Auto detailer … landscaper … contractor.
These are the types of small businesses — often started by a single person — that can grow in size to the point they can employ others in their communities.
The hardest part? Getting an initial loan to get started. It’s a situation that becomes almost impossible when the person applying for the loan is someone who was formerly incarcerated, or court-involved.
Adam Farrah, the longtime head of the Union County Economic Development Corp., is providing a lifeline to these folks. Yes, there is a loan (which can be forgivable if conditions are met), but the UCEDC goes much further than that.
As a Community Development Financial Institution (better known as a CDFI), the UCEDC has created a program called Entrepreneurship as a Second Chance.
In cohorts of 10, the UCEDC runs a seven-week training program of weekly classroom group training and individual counseling that helps formerly incarcerated or court-involved individuals learn the ins and outs of starting and running a business.
The effort, however, goes deeper than that.
The UCEDC gives graduates of the program a $2,500 loan, helps them put together a business plan and gives them two years of mentoring. The guidance not only is free — if they complete it, the loan is forgiven, too.
On top of that, the UCEDC also gives each graduate a laptop that’s preloaded with QuickBooks and Microsoft Office.
“Given the extra challenges that are often presented to those folks, we have tried to eliminate as many hurdles as far as entry to business goes by doing all these things,” Farrah said.
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CDFIs across New Jersey and across the country do a lot of amazing things to help those in underserved communities. But they don’t do it alone. The model doesn’t work that way.
The Entrepreneurship as a Second Chance program was started in 2021, thanks to an initial $100,000 grant from Impact100 Garden State, a special fund of Community Foundation of New Jersey.
Grants from other groups, including banks such as Wells Fargo, help sustain the program.
Wells Fargo donated $500,000 from its Open for Business Fund to the UCEDC because of programs such as this. It’s a donation that not only helps the initiative — but can lead to additional funding from others as well, Farrah said.
The federal government has numerous financial assistance award programs to help CDFIs. But — in an effort to spur additional donations — the feds generally prefer to award grants that match the contributions of others, Farrah said.
Wells Fargo helped UCEDC do that.
“These awards are very competitive among CDFIs,” Farrah said. “The contributions we get from Wells Fargo and others help us increase the amount of grants we get from the federal government.”
Tomas Porturas, senior community impact and sustainability specialist at Wells Fargo, said the bank loves initiatives such as the Entrepreneurship as a Second Chance program because it allows the bank to assist members of the community that have the most challenges.
“This population needs help,” he said. “Otherwise, we are just inviting them to go back in a few weeks or months or years.”
The state’s recidivism rate is approximately 30%. Porturas feels it is everyone’s responsibility to help change that — which is why he said he’s privileged to have the bank be able to support the program.
“We need to help these people get integrated into our society,” he said. “If we want them to have an independent and successful life — if we want them to pay taxes and contribute to society — then, we need to help them.
“Companies don’t easily hire these individuals. Even getting a place to stay is not easy. We need a team approach to help. That’s why we work with organizations who are committed, like the UCEDC.”
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Getting access to capital is a common refrain when it comes to explaining why those in underserved communities struggle to start — and maintain — a business.
Farrah said he prefers to amend the statement.
“I think it’s really more access to affordable capital,” he said. “There are other organizations out there, some of which are CDFIs, some of which are private groups, that will give you access to capital, but the interest rates are not always all that attractive.
“On a very small microloan, even a $10,000 loan, the difference in a monthly payment can be huge if it’s 3% or 4%, compared to 12% or 15%, when you’re a mom-and-pop type operation.”
When it comes with a low or no-interest rate — or a forgivable loan — all the better.
Farrah said that has been a key for the Entrepreneurship as a Second Chance program, which runs two programs a year and is just starting its fifth cohort.
The impact, he said, has been huge. Not only has it helped some individuals — but those individuals have then been able to create jobs for others in their community.
“A lot of these entrepreneurs are eager to help those who are in the same position that they were,” Farrah said. “It’s one of the best things about the program.”
The program, however, is only possible if the UCEDC can get enough grant money to make it so. Donations, such as $500,000 that came from Wells Fargo’s Open for Business Fund, make a huge difference, Farrah said.
“These dollars have huge impact,” he said. “Whether it’s expanding the amount of dollars I can get for microlending to small businesses, to being able to offer special programs where we can offer 0% loans, we couldn’t afford to do that without this support.
“Grants from Wells Fargo and other sources made it much easier for me to go back to my board of trustees and say, ‘There’s a need to increase access to affordable capital.’”
Farrah said these needs, seemingly omnipresent since the pandemic, may become even more necessary in the months ahead.
“We’re starting to see an increase in the need for alternative loan sources, like our organization, for small businesses,” he said. “If we didn’t have the support of groups like Wells Fargo, I wouldn’t be able to have the programs in place and we wouldn’t be able to meet our goal, which is deploying capital to underserved communities.”
Conversation Starter
Learn more about Open for Business Fund at: smallbusinessresources.wf.com/small-business-owners-guide-to-grants.
