Microenterprise grant gives entrepreneurs a head staRt

Microenterprise grant gives entrepreneurs a head start

Patrick Harney

Staff Writer

For anyone interested in opening a small business, New York State is the place to be.

According to the U.S. Small Business Association’s Small Business State and Territory Profiles, which feature data from 2007 to 2014, New York has 2,057,959 small businesses (i.e., “firms with fewer than 500 employees”). Additionally, the state also has a low turnover rate of small businesses. According to the profile, New York saw 40,765 businesses open in 2013, 80 percent of which managed to stay open into 2014.

Given the number of small businesses providing employment opportunities in New York (99 percent of all businesses in the state qualify as such), it would make sense for the state, counties, towns, and villages to initiate programs for local entrepreneurs that would provide assistance in training, equipment, or additional purchases.

Which is exactly what Albany County did this past August.

Called the Microenterprise Grant Program, the initiative is designed to “provide direct assistance to start-ups and small business entrepreneurs” in the county, according to a press release dated August 22, 2015.

The program is funded by New York State’s Community Development Block Grant program (NYS CDBG), which is administered by the Office of Community Renewal. According to New York State’s Business First website, the grant program, federally funded by Title I of the Housing and Community Development Act of 1974, helps to “foster the development and support the growth of microenterprise businesses by providing grants in conjunction with capacity building and entrepreneurial assistance.”

In order to be eligible to receive the grant, applicants must be part of a “microenterprise,” which is defined on Business First as: “a commercial enterprise that has (5) five or fewer full-time equivalent employees, one (1) or more of which owns the enterprise.” Additionally, in order for a small business to qualify as a microenterprise, it must require no more than $35,000 in start-up capital.

For businesses in Albany County, applying for the CDBG program seemed to be the perfect opportunity for the region. The grant program’s purpose was to help provide “entrepreneurial opportunities or jobs for persons who are low-to-moderate income,” according to the press release issued by both the county and New York State’s Business First website.

Additionally, the program would allow for another opportunity for the county to collaborate with the Capital Region Chamber of Commerce in Albany, which has worked with the county in the past.

According to Mary Rozak, the Director of Communications for Albany County, the county office “has been, and continues to be, a valuable resource, not only in Albany County, but across the region.” The Capital Region Chamber even acts as a host for the Albany County Business Development Corporation, a local development corporation that handles oversight of the Al Tech Trust Fund. This fund grants loans of up to $1 million to be used for “acquisition or renovation of owner-occupied real estate, purchase of fixed assets, and working capital,” according to a fact sheet provided by the chamber.

Given the close collaboration between the county and the chamber, both parties chose to work on a joint proposal for the Office of Community Renewal, submitting their application and receiving word that they had won the grant funds on December 10, 2015.

As a result of winning $200,000 in grant funds, the county and chamber set up a system through which those interested in receiving an application for the Microenterprise Grant program would reach out to Joseph Landy, who is the chamber’s Director of Commercial Lending. Landy then teams up with Scott Siegel, Albany County’s Senior Policy Analyst, to provide administrative support for the program. The Al Tech Loan Fund Board then selects and chooses applicants who would be most deserving of the award funds, which can range from $5,000 to $35,000, according to both Rozak and the county’s webpage.

To ensure the applicants applying to the program are eligible to receive funding, a series of safeguards are put in place.

For applicants to be considered, they must own an existing business with “no more than five employees.” Additionally, applicants must pass a “low-to-moderate income test,” which is completed by submitting tax returns and financial disclosure forms provided by the Office of Community Renewal. Finally, those applying also must pass an approved training program for start-ups and entrepreneurs. According to Rozak, the Capital Region Chamber offers such a training program, along with others, including one under New York State Empire Development. While there are costs associated with these training programs, those costs can be included in the grant awards.

While the Microenterprise Grant Program in Albany County has just begun, it is far from being the first program in the state. There are a number of other municipalities and counties that either had a microenterprise program in the past, or still possess a program today.

Counties and towns that were reached for comment on their programs included the Town of Bethlehem, Oneida County, Fulton County, Livingston County, St. Lawrence County, and Greene County.

Out of these five counties and one town, Oneida County had just completed its funding cycle with the CDBG, which typically lasts for two years. Fulton County and the Town of Bethlehem are currently working on applications to the Office of Community Renewal to extend the funding for the program.

For towns and counties looking to attract entrepreneurs and start-up businesses, there are a few other opportunities available for applicants through the Office of Community Renewal (OCR).

In Livingston County, the Livingston County Development Group has several programs, including a “Brew In Livingston” competition. The goal, as the group’s director Bill Bacon puts it, is to “create potentially four breweries in Livingston County,” where applicants would pitch business plans for opening a brewery. Currently, Bacon added, there are not any “craft-brewing facilities in [Livingston] County.” As of October, the “Brew In Livingston” program is not funded using CDBG dollars, although Bacon hopes OCR will approve it within the next few months.

Additional projects in Livingston County eligible for funds from OCR include the Downtown Partnership, designed to preserve and maintain buildings located in each of the county’s nine towns, and the microenterprise program. While many of these programs are administered by local development corporations, there are a few run solely by governmental bodies.

In the Town of Bethlehem, which was awarded funds in December of 2014, Elizabeth Staubach oversaw the administration and application process throughout the funding cycle. The decision to keep the program in-house without additional parties made sense from Staubach’s perspective, given her position in the town as Economic Development Coordinator.

Given the evident success of microenterprise programs throughout New York State, it would seem as though it could be replicated in other states. However, the efficacy of such programs can depend largely on several factors.

According to Amit Batabyal, a professor of economics at the Rochester Institute of Technology, microeconomic programs can be used elsewhere in the country, although it depends upon the location.

In a recent phone interview, Batabyal mentioned West Virginia and Wyoming as examples of states that would benefit from a microenterprise program. For West Virginia, this would be due, in large part, to the state’s reliance on coal mining as a source of income for a large majority of the state’s population, where the miners had “little or no job skills,” aside from mining coal.

Similarly, Batabyal also made note of how a microenterprise program could benefit Wyoming, where the state population is scattered, and without any help from the state government. He said that for people in such sparsely populated states, “it’s difficult to see how private entities might actually do anything, because it would simply be hard for these people to access the private credit providing facilities,” due to their rarity in rural areas, and possible exclusionary tactics for “dispersed rural folks.”

Examples aside, Batabyal does find the possibility of microeconomic programs to be “generalizable,” although it is important for officials considering such grants to look at the specifics of their state’s economies.

“We have very, very different economies in all of these states, and that needs to be a significant part of the calculation before deciding if we should have something like this in place,” Batabyal explained. He also emphasized the importance of each state conducting thorough evaluations in order to determine “who is the most likely to be the most useful beneficiaries.” In other words, he added, consider “where am I most likely to get the biggest bang for my buck if I do decide to put into place a microenterprise loan program?”

The need for microenterprise loan programs in other states with low-income and low employment rates is evident, due to a number of other states possessing similar programs as a means of mitigating such challenges. According to the Corporation for Enterprise Development (CFED), 34 states currently “fund microenterprise development directly or have codified microenterprise in state law.” Of these states, 23 of them use CDGB dollars support microenterprise.

Representing more than 80 percent of all businesses in the United States, microenterprises constitute an effective means of job creation and asset-building. For more information on the Community Development Block Grant program, visit www.hud.gov/cdbg.