Providing Business Development Assistance and Training to Low-Income Entrepreneurs I. TOPIC Jobs and Business Development II. LOCATION West Central Wisconsin III. SUBJECT Providing Business Development Assistance and Training to Low-Income Entrepreneurs IV. SUMMARY In 1990, the Western Dairyland Economic Opportunity Council (WDEOC), a Community Action Agency serving a rural, four-county area in west central Wisconsin, began a program to provide entrepreneurial opportunities to low-income people in its service area. WDEOC provides low-income individuals with technical assistance and formal training in all areas of business development to help them pursue their ideas for self-employment. Training and assistance topics include conducting feasibility studies, preparing business plans, securing financing, and accounting. The project uses group training, one-on-one instruction, and ongoing business assistance for as long as the entrepreneur needs it. WDEOC coordinates its efforts with other economic development resources in the area, including the U.S. Small Business Administration, chambers of commerce, small business development centers, university extension programs, and vocational and technical adult education schools. WDEOC also persuaded 13 area banks to contribute $3,000 each to a loan guarantee fund that new and expanding businesses can use to help obtain commercial loans. V. SUCCESSFUL PRACTICE Developed a program of business development training and assistance, including a loan guarantee fund, that has helped low-income individuals start 56 new businesses in the last two years. The businesses provide full-time employment to 77 individuals and generated gross sales of $2.5 million in 1994. VI. CONTACT James W. Schwartz, Executive Director Renee Walz, Project Director Western Dairyland Economic Opportunity Commission (A Community Action Agency) P.O. Box 45 Independence, Wisconsin 54747 715-985-2391 715-985-3239 (FAX) VII. CASE STUDY The Problem: West central Wisconsin is a rural area with limited job opportunities. Low-income individuals and public assistance recipients often have good ideas for starting their own businesses to attain self-sufficiency, but they lack the technical expertise and financial backing to actually start a business. The Approach Adopted: The Western Dairyland Economic Opportunity Council (WDEOC), a Community Action Agency, developed a comprehensive program of business development services that employs a case management approach to help low-income individuals and public assistance recipients bring their entrepreneurial ideas to fruition. How They Implemented The Approach: In 1989, the Wisconsin Association of Community Action Agencies approached the governor of Wisconsin and asked the state to provide funds to Community Action Agencies so they could develop programs to promote self-employment among the state's low-income population. The state agreed to participate. In 1990, WDEOC received $12,000 of state general purpose funds and $12,000 in matching funds, mostly from its Community Services Block Grant, and started a program to provide the necessary training and business development services. WDEOC recruits would-be entrepreneurs through its other programs, its newsletter to clients, word-of-mouth, and referrals from other sources, such as banks and economic development organizations. Participants receive twice-a-month group instruction in the basics of running a business, e.g., developing business plans, business accounting, and pricing. After they have learned the basic skills of running a business, individuals receive one-on-one assistance to help them pursue their own business ideas. This includes conducting market feasibility studies, preparing detailed business plans, projecting cash flows, and locating and securing financing. Once a business is in operation, WDEOC provides ongoing development assistance for as long as the person needs it. A significant obstacle in starting or expanding a business is securing capital. This is an even greater barrier for low-income individuals because they usually do not have sufficient collateral to get a loan. Therefore, WDEOC approached area financial institutions and asked for $3,000 donations to establish a loan guarantee fund. Financial institutions saw this as an opportunity to stimulate business development in the community and, in so doing, cultivate long-term business customers. Investing in this fund was also a way for financial institutions to meet their obligations under the Community Reinvestment Act. To date, WDEOC has asked 15 institutions for donations; 13 of them have given $3,000 each. WDEOC uses this $39,000 fund to guarantee up to 40 percent of a business loan. WDEOC plans to approach the remaining 12 financial institutions in the area to secure their participation. Results: WDEOC's job and business development program provides training and assistance to more than 500 people per year. In the last two years, 56 new businesses have been created that employ 77 full-time workers. Ninety-four percent of the businesses started since 1992 are still in operation. Gross sales in 1994 totaled $2.5 million. Among the businesses created in 1994, 14 were started by people on AFDC. All 14 are still in business, and 11 of the families have left AFDC. New businesses that started with WDEOC's help include a fishing bait supply company that sells its lures in national chain stores and has been credited with advancing fishing technology by developing lures that glow under water for a longer time. Other businesses include a company that manufactures high tension fencing for livestock, a stained glass supplier, a trucking company, and a company that performs Civil War re-creations at local events. WDEOC's business development program also provides assistance to businesses in crisis. In particular, it has helped two area specialty restaurants rebound from the brink of failure and become profitable. VIII. KEY WORDS Aid to Families with Dependent Children Business Development Community Action Agency Community Reinvestment Act Economic Development Employment Entrepreneurs Jobs Loan Guarantee Fund New Businesses Self-Employment Small Business Small Business Development Center ref: dairylnd.doc