Main Street Takes on the White House


Baltimore Main Streets took to the White House last week, with the message of Main Street revitalization and small business in tow. Donna Langley, director of Baltimore Main Streets, along with her supervisor and board president, joined a group of invite-only folks on Pennsylvania Avenue at the White House Business Leaders Briefing last Wednesday. The forum brought guests, many of whom by coincidence ended up being Baltimore Main Streets merchants or local program board members, to offer their on-the-ground perspectives about employment, economic competitiveness, and small business issues.

White House staff made short presentations about health care reform (specifically how smaller businesses have trouble getting insurance for employees), manufacturing, and technology. They asked the forum participants to introduce themselves and say what they wanted to talk about. Almost the entire room brought up access to capital.

Prepared with talking points, “my hand shot up,” says Langley. “Out of 25 people in the room, only three of us got the chance to speak about our needs for access to capital. I took the opportunity to share information about Main Street and how our microenterprise businesses are not getting bank loans that would allow them to strengthen or grow their businesses.”

While others in the room suggested that many small businesses are seeking loans of $5,000 and up, Langley countered that businesses in her neighborhood business districts are often seeking smaller amounts, which banks were not interested in funding. While some smaller towns benefit from community banks willing to loan small amounts, in Baltimore banks located in the Main Street districts are often larger corporations that prefer to lend businesses $300,000, rather than $3,000. “We need smaller loans in our Main Streets,” said Langley. “The bigger banks just don’t have local staff members with the authority to do that underwriting.”

Not one to just cite a problem, Langley offered an example of a local Main Street program’s solution. Realizing that small businesses in Baltimore’s Federal Hill district were using high-interest credit cards after access to capital started drying up in October 2008 when the economy took a nosedive, Federal Hill Main Street developed its own microloan program. Taking money from its annual gala and soliciting additional contributions, Federal Hill started its low-interest revolving microloan program with $9,600. The program offers loans between $500 and $3,000 with an interest rate of about 5 percent for periods of six months to three years. Giving entrepreneurs money to add to their current business model allows them to strengthen their enterprises and ultimately strengthen the entire business district. (See sidebar below for details about the microloan program.)

The work of Federal Hill Main Street excited White House staff members who indicated that they were looking for this type of program that can get funding to businesses that aren’t being supported otherwise. They asked Langley to furnish more details about the program after the meeting.

In the end, Langley says that going to the White House to represent Main Street and small business issues was exciting. “I was honored to be able to represent Main Street and small businesses at the White House,” she says. “I left feeling confident that the White House is interested in how their economic policies are impacting our neighborhoods and how the Main Street Approach can be utilized to reach and support our merchants in conjunction with the administration's initiatives.”

The Federal Hill Microloan Program

by Federal Hill Main Street, Inc.

After several fruitless attempts to improve access to capital for local business, the Federal Hill Main Street Board of Directors decided to take the bull by the horns and start its own revolving microloan program. The Business Development Committee is spearheading the effort and has taken several steps toward making the program a reality.

To start, the Board of Directors, consisting of area residents and business owners, allocated $5,000 from its annual gala and raised an additional $4,600 in contributions. The organization announced that a portion of proceeds from its major yearly fund-raising gala, the 2011 Annual Fest-of-All: A Celebration of Everything Federal Hill, would be earmarked for the small business microloan program. The event was sold out for the first time. Many who purchased tickets expressed a desire to support the microloans and small business assistance in general.

The Business Development Committee established loan criteria and terms; created documents such as a detailed application, checklist, policies and procedures, and a business plan template; and recruited a volunteer Loan Review Committee of professionals and entrepreneurs with related experience. The last remaining piece was to secure insurance coverage (the current Directors & Officers policy will not cover lending activities). Download the Federal Hill Microloan application and other documents from our Solution Center.

Initially, the revolving fund provided loans of $500 to $3,000 at an interest rate of about 5 percent for periods of six months to three years.

The goal of Federal Hill Microloans is to make loans to local businesses to help them grow or to address specific needs, such as adding a line of greeting cards to a gift shop, buying software to enable customers to purchase online, engaging professional web developers to enhance online presence, or improving a storefront to attract customers. Federal Hill Main Street would then use this experience to grow the revolving loan fund into a more meaningful program, perhaps eventually becoming qualified as a Small Business Administration nonprofit microlender intermediary. There is currently only one in the state.

Beyond meeting its goals to help small businesses, Federal Hill Main Street is aware of the need to measure its successes so it can expand the program. The direct impact of Federal Hill Microloans will be measured in terms of the number of loan applications received and awarded and the number of businesses that are able to improve or expand their enterprises. It will also be possible to determine which enterprises develop mutually beneficial relationships with other local businesses through the project. The performance measures are straightforward, as it is easy to track applications filed, reviewed, and accepted/rejected, as well as loan payments. Federal Hill Main Street tracks business closures, openings, and expansions on an ongoing basis to monitor the health of the district, so it will be simple to determine the impact that the revolving microloan program is having by comparing past data to current data. The organization will be able to discern whether the program is having an effect in terms of new interest in the district as a good place to do business.

The economic impact of each loan can be assessed in terms of dollar amount, purchases made with the funds, number of employee(s) added as a result, and eventually, how the infusion of funds affected the bottom lines of the business. Federal Hill Main Street also tracks the number of volunteers involved along with their hours, as well as the Business Development Committee and Loan Review Board activities to show the level of community involvement in the project.

A separate Loan Review Committee was established to remove the board and executive director from the application review process. There are eight members (three of whom are on the board of directors): an attorney, a small business owner, an experienced nonprofit microlender, a mortgage lender, a banker, a restaurant owner, the director of an entrepreneurial training center, and a consultant whose firm works with microenterprises and entrepreneurs.

Federal Hill Microloans is an example of the smart growth strategy that Federal Hill Main Street consistently follows. By offering low-interest loans to local businesses, the project will help strengthen the business district, reduce vacancies, further enable area residents to spend their hard-earned dollars in the community, and continue to focus redevelopment in a long-standing community that has the necessary infrastructure in place. Best of all, Federal Hill Microloans is a grassroots effort that grew out of a community need and that enjoys widespread community support, which will help guarantee its success.