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The Fairness Pledge helped Cambridge Savings Bank launch a small business mentoring program, an open-to-the-minority-entrepreneurs contact section that opens up lines of credit from the bank.
The startup epidemic is showing signs of abating, and some local banks are expanding their financial education to support new — especially minority — business owners and possibly new customers down the road.
“It’s a big commitment and a risk on their part to start a small business,” said Carol Sexton, senior vice president and head of retail banking at Cambridge Savings Bank, which recently launched its own programs based on feedback from local businesses. “We wanted to develop a program that really helped them through that whole journey — from starting to founding to growing.”
These programs provide opportunities for banks to reach businesses in low- and middle-income communities, where the epidemic’s struggle to access credit is thrown into sharp relief.
The need for starting fuels
The last two years a A large and sustainable development of entrepreneurship at the national level. With the millions of layoffs at the start of the pandemic, and many Americans reassessing their lives and goals after the harsh experiences of 2020.
Census Bureau information Compiled by the Federal Reserve Bank of St. Louis The number of applications to start a business in Massachusetts jumped 34 percent between the second quarter of 2019 and the second quarter of 2021. Census statistics on business establishment Show Massachusetts has double-digit percentage growth in the number of new businesses started every month since July 2020 over 2019 figures.
The Massachusetts Small Business Development Center provides another barometer that shows the growing demand for education from current and aspiring business owners.
Sponsored by the US Small Business Administration, the MSBDC offers group workshops and one-on-one counseling, including helping with business plans and helping businesses apply for loans.
In addition to courses on how to start a company, financial education classes are in high demand, including credit scores and financial record keeping, said Nancy Gerardi, director of MSBDC’s Northeast Regional Office at Salem State University. She added that financial recordkeeping problems have created obstacles, particularly for small businesses seeking Paycheck Protection Program loans and economic injury and disaster loan funds.
The office provided counseling services to 825 people in the nine months of the fiscal year, which is 65 percent more than the forecast for the fiscal year. And after the office had held 19 workshops throughout the year, 30 workshops were held in these nine months attended by about 735 people.
“Then that tells me there’s an interest,” Jarry said. “So that’s good – if people want to start a business, it means they’re getting a good move on the economy.”
Programs combine training and credit
Some banks have long included small business owners in their financial education programs.
US-headquartered Santander in Boston launched a free program in 2017 to help early-stage entrepreneurs in the food industry — with a focus on women, minorities and immigrants — build their businesses.
““We thought there was particular demand around foodservice,” said Patrick Smith, Santander’s head of consumer and commercial banking. I think this need was more pronounced during and after the pandemic.
The program, called “Developing Small Business,” involved Commonwealth Kitchen, the Initiative for a Competitive Inner City and Babson College and 150 Boston-area business owners, Smith said. The program also includes grant opportunities, and Smith said the bank has invested $1.6 million in the program.
A financial education program through Brockton-based HarborOne Bank offers small business owners, including those just starting out, the opportunity to apply for a loan or line of credit at the bank.
Harbor One in 2010 It has offered financial education programs since 2007, launching Harbon U in 2010. After a few years of providing well-educated classes to small businesses, the bank realized that prospective businesses need capital in the early stages, said Maureen Wilkerson, president of community education at HarborOne.
The bank launched “Success for Small Business” in 2015 by offering five essential courses and additional classes. Participants do not need to be customers of HarborOne, and anyone who completes the necessary courses can apply for a $5,000 loan or line of credit, with the opportunity to increase the loan to $10,000 after a year.
While the loan amount is relatively small, Wilkerson said the funds could make a difference in the early stages of purchasing equipment and other needs.
Still, many participants told the bank that the education was more important than the loan, Wilkerson said. In the year Since 2015, the program has had 700 participants, but not everyone who takes the course ends up getting a loan or even opening a business, she said. The bank had 100 participants apply for a loan. As of June 30, it had 75 loans totaling $250,000 in the program.
During the pandemic, the courses switched to a virtual format, and Wilkerson said the bank will continue this format going forward. HarborOne was initially concerned that switching to virtual programs would affect the market’s reach in low- and moderate-income communities, said Wilkerson, the bank’s community improvement law officer.
Instead, she revealed that in a recent analysis of participant addresses, the bank was able to increase participation from low- and middle-income census tracts.
CSB provides consultancy services
Cambridge Savings Bank has recently launched small business training programs in partnership with several non-profit organizations.
Sexton, head of retail banking at Cambridge Savings Bank, said the program was in response to feedback from small businesses that they needed help in a range of areas, including cash flow and marketing. The courses are offered in person and virtually, depending on how the partner offers the program.
Participants who don’t need to be bank customers can complete the four-course program and apply for a line of credit to help them start their business, Sexton said.
Diane McLaughlin
“They may not have a typical credit score that we’re looking for, but I think we do a really good job of understanding the story behind the business and connecting the dots to make the transaction work for the small business customer,” she says.
Anyone who completes the financial education program will have a Cambridge Savings banker as a mentor who will continue to connect with the business owner, he said. Brad Fitts, Cambridge Savings Bank First Vice President and Small Business Development Group Leader.
The program is part of Cambridge Savings Bank’s commitment to working with minority-owned and other underserved businesses that have lost access to capital, Fitts said.
“There’s some additional risk there, but we’re committed to doing that, and that’s from the top down,” Fitts said. “I think that financial education and counseling is what creates success for those business owners that they may not have had access to before.”
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