Personal Savings for Microbusiness Clients

Personal Finances BlogPlaza Adelante, the neighborhood center of the Mission Economic Development Agency (MEDA), welcomes financially challenged, budding entrepreneurs every day. There are two things these new clients have in common: a dream of starting their own business and the need of capital to make that dream a reality.

New Report on Personal Finances and Small-Business Ventures
The Corporation for Enterprise Development (CFED), an organization with the goal of expanding economic opportunity, has published a comprehensive analysis of the fiscal realities of starting a business.

Entitled “In Search of Solid Ground: Understanding the Financial Vulnerabilities of Microbusiness Owners,” this financial services report notes that microbusinesses account for approximately 92% of all U.S. businesses and 26 million jobs. The report also details how a microbusiness owner’s personal and business finances are closely intertwined.

MEDA’s History Fostering Small-Business Creation
With 40 years of assisting financially challenged individuals with small-business issues, MEDA is up to the difficulties that come in this process. In 2013, MEDA helped clients create 36 new businesses, while 286 businesses were assisted in other capacities.

Edwin Rodriguez, MEDA’s Business Development Program Lead, has guided scores of deserving clients through the steps to open a small business. He understands that a poor credit score and paucity of personal savings can hinder this process.

“The free Business Development workshop at MEDA comprises five sessions. The third session’s focus is on the personal finances of the prospective entrepreneur. This covers credit, debt and savings, plus how to set goals to achieve personal financial security,” explains Rodriguez. “MEDA’s service integration model translates to there being a common thread of financial capability among all programs.”

Once the workshop has been attended, MEDA offers expert one-on-one coaching. Part of this coaching entails offering ideas on how to obtain needed funding for the business venture.

Obtaining Capital Through MEDA Partners
There are numerous ways to secure requisite capital from MEDA’s community partners. The main programs:

Individual Development Accounts (IDA’s) are offered through MEDA’s partner, EARN, one of the two largest providers of goal-based savings accounts in the U.S. MEDA helps its client determine the capital needed to start their venture and devises a savings strategy. Let’s say $5,000 is needed to start the business. The client then saves and deposits money into their IDA, with the funds matched by an amount determined by EARN.

Lending Circles are offered though MEDA’s partner, the Mission Asset Fund, with this cultural program based on trust. People around the world use informal lending circles when they do not feel comfortable using banks. Mission Asset Fund combines this age-old tradition with credit reporting. Think of a lending circle as a wheel, where each month everyone who is part puts in an agreed-upon amount of money on their spoke. Once you make a full circle, you collect your money and have the capital needed to start a business.

Kiva Zip Loans leverage the Internet and a worldwide network of microfinance institutions. MEDA coaches teach clients how to apply for such a loan.

Valley Economic Development Center (VEDC) has a goal of “enriching communities by making economic dreams a reality.” Loans of $1,000-$50,000 are available through the “MicroEntrepreneur Loan Fund,” with all loans going to underserved communities. Comerica Bank backs this program to expand businesses, generate greater revenues and hire more employees.

Opportunity Fund provides working capital for working people by offering microfinance loans from $2,600 to $100,000. This organization knows that sometimes all a prospective business owner needs is as little as $5,000 to start their venture, with the result of increased income and new jobs.

MEDA Small-Business Loans are planned to start later in 2014 via the Administration for Children & Families’ Community Economic Development Fund. Stay tuned for more information on this innovative program. 

Client Success Story: Maria Alonso, Perfumes and Accessories Alonso
Maria Alonso, an Immigrant from Puebla, Mexico, came to MEDA with the dream of starting a fashion business. With assistance from MEDA’s Business Development team, Maria opened Perfumes and Accessories Alonso in 2013 in the heart of San Francisco’s Mission District.

How did MEDA help Maria overcome personal financial issues to start her own small business? MEDA combined a trio of its partner services. First, Maria was advised to open an IDA account, where she saved $2,000 and received back a total of $6,000. Second, Maria participated in Lending Circles to increase her savings for her business. Finally, MEDA taught Maria how to apply for a business loan through Kiva Zip. Harnessing the power of MEDA’s partners, Maria found the necessary funds to start her small business.

In Conclusion
While the idea of starting your own business can be intriguing, the financial needs can be daunting. MEDA is about solutions, guiding its clients through the complex web of issues that create a hindrance to getting personal finances in order to be able to start a business. MEDA takes that client through the financial steps required to make their venture a success.

If you are interested in free business development workshops, please contact MEDA: (415) 282-3334 ext. 101; business@medasf.org.

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