The wave of pandemic startups shows few signs of waning, and some local banks are expanding their financial education program to support new business owners, especially minorities, and perhaps win new customers along the way. .
“It’s a big commitment and 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 along this journey – from launch to establishment to early growth.”
These programs also provide opportunities for banks to reach out to existing businesses in low- and moderate-income communities, whose difficulties in accessing credit have been highlighted by the pandemic.
Need for starting fuels
The past two years have seen a significant and sustained increase in entrepreneurship nationwide. Commentators have linked it to the millions of layoffs at the start of the pandemic and the reassessment by many Americans of their lives and goals after the intense experiences of 2020.
Census Bureau Data compiled by the Federal Reserve Bank of St. Louis shows that the number of business start-up applications in Massachusetts jumped 34% between the second quarter of 2019 and the second quarter of 2021. The second quarter of 2022 saw 22% more applications than the same quarter in 2019, and Census statistics on starting a business show that Massachusetts has double-digit percentage growth in the number of new businesses launched in 2019 figures every month since July 2020.
The Massachusetts Small Business Development Center offers another barometer that shows that the demand for education from current and future business owners is increasing significantly.
Supported by the US Small Business Administration, the MSBDC offers group workshops and individual counseling, including helping develop business plans and helping businesses apply for loans.
In addition to a course on starting a business, small business owners need financial education classes the most, said Nancy Gerardi, director of MSBDC’s Northeast Regional Office based at the University. of Salem State, including those on credit ratings and financial record keeping. She added that issues with financial record keeping, in particular, created a barrier for small business owners seeking Paycheck Protection Program loans and economic injury and disaster loan funds.
The office provided advice to approximately 825 people in the first nine months of its current fiscal year, which is 65% more than planned for the full fiscal year. And 30 workshops were held in those nine months with about 735 people in attendance after the office had scheduled 19 workshops for the whole year.
“It tells me there’s a need out there,” Gerardi said. “So that’s good – if people want to start businesses, that means they have a good pulse on the economy.”
The programs combine coaching and credits
Some banks have a long history of including small business owners in their financial education programs.
Santander, which is headquartered in the US in Boston, launched a free program in 2017 to help startup entrepreneurs in the food industry — with a focus on women, minorities and immigrants — start their businesses.
“We felt there was a need specifically around foodservice,” said Patrick Smith, head of retail and business banking at Santander. “I think that need has become even more pronounced during and after the pandemic.”
Called “Cultivate Small Business,” the program is run in partnership with Commonwealth Kitchen, Initiative for a Competitive Inner City and Babson College, and 150 Boston-area business owners participated, Smith said. The program also includes grant opportunities, and Smith said the bank invested $1.6 million in the program.
A financial education program through Brockton-based HarborOne Bank offers small business owners, including those just starting their businesses, the opportunity to apply for a loan or line of credit from the bank.
HarborOne has been offering financial education programs since 2007, naming the initiative HarborOne U in 2010. After offering well-attended classes for a few years to small businesses, the bank recognized that prospective businesses needed capital early on, said Maureen Wilkerson, first vice-president. president of community education at HarborOne.
The bank launched “Success for Small Business” in 2015, offering five required courses as well as additional courses. Participants do not need to be HarborOne customers, and anyone who completes the required courses can apply for a $5,000 loan or line of credit, with the option to increase the loan to $10,000 after a year.
Although the loan amount is relatively small, Wilkerson said the funds can make a difference in the early stages for purchasing equipment and other needs.
Even so, many participants told the bank that the education was more important than the loan, Wilkerson said. The program has had 700 participants since 2015, she said, but not everyone who takes the course ends up applying for a loan or even opening a business. The bank has had 100 participants apply for loans and, as of June 30, had 75 loans totaling $250,000 under the program.
Classes moved to a virtual format during the pandemic, and Wilkerson said the bank will maintain that format going forward. HarborOne initially worried that the shift to virtual programs would affect its reach in low- and moderate-income communities in its market, said Wilkerson, who is also responsible for the bank’s Community Reinvestment Act.
Instead, she said, a recent analysis of attendee addresses showed the bank saw an increase in attendance from low- and moderate-income census tracts.
CSB offers mentoring
Cambridge Savings Bank recently launched training programs for small businesses in partnership with several not-for-profit organisations.
Sexton, head of retail banking at Cambridge Savings Bank, said the program was launched in response to feedback from small businesses that they needed help in various areas, including cash flow and marketing. Classes are offered in-person and virtually, depending on how the partner delivers 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 businesses, Sexton said.
“They may not have the typical credit score 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 a transaction work for a small business client,” she said.
Everyone who completes the financial education program will have a Cambridge Savings Bank employee as a mentor who will continue to interact with the business owner, said Brad Fitts, senior vice-president of Cambridge Savings Bank and head of the small business development team.
The program is part of a commitment Cambridge Savings Bank has made to work with minority-owned businesses and other underserved businesses that have not had the opportunity to access capital, Fitts said.
“There is additional risk there, but we’re committed to it, and it’s top-down,” Fitts said. “I think financial education and mentorship is what’s going to create success for business owners who may not have had access to it before.”