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What Is A Micro Business? ||
Role of the Microenterprise Sector ||
Role of Non-profit Organizations ||
What Is NEON?
How Does Micro Lending Work? ||
The Role of Local Government and Commercial Lenders ||
Acknowledgements
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What Is A Micro Business? A micro business or microenterprise is commonly defined as a business with five or fewer employees. Micro businesses may be home-based, farm-based or street front businesses. Some are part-time businesses and some are full-time businesses. Some businesses are started by dislocated workers, and some provide an opportunity for low-income households to become more self-sufficient. Micro businesses are at the leading edge of the enterprise formation process and are found everywhere: rural, urban, suburban. Most micro businesses need access to technical information, small amounts of credit and networking opportunities. As recently as five years ago, there were very few resources designed for the unique needs of micro and other start-up businesses. These businesses were on their own. Slowly, as awareness of the importance of the microenterprise sector increased, more and more organizations became interested in supporting these businesses. Role of the Microenterprise Sector According to the U. S. Small Business Administration, "Micro businesses, not large businesses, create the jobs in our economy." Census data, shows that micro businesses, nationally, created 2.6 million net new jobs between 1989 and 1991. This is more than all other job-size sectors combined during this period. SBA analysis of Nebraska data indicates that Nebraska micro businesses: Complied from data prepared by SBA Office of Advocacy of the Bureau of Labor Statistics, 1992. NEON believes that self-employment and microenterprise is a major job-producing sector in both urban and rural areas of the state, and that the microenterprise sector plays a critical role in communities because they hire and purchase supplies locally. Micro businesses are almost always started by local individuals who live and raise families in the community. These business owners care as much about the community's well-being as they do about their businesses' success. In addition, the microenterprise sector serves as an important economic shock absorber that makes communities more resilient and viable. When large firms downsize and workers are dislocated, many of these individuals turn to self-employment as a long-term or short-term re-employment strategy. For disadvantaged communities and neighborhoods, the creation and retention of new enterprise opportunities is an important approach that complements business recruitment as a development strategy. Back to Top
Role of Non-profit Organizations In Nebraska, the first program dedicated to demonstrating microenterprise development techniques was launched in 1989 in farm-based rural areas as a community development response to the 1980's farm crisis. Programs in urban areas followed in 1993 and often targeted disadvantaged populations and neighborhoods. The micro loan application procedures and the type of training process is different from program to program. While these programs have different missions and constituencies, all these programs have recognized that microenterprise development strategies focus on individuals who are both committed to making a decent living for their household as well as to their communities and neighborhoods.What Is NEON? In Nebraska, community-based organizations are working together through NEON (Nebraska Enterprise Opportunity Network) to create an infrastructure that can deliver microenterprise assistance across the state. NEON is a statewide trade association of organizations and individuals who are microenterprise practitioners. Since its beginning in June 1994, NEON's mission has been to create, expand and support small and micro business opportunities for individuals and communities with limited resources. NEON strives to achieve its mission through networking, training, advocacy, and sharing resources. Membership in NEON is open to organizations, individuals, or government agencies which provide services or support small and micro business development. NEON's seven-member executive committee is elected by its membership and is responsible for determining member services and policy education. NEON currently has 36 members who are listed in the Index of NEON Members of this directory. Membership in NEON includes voting privileges, an annual subscription to NEON Notes, one free copy of this directory and reduced registration fees to NEONês annual training conference and membership meeting. How Does Micro Lending Work? Micro lending is a new term which was first used to describe small business loans which, for many reasons, private capital markets could not make. The conventional definition of micro loan is a business loan under $25,000 which is unavailable through normal commercial channels. Micro lending programs have different missions and target populations; there are also different kinds of micro lending techniques. Some programs, especially those which target low-income communities or specialize in start-up loans under $10,000, make use of innovative character-based lending techniques. These include group borrowing (or peer lending) in which potential members form a group (5-15 members). Members of the group review each others' applications and may incur the costs when a fellow member defaults. Often, programs use some form of step-up borrowing which means that a borrower must start with a very small loan, say $1,000, then after paying that back, the borrower can "step up" to a loan twice the size. Programs which make larger micro loans (up to $25,000) where the businessowner has more experience and some collateral, will use more conventional commercial credit analysis. Many micro business borrowers need pre-loan and post-loan technical assistance. This can significantly increase costs of operating a micro lending program, and, unlike affordable housing non-profit organizations which deal with much larger amounts of credit, non-profit micro lending programs are unable to support their program costs through interest earned from their lending operations. Some micro lending programs have tailored relationships with commercial lenders so that the borrower can graduate smoothly from the micro lending program to a commercial lender. The Role of Local Government and Commercial Lenders In Nebraska, state and local governments are involved in supporting microenterprise development in a number of ways. In rural communities, the Nebraska Department of Economic Development (DED) has created a set-aside in its Community Development Block Grant (CDBG) program for microenterprise development and funds incubators, technical centers, and microlending programs in non-metropolitan areas. In Omaha and Lincoln, city government has also used the CDBG program to support microenterprise development. Some microenterprise programs have received support under the Nebraska Economic Partnership Act (LB 144), administered by DED. The Nebraska Microenterprise Development Act (LB 327), passed in 1997, provides $250,000 worth of annual support for microenterprise development programs. The Nebraska Investment Finance Authority (NIFA), a quasi-public agency, has also provided support for microenterprise development. Commercial lenders are involved in microlending in different ways. Some regularly make business loans under $25,000 or actively participate in the Small Business Administration's "low doc" program. However, many micro business loans, especially those under $10,000, are more problematic for commercial lenders. Loans to businesses with little or no collateral or business track record are difficult for commercial lenders to make safely or profitably. Federal regulators may further discourage under- or uncollateralized micro business loans. While the field of micro lending is new and still evolving, Nebraska programs have designed a number of different ways for commercial lenders to partner with these programs. Contact individual practitioner agencies listed in this directory for more information. Acknowledgements Welcome to the second edition of the Nebraska Micro Business Resource Directory. The first edition was published in October 1996 and was the culmination of a process which began in June 1994 and continues today. Through the volunteer efforts of the Nebraska Enterprise Opportunity Network (NEON) board and committee members the organization is reaching out and supporting the various lending and training programs in Nebraska. We are proud to provide this directory as a means to furthering the growth of the small businesses that we service. Thank you to all who contributed towards this effort. We would also like to extend to the Nebraska Department of Economic Development our many thanks for their support of NEON and the production of this directory. The Nebraska Department of Economic Development has been instrumental in the current success of NEON from their early assistance to their recent technical assistance support. Since NEON first began four years ago the Charles Stewart Mott Foundation (administered by the Corporation for Enterprise Development) has consistently funded our efforts. Other funders or agencies which have also supported our efforts include the U.S. Small Business Administration and the Nebraska Cooperative Extension Division at the University of Nebraska. Thank you for your support. We would also like to acknowledge both the past and present Executive Committee members and their organizations which have contributed to this publication:
Cheryl Bressington, Central Nebraska Community Services Finally, a special thank you is extended to the directory production team including Marilyn Schlake, Cheryl Bressington, Kendall Scheer, Gene Severens, Tammy Childers and Steve Williams. As NEON's Administrative Coordinator, Tammy organized and produced the final copy for the directory. And Steve, the Business Assistance Manager at the Nebraska Department of Economic Development, was instrumental in publishing the directory in electronic form on the World Wide Web. You can access the web directory at http://neon.ded.state.ne.us/microhea.html. Every effort has been made to assure that the entries are accurate and up-to-date. The information was solicited through a mailed questionnaire and each program was given an opportunity to correct its entry. We apologize for any mistakes or omissions, and urge readers and programs to inform NEON of changes for future editions. |
