Create Jobs for USA plan on expanding small business lending

The $7 million the Starbucks foundation has given to the Opportunity Finance Network has reportedly created 2,300 jobs. Image: Flickr / ralph and jenny / CC-BY

Over the holiday 2011 season, Starbucks corporation partnered with the Opportunity Finance Network to create a small business lending fund. After just three months of lending, the $7 million fund is planning on expanding.

The lending fund thus far

When Create Jobs for USA launched on Nov. 1, 2011, Starbucks seeded the fund with $5 million. Starbucks also started soliciting donations at its coffee shops and selling wristbands. All of the money that goes into the fund is used to leverage additional financing and loans to small businesses through the Opportunity Finance Network, a group of community development financial institutions that focus on small local businesses. Approximately 7,000 of the 17,000 Starbucks locations in the United States are collecting donations for the fund.

Success of small business financing

In the last three months, the Opportunity Finance Network and Starbucks partnership has raised $2 million in donations from Starbucks customers. The $7 million in funds have been used to build 278 loans in 31 states to small businesses. Those 278 loans work out to about $50 million in financing, which the foundation estimates helped to create and retain over 2,300 jobs.

[Many businesses have found themselves unable to rely on cash advance financing for everyday operating costs.]

Most of the businesses that receive Opportunity Finance Network loans are small businesses, nonprofits and microenterprises that are owned by low-income, low-wealth or otherwise disadvantaged people. These are often the businesses that have trouble finding traditional financing, because lending standards have been tightened in the credit crunch.

The challenge of creating jobs

Small businesses, in the United States, are responsible for a very large proportion of the jobs created in the economy. This is actually part of the problem for governmental programs focused on creating jobs. Small business owners, even if they do want to hire employees, are making a big investment when they hire an employee. Depending on state taxes, an employee that is paid $10 an hour can often cost as much as $16 per hour to the business. When the government gives tax breaks or incentives for hiring employees, they must overcome a small business owner’s concerns about hiring that employee; small tax breaks or credits simply may not be enough to overcome that. According to Starbucks, a $20,000 loan is often considered “enough” for a small business owner to create a job.

Creating financing opportunities

The financing opportunities available for small businesses are limited, which is what the Opportunity Finance Network and Create Jobs for USA are attempting to address. Microfinancing and small loans for small businesses often require less than $50,000 each. The average cost-per-job, currently, is just more than $30,000 per job created. As the program expands, program managers expect that the cost-per-job will continue going down, helping to create more jobs with less money for these small businesses.

Sources

Marketplace.org
CNN Money
BusinessWeek

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