Bringing financial counseling to small businesses and entrepreneurs through the Small Business Boost pilot
Small businesses employ more than 60 million Americans and are responsible for nearly 44% of the country’s economic activity. They are an economic force that shapes the social and cultural fabric of communities where they operate. To finance their ventures, small business owners often use internal financing, such as friends, family or personal savings, or external financing, such as bank loans. Financial management plays an essential role to ensure a small business is among the less than 50% that survive its first five years. The reality is many entrepreneurs, especially entrepreneurs of color, face geographic, demographic, and wealth barriers preventing them from accessing capital and building a thriving business.
Principal Foundation’s decision to support the Cities for Financial Empowerment Fund (CFE Fund) was rooted in an understanding of the importance of financial education to small businesses and how it impacts a community’s entrepreneurial ecosystem while helping families build wealth.
The CFE Fund provides both funding and focused technical assistance to mayors and their teams to help them embed systemic financial empowerment programs and policies into city services to improve individual and family financial security and stability. The municipal strategies focus on four key disciplines of asset building, banking access, consumer financial protection, and most pointedly, financial education and counseling. In a little over 10 years, the CFE Fund has granted over $59 million dollars to more than 100 cities in the U.S. and directly supported more than 900,000 residents.
In February 2022, Principal Foundation awarded a $1 million grant to the CFE Fund to launch the Small Business Boost initiative in five cities and counties. The program is designed to help small businesses and entrepreneurs in Akron, Ohio; Lansing, Mich.; Pittsburgh, Pa.; Polk County, Iowa; and Rochester, N.Y. improve their personal finances, better positioning them to access capital and achieve their business goals.
Small Business Boost integrates with the CFE Fund’s existing Financial Empowerment Center, which provides one-on-one financial counseling as a free public service to small business owners and entrepreneurs. Over the course of a year, grantees worked with local organizations dedicated to serving small businesses, including loan providers, accelerators, mentoring programs and economic development agencies to connect clients to financial counseling. The goal was to help business owners and entrepreneurs address personal financial challenges that become barriers to building a successful business. Through the initiative the CFE Fund is tracking best practices and successful strategies to share with its wider community.
More than 1,200 counseling sessions have been provided to more than 430 clients who have reduced their debt by over $860,550 and built their savings by more than $235,120. Small Business Boost clients have also established credit, opened new bank accounts, and shown a higher retention rate than those who leverage the CFE Fund’s traditional Financial Empowerment Center.
As a result of the initiative, a client in Pittsburgh, Pa. was able to fully disentangle their personal and business finances, raise their credit score by 40+ points, and achieve the best month since opening their business two years ago. Now, their goal is to continue growing the pro bono and reduced-cost practice of the business to give back to the community where they operate. The client believes that the financial counseling they received has been a crucial factor in their success and because of its impact, they will be able to access capital in the future.
“Without being able to build that [credit] up and get a handle on my finances, I’m stuck in this moment and can’t get more or move forward,” said the client. “So, this is a way for me to keep pushing and grow my business.”
Principal Foundation is proud to support the CFE Fund’s success in providing financial education and counseling to the small business community as part of helping to build more financially secure futures.
To learn more about the Small Business Boost initiative, visit https://cfefund.org/cfe-fund-announces-the-launch-of-small-business-boost-initiative.
