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Chicago Smart Growth Agenda Issue - October 2000
Redesigning Chicago Neighborhood by Neighborhood


Smart Finance for Business Growth

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 forces.

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 implementation:

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 self-assessment tool.

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 underwriting.

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 support."
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."

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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 Loans

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 areas.

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).

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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 residents.
  • 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 region.
  • 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.


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