Self-Employment Opportunities for AFDC Recipients and Other Low-Income People I. TOPIC Self-Employment II. LOCATION Central Minnesota III. SUBJECT Self-Employment Opportunities for AFDC Recipients and Other Low-Income People IV. SUMMARY In 1988, the Tri-County Community Action Program (TCC), a Community Action Agency serving three counties in central Minnesota, received funding from the state Department of Human Services to initiate a federally sponsored demonstration project to assist recipients of Aid to Families with Dependent Children (AFDC) pursue self-employment opportunities. The program is now available to anyone at or below 125 percent of the federal poverty level who has a business idea that meets TCC's viability evaluation. TCC provides one-on-one business development training to would-be entrepreneurs and to people who are already self-employed but need further advice and/or training. Depending on the individual's level of experience or knowledge, training can last from four to 12 weeks. As part of the training component, those who decide to pursue a business idea receive assistance with researching potential markets, evaluating existing competition, developing a business plan, making financial projections, and locating financing. TCC also operates a revolving loan fund for program participants. An Economic Development Advisory Committee reviews and approves loan applications. Since 1988, TCC has extended 40 loans totaling $393,600, and more than 300 people have received TCC's self-employment training and/or business development services. V. SUCCESSFUL PRACTICE Created a program of business development training and services, as well as a revolving loan fund, for low-income individuals to pursue self-employment opportunities. VI. CONTACT Joseph Ayers, Executive Director Danette Ringwelski, Project Director Tri-County Community Action Program (A Community Action Agency) 501 LeMieur Street, P.O. Box 368 Little Falls, Minnesota 56345-0368 612-632-3691 612-632-3695 (FAX) VII. CASE STUDY The Problem: Central Minnesota is a rural area experiencing high rates of unemployment. Although there is some agriculture, small manufacturing, and summer tourism brought in by the area's lakes, there are no dominant employers or industries in the region. Job opportunities are scarce. The Approach Adopted: The Tri-County Community Action Program (TCC) saw self-employment as a practical means of reducing unemployment and promoting self-sufficiency among the low-income population of its three-county service area. How They Implemented The Approach: In 1988, the U.S. Department of Health and Human Services sponsored a federal demonstration project to promote self-employment opportunities among recipients of Aid to Families with Dependent Children (AFDC). TCC received funding from the Minnesota Department of Human Services to establish a self-employment program. TCC recruits participants to its self-employment program by informing participants of other TCC programs about the self-employment program and by advertising its services through local media and other service providers. One of the first steps in the self-employment program is classroom instruction on developing a business idea and starting and operating a business. TCC discovered that participants in the program had different levels of business knowledge and experience; therefore, they had different needs in business development services. Some participants were already self-employed and took part in the program to expand their businesses. Thus, in 1993 TCC switched from classroom instruction to one-on-one counseling. Training lasts from four to 12 weeks, depending on individual needs. As part of the training component, would-be entrepreneurs who have a business idea that they want to pursue or expand present their ideas to TCC staff. TCC works with the individual to evaluate the idea; if the idea seems viable, TCC helps the individual research potential markets, evaluate existing competition, develop a business plan, make financial projections, and locate financing. If a proposal is not viable, TCC will work with the individual to explore other business ideas. TCC recognized that securing financing for speculative ventures in rural, low-income areas can be difficult. Therefore, it used funds from its Community Services Block Grant and Minnesota Department of Human Services Training and Technical Assistance grants to establish a revolving loan fund for program participants. TCC set up an Economic Development Advisory Committee to review and approve loan applications. Once a business is established, TCC makes site visits and requires monthly financial statements for at least two years. This allows TCC to monitor progress and make recommendations or provide additional training and counseling. TCC established a cooperative agreement with a local technical college to encourage program participants to enroll in small business management courses after receiving a loan. TCC helps by subsidizing tuition. Project STRIDE, a local government program to promote self-sufficiency among AFDC recipients and funded by the Job Training Partnership Act (JTPA) that operates in the three-county area, has included TCC's self-employment program as a program option for its participants. Results: More than 300 individuals have participated in the self-employment program. Many of these individuals have started their own businesses; 75-80 percent of them are still in operation. New businesses include a hair salon, a daycare center, a delicatessen, a graphic design company, and an equestrian center that provides training and education to people with disabilities and other individuals. While some participants decided not to pursue their self-employment ideas, either because they decided the ideas were not feasible or because TCC recommended against pursuing them, many have used the skills they learned to advance in other jobs, or have gone on to pursue further education at local colleges. In 1990, the program expanded to include not just AFDC recipients, but anyone at or below 125 percent of the federal poverty level. TCC's revolving loan fund has lent $393,600 to 40 entrepreneurs to establish or expand their businesses. Thirty-five families have been able to leave the AFDC roles. VIII. PROGRAM SPIN-OFFS TCC's Economic Development Advisory Committee has expanded into other areas of economic development for the agency. In addition to reviewing loan applications, it serves an advisory role in TCC's family loan program that helps low-income families secure loans to purchase cars or make automotive repairs. The Committee also reviews new economic development initiatives that TCC seeks to pursue. IX. KEY WORDS Aid to Families with Dependent Children Business Development Community Action Agency Community Services Block Grant Economic Development Employment Entrepreneurs Job Training Partnership Act New Businesses Revolving Loan Funds Self-Employment Self-Sufficiency Small Business Small Business Development