Learning Cluster Members

Five organizations were selected in 1999 to receive two-year, $100,000 grants from FIELD to experiment with new approaches for providing business capital to low-income entrepreneurs.

ACCION U.S. Network
Cambridge, Mass.

The ACCION Network sought to increase outreach and the overall efficiency of the lending process in order to reach and serve more borrowers. ACCION’s FIELD-supported project focused on enhancing marketing and sales, and streamlining the underwriting process. ACCION worked to move toward implementation of an informal credit-scoring process, in which its affiliates collectively identified and focused on the personal and business factors deemed most central to the underwriting process. The Network partnered with Fair Isaac Corporation to explore the development of a formal credit scoring model for microenterprise loans.

Coastal Enterprises, Inc. (CEI)
Wiscasset, Maine

CEI found that it needed to offer a range of flexible capital products that match the financial requirements of individual businesses and their low-income owners. In its FIELD project, CEI offered two products aimed at increasing the level of its lending to low-income individuals: conditional grants teamed with flexible loans, and a "micro-equity" product. Drawing on its existing experience in community development venture capital, CEI examined three equity models: (1) traditional equity financing for incorporated microenterprises, (2) a contract-based near-equity product for sole-proprietorship businesses, in which a contract outlining the investment relationship substitutes for the ownership arrangement in standard equity deals, and (3) a royalty-based near-equity product.

Community Ventures Corporation (CVC)
Lexington, Ky.

CVC sought to create three new loan products to expand the organization's continuum of loan products for low-income borrowers. The new products were:

• A "Jump Start" peer loan that provided up to $500 to finance predevelopment costs of its training program graduates. This product had reduced underwriting requirements for clients who had some access to sources of repayment beyond their business.
• An "SBA Express" loan that provided small amounts of capital with rapid turnaround to SBA Microloan applicants  needing small amounts of financing to meet a short-term need (e.g., to fulfill a contract).
• A consumer loan product for business loan customers  experiencing personal financial needs that impact their business.

New Hampshire Community Loan Fund (NHCLF)
Concord, N.H.

NHCLF sought to expand the level of microlending in the state of New Hampshire by offering three different loan products. In designing its products, NHCLF  sought to address two challenges. The first was to create a range of products (including both peer and individual loans) and modes of outreach (offering loans directly and in partnership with local organizations) to attract larger numbers of entrepreneurs. The second was to construct careful underwriting approaches and criteria to minimize the often very high costs of making microenterprise loans. The three products offered were:

• A statewide peer-lending program.
• The "Towns" project, which offered lines of credit to municipalities and other local development organizations with business counseling and/or underwriting capacity, but lacking flexible capital to make microloans.
• The "Specialty Trades" project, which offered lines of credit to trade associations, which in turn would make microloans to members.

West Central Wisconsin Community Action Agency, Inc. (West CAP)
Glenwood City, Wis.

West CAP's project aimed to provide equity to businesses facing cash-flow issues in their early years. West CAP had observed its clients struggling with business operations and loan repayment at the 12- to 18-month period. In response, they created a Business Investment Trust to hold in escrow 40 percent of each loan payment. After 12 consecutive months of on-time repayment, the client would be able to access the funds to invest in inventory, equipment or working capital. Thus, the trust would provide both an incentive for loan repayment and a source of equity for the business.