Moving Small Business Forward
Two years ago, JPMorgan Chase committed $30 million to support the development of small businesses.
Utilizing a highly-focused incubator model to cultivate businesses within high-growth sectors, we yielded real results. A review of our first nine grantees revealed that they supported 990 businesses, helped raise $139 million in revenue and received nearly 80 new patents in 2014.
We saw these positive impacts reach beyond the individual businesses. These incubators supported businesses that hired over 3,300 people, of which 20 percent were local hires, and paid over $78 million in wages in 2014.
While the local impact was clear, so were the challenges. Too few businesses, especially those owned by women, minority and veteran entrepreneurs, have access to flexible financing and the support services that are so critical to growth. Yet it is these businesses that are uniquely positioned to revitalize local economies. In fact, new analysis from the Initiative for a Competitive Inner City suggests that with the right investments, small businesses could play a major role in lowering stubborn unemployment rates in distressed neighborhoods.
With this in mind, JPMorgan Chase is more than doubling the size of Small Business Forward, committing $75 million over the next three years to connect underserved small businesses with the capital, targeted technical solutions and networks to help them grow and succeed.
The new commitment will build on the success of this work by focusing on three key areas.
Building Capital Bridges
New data from the JPMorgan Chase Institute underscores the tremendous need to deliver capital quickly. A recent analysis found that the median U.S. small business tends to live month to month with only 27 days of cash reserves on hand. Getting access to working capital or an expansion loan may mean the difference between securing the next big project, filling a big order, or keeping new customers.
Over the last couple of years, we have invested heavily in the tech capability of our community lending partners to scale their efforts in reaching and serving underserved small businesses. For example, Accion Network has developed a system to advertise their affordable micro loans online; Opportunity Fund has built a referral system with Lending Club; and Community Reinvestment Fund has created an automated underwriting engine to support smaller community development financial institutions (CDFIs). We are also extending our collaboration with LiftFund to deliver loans more quickly to underserved business owners in the Southern U.S.
As part of our new commitment, we are taking this work to the next level. We are awarding a $1.9 million grant to Association of Enterprise Opportunity (AEO) to support its programs to connect small business owners with alternative funding sources when they are unable to qualify for traditional loans.
By providing flexible capital and technical assistance to small business owners and entrepreneurs in underserved neighborhoods, we can make an incredible impact. In the first six months since we helped launch the National African American Small Business Loan Fund and the Entrepreneurs of Color Fund, these two funds provided more than $3.7 million in loans to 35 business owners, preserving 213 jobs in underserved neighborhoods in Detroit, Los Angeles, Chicago and New York City.
Creating Entrepreneurial Support Systems
Capital is just one piece of the puzzle. Many main street businesses often do not have access to the tools and resources that are making high-growth companies successful. We will take the models that have proven to be successful and make them available to main street entrepreneurs in underserved neighborhoods. For instance, the University of Washington Foster School of Business’ Ascend 2020 will promote local support ecosystems for neighborhood-based businesses, inner-city and minority-owned businesses in several cities by linking business schools, business service-providing organizations and CDFIs.
Expand Opportunities within High-Growth Sectors
Women, diverse and veteran entrepreneurs face major barriers to accessing the resources they need to start or grow their business, particularly in high growth sectors such as technology, health and bioscience. The industry clusters approach—a support system that serves clusters of small businesses working in the same sector—has proven to be to be highly effective in helping small business grow faster and succeed. We will help our cluster-based initiatives strengthen their diversity and inclusion practices to ensure that minority entrepreneurs can take part in such support systems that link them to timely information on critical services, access to capital, training, supply chains and facilities.
Small Business is Key to Thriving Neighborhoods
JPMorgan Chase is betting big on small business – they are a critical component of thriving communities and essential partners for our business. And we are focused on growing a range of small businesses, because local economies benefit when the focus is not only on high growth firms, but also sustainable businesses that support community development, local job creation and build stronger neighborhoods. By developing programs that promote inclusive growth at all levels of business, our firm is creating the positive foundation for local communities and our national economy.
About the author: Janis Bowdler is the Head of Small Business and Community Development for Global Philanthropy at JPMorgan Chase. Previously, Janis was Director of Economic Policy at the National Council of La Raza (NCLR), the largest national Latino civil rights and advocacy organization in the United States.