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2	Neighborhood Economic Development - Financing and Feasibility “At the very center of the community building challenge is the effort to revitalize the community’s economic life”
3	Neighborhood Economic Development Overview Retain, Expand, Attract Area Businesses Land, building costs, other costs, security, infrastructure, employee skills, managerial skills, capital Marketing, membership services, brokering public services, industrial analysis
4	Neighborhood Economic Development Overview Business incubators Low rents, support services, financing, personnel selection, employee training, management, law, marketing, peer support Incubators create jobs, reuse vacant buildings, offer positive business image Receive funds from SBA, EDA, CDBG, etc.
5	Neighborhood Economic Development Overview Entrepreneurial development Seed loans Peer support Sellable skills such as child care, catering, commercial cleaning, word processing, home repairs, personal and business services Skill and competence training Immigrant groups / “Capital in hand”
6	Neighborhood Economic Development Overview Capital strategies (Equity capital and loans) Community investment funds Community Development Financial Institutions (Community development banks, Community Development Credit Unions) Community Reinvestment Act Program Related Investment (LISC, Campaign for Human Development) State chartered venture capital funds
7	Neighborhood Economic Development Overview Pension funds (State and union) Tax incentives (Tax exempt bonds for capital, tax credits for wages and equipment, tax sheltering for facilities/equipment Utilities and corporations (Loans, grants, technical assistance, lower cost energy) Federal, state, local government (Grants, revolving loan funds, training, SBA) Small Business Investment Corp (Owned by banks & corps, sell stock, loans guaranteed by SBA)
8	Neighborhood Economic Development Overview Linked development (Funding for social and econ. dev. programs, housing, investments) Buy local / produce local (Buying power within neighborhood, import substitution, directories, affiliations) Job training (Job finding, skills training, intermediary organizations, programs in affiliation with businesses, school based programs, First Source)
9	What We Know About Jobs Programs Simple inexpensive programs work that teach how to write a resume, where to look for jobs, how to present oneself, and encourage job seekers to keep looking America Works - 60-70% get jobs and 80% on jobs after year Center for Employment Training (CET) also engages employers in job training design and conducts extensive job training
10	Neighborhood Economic Development Overview Employee owned businesses Community owned businesses Community Development Corporations
11	Neighborhood Economic Development Overview - Ethnic Businesses
12	CRA and Small Business Lending Community Reinvestment Act: lending institutions have a “. . . continuing and affirmative need to help meet the credit needs of local communities in which they are chartered . . . consistent with safe and sound operation”
13	CRA Research Findings Study of $10.9 billion in Chicago commercial lending in late 1980s 67% of total went to suburban businesses 70% of loans in city went to 12 of 700 census tracts Smaller banks and banks located in neighborhoods - more likely to lend there CUED / U of Ill. study based on loans per 1000 businesses and per employee White, high income areas had significantly greater commercial loans per employee Low income areas had relatively fewer loans Mixed, average income area had significantly more loans
14	CRA Research Findings
15	CRA Agreements Commercial Loans Commitment to neighborhood lending program - $ to small business loans Specific types of loans: working capital business expansion equipment fixed assets inventory buying / renovating facilities Venture capital funds Microloan funds Special terms of loans: lower interest rates, points, and fees longer term (15 years instead of 7-8) collateralization of accounts receivable partial collateralization of subordinated debt lower equity requirements smaller minimum loan sizes
16	CRA Agreements Commercial Loans Voluntary technical assistance to small businesses Letters of credit and purchases of CDs from CDCUs / CDFIs Purchasing SBA loans Lend to small businesses with SBA loan guarantees Neighborhood commercial center loans Partnerships and grants to CBOs to solicit small business loans, provide technical assistance, and evaluate credit worthiness
17	Microlending Great majority of all U.S. businesses have less than 20 employees Microenterprises are sole proprietorships with fewer than 5 employees Microloans typically to women & minorities, 75% earn < $25k/yr, 30-49 years of age, >80% high school, 50% some college, 40% poverty level
18	Microlending Program $1,500 to $8,000 8 months to 2 years Market rate Stepped loans “Peer lending” Technical assistance: business plan, financial statement, marketing, budgeting, accounting Benefits Fills gap in commercial lending practices Goal setting Initiative taking Self-reliance Raises incomes Job creation Accumulation of capital Revitalize neighborhood economic conditions
19	Community Development Corporations Non-profit corporations in low income neighborhoods Address comprehensive set of needs. Carry out activities that reinforce one another Community control / resident participation Mobilize financial, technical, and political resources Create organizational capacity
20	Retail Market Analysis Identify trade area Determine number of households & income levels in area Calculate expenditures for goods & services of interest Estimate market capture rate Estimate sales volume Calculate size of project
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