept in the Japanese language involving business-to-business networking.
“And still plenty of opportunities within our new growth industries, green and clean technology and digital media. San Francisco also has a real entrepreneurial culture, and that comes from our talented workforce. Ninety percent of businesses currently operating within city limits have fewer than 100 employees.”
Bob Boedjin also retains his faith in the potential for financial success through owning one’s own business.
“Yes, people can still do it. I actually think it’s a better option for plenty of people, immigrants and anyone else, because it’s so much harder now to find a well-paying job in one’s field, so why not go in a different direction?”
This public optimism seems to have spread to business owners: the Forbes Magazine/Zogby poll of American small business leaders reveals that despite the recession, nearly 50 percent of entrepreneurs surveyed still profited in 2008, and 45 percent - a plurality of the total results - would still start their businesses today.
Tejeda also maintains confidence in the resilience and creativity of immigrant entrepreneurs.
“I’m not at all surprised that so many immigrants choose to start their own businesses. We’re very adept at finding ways to improvise and survive.”
"Today’s [American] Entrepreneurs: New Financial, Old Logistical Challenges, Yet Reasons for Optimism"
- CRISTINA DEPTULA
Many Americans celebrate entrepreneurship as an alternate pathway to success for the especially innovative and talented. With the current economic downturn, though, more people, immigrants and native-born, are turning to entrepreneurship because they have trouble finding regular employment. For some, working for oneself becomes a survival strategy rather than a long-range dream.
Organizing and managing a business may prove harder for these new business owners, with less managerial experience and know-how, and often less money and lower credit scores, than the entrepreneurs of the past.
However, many experts who work with local organizations assisting small businesses believe entrepreneurship can still represent a viable way to earn a living and help rejuvenate our economy, even for the changing demographic of entrepreneurs.
Cristina Deptula is a freelance journalist based in the San Francisco Bay Area. She may be reached at cedeptula@sbcglobal.net and encourages everyone to try Paula Tejeda's Chile Lindo restaurant!
Immigrant entrepreneurs face the challenges inherent in doing business in a new country - the language barrier, new sets of laws and customs - on top of the recent economic struggles facing all new business creators.
Business and nonprofit leaders, and several immigrant entrepreneurs themselves, recommend policy changes to streamline regulations, lower fees and costs, make financing more accessible, and assist immigrants with professional networking and language skills to better harness the creativity and enterprise these people can bring to our economy.
Certainly, many immigrants have reached professional success and contributed to our economy through opening their own firms. One-quarter of the U.S. publicly traded, venture capital-backed companies started in the past 15 years were founded by immigrant entrepreneurs, according to American Made: The Impact of Immigrant Entrepreneurs and Professionals on U.S. Competitiveness, a 2006 national survey commissioned by the National Venture Capital Association, with 62 percent of the companies located in California.
Right here in Silicon Valley, immigrants founded more than half of our currently operating high tech and engineering startups, according to a 2007 UC Berkeley study. However, especially in recent years, these newly aspiring business owners face a variety of financial and logistical challenges.
Paula Tejeda, owner of Chile Lindo, a Peruvian restaurant in San Francisco’s Mission District, explained that many recent immigrants have very little capital and do not know the rules of American society.
“Even a parking ticket can be a problem for some people, who truly have nothing,” she said. “And the United States is a very structured society, while in Latin America we often survive through improvisation.”
Tejeda later said that some Americans feel immigrants do not want to play by the same rules as everyone else. Most of the newcomers to the United States she knew, however, were very decent, moral, religious people, who when they violated regulations did it out of ignorance.
She strongly believes immigrant entrepreneurs should first receive a comprehensive education concerning business and language skills, financial management, and U.S. laws and policies.
Pauline Pang, whose parents came from Shanghai a little over 10 years ago and who run Diamond Computer Repair in Berkeley, also described the business-related paperwork, and the immigration process, as confusing, even for skilled professionals.
Gwyneth Galbraith, Major Gifts Director with the Opportunity Fund, a San Jose-based nonprofit providing small loans and financial counseling for families and small businesses throughout the Bay Area, views language and cultural barriers, along with insufficient capital and weak credit histories, as challenges facing would-be immigrant entrepreneurs.
Also, she has witnessed a definite change in their clientele over the past year.
“We are now seeing clients, immigrant and native-born, who have lost their jobs, who are looking to small business as a way to patch up their income.”
Tejeda asserted that with the economic crunch, “native-born Americans are now feeling the squeeze and pressure to become resourceful to survive that new immigrants go through all the time.”
Immigrant small business owners now must face the credit crunch and weakening economy on top of the obstacles they already confront, and many are reaching out for professional advice.
Emily Gasner, executive director of Working Solutions, a nonprofit small business lending group managed by the TMC Development Corporation, describes how their “phones have been ringing off the hook” since last year’s slowdown.
“We’re now taking clients with personal financial issues, trouble paying their mortgages, and having to educate them about how to understand their personal finances before investing in a business.”
Bob Boedjin, volunteer with San Jose’s Service Corps of Retired Executives, a service initiative managed through the Small Business Administration where retired businesspeople meet with and advise currently active entrepreneurs, said that his organization has seen a definite increase in the number of clients requesting appointments since last fall.
“With the bad economy, more business owners need advice and help,” Boedjin said. “That goes for immigrants and the native-born.”
Gary Marshall, public relations officer with the San Francisco Chamber of Commerce, has also noticed a significant uptick in services requested through the city’s Small Business Development Center. He says this happens every time the economy takes a downturn, and that they hear from both emerging and established entrepreneurs.
This increasing interest in entrepreneurship among those with less managerial know-how, fewer assets, and less financial prowess has inspired organizations serving immigrant entrepreneurs to adapt their approaches.
Research institutes, nonprofits, and governmental organizations are finding that traditional ways of stimulating entrepreneurship and small business growth may help some but not work for everyone.
Tejeda praised the work of San Francisco’s Renaissance Center, a nonprofit center providing entrepreneurs with education and loans, for its comprehensive approach. To her, finding seed money is important, but learning how to manage all the aspects of a small business, including finances and cash flow, is critical to one’s success.
Rashmi Sinha, entrepreneur and owner of SlideShare, a binational social media firm, advises entrepreneurs to work out a full-fledged business plan and become as functional and profitable as possible before seeking loans or capital.
“Nowadays you don’t want to start with the money, you have to show you’ll succeed first.”
Stephen Camarota, Director of Research at the Center for Immigration Studies, a nonpartisan research organization and think tank in Washington, D.C., agrees with the concept of thinking creatively to best assist immigrant business owners, as well as viewing them as individuals rather than according to stereotypes.
His group produced a 2000 report based on U.S. Census data, and it suggests that Silicon Valley’s immigrants become entrepreneurs at about the same rates as native-born residents.
When asked for information on more current research, Camarota said recent findings appeared relatively similar and provided some insight into trends within the immigrant small-business owner community.
“It’s the more educated immigrants, from a variety of ethnic groups, who are more likely to start their own businesses,” Camarota explained. “One can’t simply lump all immigrants, or all natives, together into a group and say they all act one way or another. It depends on the person.”
Camarota also observed that many immigrant entrepreneurs tend to find resources and capital from family and others of the same ethnic group who speak the same language. Also, immigrants can be less likely to go to the Small Business Administration for financing. He suggested that simply increasing SBA funding in an effort to help entrepreneurs, as has been brought up during policy debates, won’t by itself automatically assist many immigrant business owners.
Boedjin of San Jose SBA’s Service Corps of Retired Executives (SCORE) program says he and his fellow volunteers do work with many immigrants, but he, along with several other nonprofit leaders, suggested language as a possible barrier to their receiving services.
“Plenty of people in this area speak Spanish as a first language,” he said, “and we’d love to provide the counseling they’d like, but realistically most of our volunteers speak only English.”
Other programs, such as San Francisco’s Small Business Development Center, do offer more services in other languages. Marshall said the place hosts over 400 workshops per year to assist small business owners, and that the workshops in Spanish have become much more popular over the last year.
Oakland’s C.E.O. Women, a program designed specifically to provide networking assistance and business administration training to low-income immigrant and refugee women, focuses on improving clients’ English skills along with giving business advice.
The organization could not be reached as of yet for an interview, but representatives on the phone expressed optimism and enthusiasm about their work. The group specifically integrated language instruction into their curriculum after identifying English communication skills as a need among immigrant business owners.
Manjiv Mansour, Pakistani immigrant and now-retired owner of a rug importing business, believes that despite the language challenge, many immigrants are uniquely suited to develop business enterprises within the United States.
“In many countries, including my own home country, people have to pay fines and jump through a lot of paperwork just to get normal things done,” he said. “So we come over here, and the procedure of starting your own business is not too hard compared to that. We’re experienced with dealing with authorities.”
However, other immigrant entrepreneurs do face difficulties with paperwork and procedures, depending on how different their home countries’ policies are from those in the U.S.
Boedjin pointed out that he counsels immigrants selling home-cooked food who are not used to the idea of applying for Health Department permits. Also, San Jose SCORE meets many immigrants who wish to operate import-export businesses but do not yet understand the legal and customs process and the work involved with developing a legitimate firm of that type.
Dennis Conaghan, director of San Francisco’s Center for Economic Development, described some similar challenges immigrant and other local small business owners face.
“People who start businesses tend to be specialized with their knowledge, and one has to be a real generalist in order to run a business well. There are lots of people who know their fields, but are not necessarily ‘business people.’ There’s a lot to learn about laws, real estate, permits, finances, etc.”
Conaghan suggested people turn to the Small Business Assistance Center for help with those kinds of questions.
Tejeda recommends the Bay Area’s municipalities consider re-evaluating and streamlining paperwork and the permitting process involved with small business incorporation, with an eye towards making things simpler for non-native English speakers with little cash.
Conaghan further cautioned that public services for entrepreneurs, such as those the Center for Economic Development provides, were not immune from budget cuts.
“So far we haven’t yet had to make cutbacks because of the economy, but it may happen in the future.”
The Opportunity Fund’s representatives mentioned that due to their organization’s hybrid business model (loan fees coupled with donations) which provides multiple funding streams, and their recruiting new donors to replace those who no longer sponsor them, they did not need to cut services at this point. However, they pointed out that other, smaller groups providing some similar resources were facing cutbacks.
Tejeda also suggests that groups working with immigrant entrepreneurs consider lowering the costs of the services for which they charge business owners, at least on a sliding scale basis. For example, La Cocina in San Francisco rents out kitchen space to small restaurants so they will have a Health Department-approved place to prepare food. As a nonprofit, they charge below market rate rents - yet the fees are still beyond the reach of some of the Mission’s smallest and newest food vendors. They also have limited space and must turn away many who seek a place to cook.
After 2008’s economic slowdown, lenders and venture capitalists now take more care with distributing their investment funds, and less cash is available for small businesses.
The MoneyTree Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters, describes the first quarter of 2009 as seeing “double digit declines in every major industry sector, mark[ing] the lowest venture investment level since 1997.”
Public and nonprofit sources are not necessarily filling the gap left by wary private investors, especially for today’s newer, poorer, and less-experienced entrepreneurs.
Many small business startups are finding it difficult to qualify for Small Business Administration and private nonprofit loans, Conaghan and other experts say, because they often lack the required capital and high credit scores.
Even while receiving the same level of funding from the Small Business Administration, many locally administered groups assisting small businesses are now making fewer loans due to changes in applicants’ perceived creditworthiness. Lending criteria often has not changed since before the economic downturn.
A January 2009 study by Fortune Magazine of 755 American small business owners reveals that 11% of the entrepreneurs applied for a loan from a public or private source since the recession’s onset, and six percent of the total surveyed business owners were denied financing.
Although the Opportunity Fund has not technically cut back services, it admits providing fewer loans to entrepreneurs, a drop of 15% from fiscal years 2007 to 2008. This stems from a significant drop in credit scores among its loan applicants, along with an increase in clients’ other debts.
C.E.O. Women, an Oakland-based organization specializing in educational and financial services for immigrant and refugee women entrepreneurs, has conducted a survey of recent graduates from its business education program (class of 2004-05) and found that access to capital served as one of the greatest barriers to the success of today’s entrepreneurs. The organization’s leaders cite the need to prepare modern business owners to develop a credit history which will enable them to apply for increasingly hard-to-get larger loans as one of the main reasons they operate their microfinance program, which offers loans of around $2,000 to female entrepreneurs.
Some nonprofit and governmental organizations working with small business owners have refocused their marketing efforts to emphasize services other than direct lending, such as educational offerings aimed at low to moderate-income clients.
The Opportunity Fund’s leaders recently refocused their efforts on financial counseling and business and homeowner advising, to emphasize to the public the educational services they can provide without incurring financial risk.
Galbraith said their group’s name change was intended to convey a broader focus on community services, rather than simply lending cash.
“We have also expanded the business advising we provide to small business owners, whether or not they go on to qualify for a loan. We decided to rename the organization in order to communicate all that we do.”
The Small Business Administration’s office in San Francisco also changed its focus to emphasize its educational, as opposed to financial, offerings.
They have combined their online education programs, community initiatives and youth outreach programs under its newly renamed Office of Entrepreneurship Education.
The office provides information on how to start and grow a business, as well as overall financial literacy. The office will "strengthen SBA's focus on improving the economies of underserved markets through small business ownership," said SBA Acting Administrator Jovita Carranza in an interview with the San Francisco Business Times.
This new demographic of entrepreneurs may find loans and credit harder to secure, at a time when those who turn to business ownership after long, unsuccessful job searches may need financing more than past business owners who had the opportunity to plan and save. However, many community leaders remained relatively optimistic about the prospects for small business owners and have taken steps to address the challenges entrepreneurs face.
San Francisco acknowledges the difficulty of obtaining small business financing and so has teamed up with Working Solutions to offer a microloan program for small businesses that hire low to moderate income city residents. Funds will be available starting April 2009, and the organization took part in a state conference on microcredit and small business funding, on May 28th at Stanford University. San Francisco also provides information on financial and educational resources during its annual Small Business Week, held mid-May.
Gasner of Working Solutions said that the organization has been able to secure a variety of new sources of funding so service cuts are not necessary. Also, they are actually making even more loans to applicants who demonstrate professional experience and can present a decent business plan, even those with slightly weaker credit.
“There is still seed money out there,“ Conaghan confirmed, citing the Japanese angel investor group Keiretsu, named for a concept in the Japanese language involving business-to-business networking.
“And still plenty of opportunities within our new growth industries, green and clean technology and digital media. San Francisco also has a real entrepreneurial culture, and that comes from our talented workforce. Ninety percent of businesses currently operating within city limits have fewer than 100 employees.”
Bob Boedjin also retains his faith in the potential for financial success through owning one’s own business.
“Yes, people can still do it. I actually think it’s a better option for plenty of people, immigrants and anyone else, because it’s so much harder now to find a well-paying job in one’s field, so why not go in a different direction?”
This public optimism seems to have spread to business owners: the Forbes Magazine/Zogby poll of American small business leaders reveals that despite the recession, nearly 50 percent of entrepreneurs surveyed still profited in 2008, and 45 percent - a plurality of the total results - would still start their businesses today.
Tejeda also maintains confidence in the resilience and creativity of immigrant entrepreneurs.
“I’m not at all surprised that so many immigrants choose to start their own businesses. We’re very adept at finding ways to improvise and survive.”