Banks address equity concerns with financial education for new entrepreneurs

The surge in startups due to the pandemic shows little signs of abating, and some local banks may expand their financial education programs to support new, especially minority, business owners and win new customers in the process. I have.

“Starting a small business is both a big responsibility and a big risk,” said Carol Sexton, Senior Vice President and Head of Retail Banking at Cambridge Savings Bank. “We wanted to develop a program that would really help them through that entire journey, from launch to establishment to beginning growth.”

These programs also provide opportunities for banks to reach out to existing low- and middle-income businesses. The pandemic has clearly highlighted that these communities are struggling to access credit.

The Fuel Needed for the Startup Surge

for the past two years, A Massive and Lasting Rise in National EntrepreneurshipCommentators have linked it with the layoffs of millions in the early days of the pandemic, and many Americans reassessing their lives and goals after 2020’s intense experience.

Census Bureau data Compiled by the Federal Reserve Bank of St. Louis shows that the number of applications to start a business in Massachusetts surged 34% between the second quarter of 2019 and the second quarter of 2021. Founding statistics show Massachusetts has seen double-digit growth in the number of new businesses launched each month since July 2020 over its 2019 figure.

The Massachusetts Small Business Development Center provides another barometer of the significantly increased demand for education from current and prospective business owners.

Supported by the US Small Business Administration, MSBDC offers group workshops and one-on-one counseling. This includes helping with business plans and helping companies apply for loans.

Small business owners most need financial education classes in addition to courses on how to start a company, according to Nancy Gerardi, director of the MSBDC’s Northeast Regional Office, based at Salem State University. It says. She added that financial recordkeeping issues, in particular, are a barrier for small business owners seeking funding for Paycheck Protection Program loans and economic injury and disaster loans.

The office has provided counseling to approximately 825 people in the first nine months of the year. This was 65% above forecast for the full year. And in these nine months he had 30 workshops, and the secretariat planned his 19 workshops for the year, with about 735 people attending.

“It tells us there is a need,” Gerardi said. “It’s a good thing. If people want to start a business, it means they’re having a positive impact on the economy.”

A program that combines coaching and credit

Some banks have long included small business owners in financial education programs.

With US headquarters in Boston, Santander launched a free program in 2017 to help early-stage entrepreneurs in the food industry build their businesses, with a focus on women, minorities and immigrants.

“Patrick Smith, Head of Consumer and Business Banking at Santander, said: “I think the need became even more pronounced during and after the pandemic.”

The program, called “Cultivate Small Business,” was held in partnership with Commonwealth Kitchen, the Initiative for a Competitive Inner City, and Babson College, and was attended by 150 Boston-area business owners, Smith said. The program also includes grant opportunities, and according to Smith, the bank has invested his $1.6 million in the program.

A financial education program by Brockton-based HarborOne Bank provides small business owners with the opportunity to apply for a loan or line of credit at the bank.

HarborOne has offered financial education programs since 2007 and named its initiative HarborOne U in 2010. After several years of offering high-attendance classes for small businesses, the bank realized its future businesses needed capital in its early stages, she said Maureen Wilkerson, first vice president. . She is Harbor One’s Regional Education President.

The bank launched “Success for Small Business” in 2015 and also offers five required courses plus additional classes. Participants do not have to be HarborOne customers. Anyone who completes the required courses can apply for a $5,000 loan or line of credit, and after one year the loan can be increased to $10,000.

Although the loan amount is relatively small, Wilkerson said early funding could make a difference to purchase equipment and other needs.

Still, many participants told banks that education was more important than loans, Wilkerson said. The program has 700 participants since 2015, but not everyone who takes the course ends up applying for a loan or starting a business. The bank has 100 participants applying for loans, and as of June 30, the program has 75 loans for him, totaling him $250,000.

The course switched to a virtual format during the pandemic, and Wilkerson said the bank will continue to maintain this format. HarborOne was initially concerned that the switch to a virtual program would affect its reach in the low- and middle-income segments of the market, said Wilkerson, who is also the bank’s head of community reinvestment law. increase.

Instead, a recent analysis of participants’ addresses revealed an increasing number of participants from low- and middle-income census districts, she said.

CSB offers mentorship

Cambridge Savings Bank recently launched a small business training program in partnership with several non-profit organizations.

Sexton, head of retail banking at Cambridge Savings Bank, said the program was launched in response to feedback from small businesses that they needed help in a variety of areas, including cash flow and marketing. Courses are offered both face-to-face and virtual, depending on how the partner delivers the program.

Participants who don’t need to be bank customers can complete a four-course program and apply for a line of credit to help start a business, Sexton said.

“They may not have the typical credit scores we’re looking for, but they’re really good at understanding the story behind the business and connecting the dots to make the transaction work for their small business customers. I think you are doing a good job.

Anyone who completes a financial education program will have a Cambridge Savings Bank employee as a mentor and will continue to interact with business owners. Brad Fitts, first vice president of Cambridge Savings Bank and leader of the small business development team, said:

The program is part of Cambridge Savings Bank’s commitment to work with other underserved businesses owned by minorities who lacked the opportunity to access capital, Fitz said.

“There are some additional risks there, but we are committed to doing it and it is top-down,” Fitz said. I think it will bring success to business owners who could not.”