Smart Growth Agenda Issue - October 2000
Chicago Neighborhood by Neighborhood
Smart Finance for Business
Smart Growth in Chicago must include small business
growth if our communities are to economically improve. Opportunities for new
businesses and expansion by current firms are essential to create wealth and
jobs. However, finance and technical assistance opportunities must also be made
available citywide to fully realize our communities’ potential. The Small
Enterprise Capital Access Partnership [SECAP] is an initiative of the
Federal Reserve Bank of Chicago that can be traced back to discussions on small
business financing issues by CANDO directors with Federal Reserve Board
Governors Laurence Meyer (December 1997) and Edward Gramlich (December 1998).
The SECAP process has involved numerous stakeholders, and with CANDO as a
co-convener, included over 20 CANDO members who served on one of four task
With the goal of improving access to
credit and related resources by historically underserved small business owners,
SECAP task forces have identified several recommendations for
EQUITY INVESTMENT: The establishment of a targeted
venture capital fund for firms seeking equity from $250,000 to $1.5 million. The
objective is for 50% of the investments to be under $750,000 in size and at
least 70% of the deals to be within low- and moderate-income (LMI) areas or for
firms owned and operated by women or minorities. Other recommendations include
fostering an "angel" investment network and providing assistance for
entrepreneurs seeking equity financing.
MARKETING & DELIVERY SYSTEMS: The establishment
of a web-based information resource for entrepreneurs seeking assistance and
financing. This internet-based clearinghouse will include directories and links
to resources, descriptions of loan products, and eventually an interactive
PRE- AND POST-LOAN TECHNICAL ASSISTANCE: Increasing
the quantity and quality of technical assistance (TA) providers. Recommendations
include facilitating the establishment of quality standards for TA, developing
certified training for TA, and fostering ongoing dialogue between TA providers
and small business lenders.
UNDERWRITING: Improve loan products for cash-based,
non-asset-based service businesses. Recommendations include encouraging lenders
to institute a secondary review process when using credit scoring and automated
Michael Moskow, President & CEO of the Federal
Reserve Bank of Chicago, notes, "It is our hope that our SECAP partners will
commit, or continue to commit staff to the implementation process, and will be
an active participant in implementing changes and recommendations that they
For a copy of the SECAP report, contact Michael Berry of the
Federal Reserve Bank of Chicago at (312) 322-5192.
Smart Finance for Smart Leaders
In her 12 years at the Women’s Business
Development Center, a downtown non-profit whose mission it is to accelerate
and strengthen the growth of women-owned businesses, Linda Darragh has seen a
lot of businesses that needed financing. But many
didn’t realize what kind
of financing they needed.
On the Equity Task Force of SECAP,
she and other members wrestled with how to increase access to equity
investments, as well as how to increase awareness of when to use this type of
financing. The task force developed recommendations to create a new equity fund
to target smaller-sized businesses, while raising the awareness of investors to
opportunities with smaller firms.
"A socially-responsible equity fund
is important to smart growth," Darragh asserts, "because it will help to spur
technology-driven enterprises in older, low-income city neighborhoods that have
been left out of the information boom."
Debra Osborn knows the importance of
getting the word out. Being a part of the Marketing Task Force of SECAP showed
her how much work is left in informing entrepreneurs about the options open to
them in small business financing. As a lawyer for the Community Economic
Development Law Project [CEDLP], a group that gives pro-bono legal advice to
economic development groups and disadvantaged small businesses, Osborn sees on a
regular basis how much misinformation is out there.
The Marketing Task Force, she says,
brought together a variety of mindsets to see how more businesses can be
reached, thus strengthening communities and businesses, and even benefiting
banks. "The knowledge gap between entrepreneurs and lenders needs to be
bridged," insists Osborn. "We need to get smarter on how to use the web and
internet to do so."
SBA Expands Community Express
An innovative US Small Business Administration
(SBA) loan product, Community Express, is now being offered to lenders
participating in the agency’s Preferred Lenders Program (PLP). Designed by the
Bankers Community Collaborative Council of the National Community
Reinvestment Coalition (NCRC), this product encourages lenders to make loans
that they might not otherwise make. SBA guarantees 80% on loans of $100,000 or
less and 75% on loans above that up to $250,000 if the loans also fit SBA’s
New Markets Initiative – targeting of small businesses owned by
minorities, women and veterans or located in low and moderate income
A key component of Community Express is the
inclusion of post-loan technical assistance (TA). During its first-year pilot,
Bank One has been the sole lender in the Chicago market working with CANDO and
members including Greater North Pulaski Development Corporation and the Women’s
Business Development Center. As of the end of August, over 120 loans for $11.8
million have been made nationally. Bank One has been the largest lender with
over one-third of the volume nationally and over 10% of the national volume here
in the Chicago area.
CANDO encourages its bank affiliate members and its
neighborhood-based voting members to actively market Community Express
loans with this expansion. SBA Administrator Aida Alvarez notes, "The
partnership between the SBA and NCRC provides critically-needed access to
capital for small businesses in traditionally underserved areas of the country,
along with technical and management assistance to loan recipients."
Ted Wysocki, CANDO's President & CEO, serves as
NCRC vice-chair. He comments that "Community Express illustrates how smart a
collaboration between non-profit business assistance providers, banks and
government can be in working together to put dollars on the street for small
business growth." For more information, contact Steven McCullough, CANDO’s
Executive Vice President & COO at (312) 372-2636 (ext 233).
CANDO's Chicago Smart Growth Agenda
'Smart Growth for Chicago neighborhoods is not an oxymoron.
Redesigning Chicago neighborhood by neighborhood not only merits our
collective dedication; it is a necessary endeavor.' -- Ted
Wysocki, CANDO President & CEO.
- Smart TIFs include community involvement, front-funding
the assembly of land, and increased hiring of neighborhood
- Smart Zoning focuses on planning for public purposes,
such as affordable housing and industrial retention, and not just
to enrich developers' pockets.
- Smart Work force funds vocational skills training to
help businesses grow and to attract new industries to the Chicago
- Smart Finance promotes technical assistance and access
to smaller equity investments for small businesses to spur
economic activity in low- and moderate-income areas.
- Smart Leaders need to be recruited, trained, and
retained to move community projects from planning to development.
- Smart Land Use is highlighted in this inaugural edition
of Chicago Smart Growth Agenda.