Approximately 92% of U.S. businesses are microbusinesses.

Transcription

1 Augus 04 Craing an owning a businss has long bn a pah o financial succss an conomic mobiliy. In fac, businss quiy rprsns narly on fifh of oal houshol walh naionwi, making i h scon largs sourc of walh byon hom quiy. For low- an mora-incom (LMI) iniviuals, slf-mploymn an businss ownrship can conribu maningfully o family conomic scuriy. Millions of small businss ownrs, howvr, sruggl o achiv financial succss, vn as hy prov o b skill praciionrs wihin hir inusry. Approximaly million microbusinss ownrs arn lss han $50,000 pr yar. Bu financial vulnrabiliy is abou mor han jus incom; vn microbusinss ownrs wih highr arnings may xprinc financial insabiliy if hy lack h financial capabiliy n o manag businss financs, hav ply inrwin businss an prsonal financs, lack accss o cri or hav insufficin savings o provi a cushion agains conomic shocks. In fac, lack of savings is a criical financial challng for microbusinss ownrs a virually all lvls of incom. Rcn CFED rsarch survy narly,000 microbusinss ownrs wih annual rvnus ranging from lss han $0,000 up o $ million, an foun ha mor han half (55%) coul covr jus on monh or lss of businss xpnss using currn savings an 0% ha no savings a all. Whn ask how hy woul al wih a $,000 mrgncy businss xpns, 5% of survy rsponns rpor ha hy woul b unabl o covr i. 4 Ths rmarkably low savings lvls cra financial uncrainy an insabiliy a boh h businss an houshol lvls. Businsss wih no savings n o b youngr, hav lowr rvnus, an hav lowr oal houshol incoms. Lack of savings lavs hs businsss unabl o al wih financial mrgncis or vn shor-rm cash flow shorags; on of h fw ools microbusinss ownrs hav in hs siuaions is rucing or liminaing hir own paychcks. In h longrm, lack of savings ranslas ino lack of capial o suppor businss Approximaly 9% of U.S. businsss ar microbusinsss. Th vas majoriy of all small businsss ar microbusinsss, or hos wih -5 mploys, couning h ownr. Numbr of Small Businsss (In millions).7.9 Largr small businsss.6 Microbusinsss wih -4 mploys Slf-mploy iniviuals Sourc: U.S. Cnsus Burau, Saisics abou Businss Siz (Incluing Small Businss) an U.S. Cnsus Burau, Nonmployr Saisics.

2 p growh an cra jobs, as wll as ruc capaciy o achiv prsonal an family goals such as proviing highr ucaion for chilrn an a prparing for a scur rirmn. Alhough mos small businsss ar microbusinsss, mos govrnmn suppor for small businsss bnfis firms wih ozns of mploys an millions of ollars in rvnu. Whil h fral govrnmn allocas billions ach yar owars guaran loans o small O businsss wih fwr han 500 mploys, i vos only abou $00 c million o raining an loans for microbusinsss. 5 Policy suppor for LMI microbusinss ownrs an nrprnurs is also noably minor in o comparison o policis ha suppor ohr LMI populaions. Th mulibillion ollar fral workforc vlopmn sysm, for xampl, b channls mos of is suppor o raiional mploymn rahr han r nrprnurship. Furhr, misconcpions abou who small businss ownrs ar an wha yps of businsss hy run hav conribu o h vlopmn of fral small businss policis ha ar poorly sign o arss h ns of financially vulnrabl microbusinss ownrs. 0 Aiional policy suppor is ncssary o nsur ha h walhbuiling an mobiliy-nhancing aspcs of businss ownrship ar maningful an achivabl for financially vulnrabl nrprnurs. This rpor inifis ky policy rcommnaions o nsur ha hs nrprnurs can succssfully sar an run businsss ha conribu maningfully o hir familis financial scuriy. Our rcommnaions arss h challngs ha prvn financially vulnrabl microbusinss ownrs from succssfully growing walh hrough hir businsss: low businss an prsonal savings, lack of accss o financial proucs an srvics incluing cri ha m hir ns, consrain accss o cri an limi accss o businss vlopmn srvics an rsourcs. W focus paricularly on h workforc an ax sysms as livry channls bcaus hs major public sysms alray offr limi suppor ha rachs a small proporion of financially vulnrabl microbusinss ownrs. Expaning ha suppor woul lvrag hs sysms larg scal o rach millions mor currn an ponial LMI microbusinss ownrs. U Dmographics of microbusinss ownrs Compar o h gnral populaion of small businss ownrs, microbusinss ownrs ar mor likly o b young, womn an popl of color Microbusinss ownrs Small businss ownrs Mian yars of ag % Womn % Popl of color Sourcs: aa on small businss ownrs is from SBA an aa on microbusinss ownrs is from AEO. Microbusinsss hav oo much of an impac on h conomy o b ignor. Mor han 6 million microbusinsss hav cra hir own jobs. Th.6 million microbusinss ownrs who also mploy ohrs cra an aiional.7 jobs apic, on avrag. 6 Incluing boh ownrs an workrs, ha as up o approximaly million Amricans who ar currnly mploy by microbusinsss. Th Associaion for Enrpris Opporuniy (AEO) simas ha h microbusinss scor as a whol gnras almos $ rillion in sals an rcips on an annual basis. 7 Th slfmploy alon accoun for almos $ rillion in conomic aciviy ach yar. 8 As h pos-gra Rcssion conomy Sourcs: aa on small businss ownrs is from SBA rmains fragil an only parially rcovr, failing o quip hs nrprnurs wih h ools hy n o succ in an aa on microbusinss ownrs is from AEO. businss is a miss opporuniy o boos conomic growh. As mor popl bcom slf-mploy, rfocusing small businss policis owar microbusinss ownrs bcoms impraiv. Employrs ar incrasingly rlian on consulans an conrac workrs as a cos-cuing masur. As a rsul, slf-mploymn is growing. MBO Parnrs, a consuling firm for inpnn workrs, simas ha by 00, fully half of all workrs will hav spn som im slf-mploy uring hir carr. 9 Acing now o improv public

3 policis inn o suppor h slf-mploy will nsur ha hs workrs can accss rsourcs ha hlp hm succ whn hy o no hav raiional wag mploymn. Enrprnurship provis opporuniis for workrs wih lil chanc of scuring high-qualiy jobs in h labor mark o incras hir incom. For xampl, whil mos wll-paying jobs rquir workrs o hav compl a las som highr ucaion, saring your own businss has no such barrir o nry. AEO foun ha only 7% of microbusinss ownrs possss collg grs. Many iniviuals who lack a collg gr sruggl o fin mploymn ha pays a livabl wag, howvr, AEO s rsarch fins ha h mian microbusinss wag is ofn significanly grar han minimum wag; 0 hus popl who may b limi o low-wag posiions as an mploy may hav highr arning ponial hrough microbusinss ownrship. Slf-mploymn provis h opporuniy o supplmn houshol incom. Th FIELD program a h Aspn Insiu has sui iniviuals an houshols combining mploymn incom wih arnings from slf-mploymn. FIELD survy narly,00 microbusinss ownrs who rciv srvics from a microbusinss vlopmn organizaion (MDO), an foun ha 7% pursu slf-mploymn in aiion o a raiional job. Slf-mploymn incom no only supplmn hir prsonal arnings, bu also nabl hm o pach oghr various sourcs of houshol incom o mak ns m for hir family. Incom pachrs n o hav highr oal arnings han o nonpachrs. Of h microbusinss ownrs who wr in povry whn hy firs rciv srvics, 84% of pachrs succssfully mov ou of povry by h im of h survy, compar o 70% of non-pachrs. Microbusinss can also b vial for incom an walh builing in unrsrv communiis. Rsarch shows ha microbusinss ownrs ar mor likly han h small businss ownr populaion in gnral o rprsn marginaliz populaions; hy ar mor likly o b young, a woman, or a prson of color. For hs groups, which ofn fac isavanags in h labor mark, nrprnurship can offr bnfis ha raiional wag mploymn canno. In 00, for insanc, fmal-ha family houshols in which a las on prson own a microbusinss gnra $8,000 o $,000 mor in annual houshol incom han similar houshols wihou a businss ownr. This aiional incom coul spcially mak a iffrnc among singl fmal-ha houshols, which ar isproporionaly likly o sruggl wih financial inscuriy. Slf-mploymn booss incom. A FIELD suy foun ha microbusinss ownrs who ha a businss as wll as a job ( incom pachrs) arn mor han hos who solly work a hir own microbusinss (non-pachrs). $40,000 $0,000 $0,000 $0,000 Sourc: FIELD, 0. $,444 $6,95 $0 Toal incom Pachrs Non-pachrs Many of h challngs ha financially vulnrabl microbusinss ownrs fac coul b allvia by br arging small businss policis an programs o m hir ns. Succssful an ffciv policis o assis LMI microbusinss ownrs o xis, bu hy ar small in scal an can only srv a iny prcnag of hs nrprnurs. Thos policis ar valuabl, bu hy o no comprhnsivly arss ky financial capabiliy issus, such as low savings, ifficuly wih cash flow an rvnu projcions, n for afforabl ax assisanc an accss o appropria an afforabl forms of cri. Small businss ownrship can coninu o b an ngin of conomic growh an sourc of upwar conomic mobiliy, bu improv an aiional policy suppor is ncssary o nsur ha hs goals ar achivabl for nrprnurs who sar wih fw rsourcs. Improv an aiional policy suppor is ncssary o maximiz h

4 U p prouciv capaciy of microbusinss ownrs an o nsur ha hir succss is no limi o h highs uca, highs arning fw, bu possibl for all, rgarlss of incom or circumsanc. a Vry fw workforc vlopmn agncis or organizaions suppor nrprnurship raining, spi h ponial for slf-mploymn o la o financial sabiliy for unmploy O an har-o-mploy workrs. Workforc vlopmn policis ar ovrwhlmingly focus on hlping c clins fin wag-bas mploymn. Thos who xprss inrs in saring a businss ar insa acivly sr away from nrprnurship or fin ha h workforc sysm provis hm lil o no accss o raining an rsourcs o hy woul n o succ as nrprnurs. In fac, pursuing slf-mploymn can caus unmploy b workrs o los hir unmploymn insuranc (UI) bnfis, an prvn workforc raining clins from coninuing o rciv srvics. In orr o facilia microbusinss accss o h workforc sysm w rcommn: r Congrss shoul amn h Slf-Employmn Assisanc (SEA) Program o nabl mor sas o offr i o unmploy workrs. 0 SEA allows UI claimans who ar inrs in nrprnurship o paricipa in nrprnurship raining an sar hir businsss whil rciving UI. Th program has bn inpnnly valua an has monsra ffcivnss in hlping unmploy workrs sar succssful businsss. 4 SEA is limi in scal for wo main rasons. Firs, unlik mos sa-fral workforc parnrships, SEA rquirs sa lgislaurs o auhoriz h program. Scon, sas, no h fral govrnmn, ar solly rsponsibl for paying for nrprnurship raining availabl o paricipans. In orr o maximiz SEA s ponial, govrnors shoul b allow o op ino SEA wihou rquiring sa lgislaiv acion; an DOL shoul allow sas ha offr SEA o us fral workforc raining ollars o offs h cos of proviing nrprnurship raining o paricipans, an vlop raining rsourcs ha ar ailor o h spcific ns of unmploy workrs. DOL shoul, as i implmns nw provisions of h Workforc Innovaion an Opporuniy Ac (WIOA), inify how nrprnurship raining an vlopmn srvics can saisfy WIOA s Prformanc Masurs. 5 WIOA, rcnly pass lgislaion o rform h fral workforc raining sysm, inclus rvisions o DOL s prformanc accounabiliy sysm. For yars, WIA s Common Masurs hav bn us o valua whhr workforc srvics, such as On-Sop Carr Cnrs, ar ffcivly conncing iniviuals o mploymn opporuniis (.g. by rporing h numbr of popl who fin jobs, whhr hy rmain mploy ovr im, an hir avrag arnings). Ths masurs fail o proprly gaug h ffcivnss of nrprnurial raining provi hrough h workforc sysm. Alhough DOL rcognizs nrprnurial raining as a prmissibl us of WIA funs, 6 is failur o sablish appropria prformanc mrics cras a powrful isincniv for workforc agncis an organizaions o provi nrprnurship srvics. As a rsul, whil 87% of Workforc Invsmn Boar (WIB) ircors rpor ha nrprnurship shoul b a carr opion for h unmploy, lss han 5% say hy provi all h srvics an nrprnur ns o sar a businss succssfully. 7 Th passag of WIOA provis a ky opporuniy for DOL o implmn prformanc masurs ha can accuraly ocumn h impac of nrprnurship raining provi hrough h workforc sysm. I mus issu upa ruls an guianc on h rvis prformanc masurs, an can us ha procss o arss how workforc agncis can apply hm o nrprnurship raining. Microbusinss an workforc xprs hav propos fasibl, ffciv prformanc masurs for nrprnurship raining srvics livr hrough WIA ha shoul srv as h basis for h Dparmn. 8 4

5 Tax im shoul b an opporuniy for fral agncis o ngag posiivly wih microbusinss ownrs by proviing ucaion abou hir ax rsponsibiliis, xpaning accss o afforabl ax prparaion assisanc, an lvraging h ax co o arss low liqui an long-rm savings. Insa, ax im is a sourc of frusraion for many nrprnurs. CFED s rsarch 9 inicas ha approximaly on in four microbusinss ownrs xprinc cash flow problms associa wih ax im. Dspi srong poliical suppor for small businsss h iniviual ax co provis rmarkably lil suppor o microbusinss ownrs, h majoriy of whom ar ax as iniviuals rahr han corporaions. Improving h ax policis ha impac microbusinss ownrs can hlp boh nw nrprnurs an currn microbusinss ownrs achiv grar financial sabiliy. Mor ffciv ax policis arging microbusinss ownrs savings an invsmn ns mus arss boh liqui savings which can srv as sarup quiy an ruc financial vulnrabiliy as wll as long-rm savings ha nabl businss growh an achiv houshol goals such as scur rirmn. In orr o achiv his w rcommn ha: Congrss shoul sablish a Nw Enrprnur Tax Cri ha nabls nw microbusinss ownrs o offs axim cash flow challngs an incn businss savings. Th Nw Enrprnur Tax Cri (NETC) shoul b availabl in h firs ax yar in which h axpayr arn slf-mploymn rvnus uring all four quarrs, an o nsur i bnfis h mos vulnrabl nrprnurs b limi o microbusinss ownrs wih houshol arnings lss han h mian incom. Esablishing a lifim limi on h valu of h cri pr ax filr woul nsur ha h cri is no prominanly claim by srial nrprnurs who buil an sll businsss many ims. Th cri shoul b sign o livr rlaivly small amouns of capial o a broa s of businsss. Alhough h NETC will hav h highs impac if i is rfunabl, a lss xpnsiv an sill ffciv opion is o mak i parially rfunabl. Congrss shoul simplify an xpan h Savr s Cri o ncourag LMI microbusinss ownrs o sav for rirmn. Th xising Savr s Cri is nonrfunabl, nlssly complx an is fin by hr sharp incom ligibiliy cliffs. Ths shorcomings man ha only a vry small prcnag of low-incom ax filrs qualify for h cri, an an vn smallr numbr acually claim h cri. By simplifying h Savr s Cri an making i rfunabl, Congrss coul provi aiional suppor o all LMI workrs an nrprnurs inrs in puing savings away for rirmn. Congrss an h IRS shoul xpan h Volunr Incom Tax Assisanc Program s capaciy o hlp LMI microbusinss ownrs naviga h ax sysm. Th IRS Offic of Sakholr Parnrships, Eucaion an Communicaion (SPEC) Offic shoul improv h suppor ha h Volunr Incom Tax Assisanc Program (VITA) livrs o microbusinss ownrs. VITA provis LMI ax filrs wih fr ax prparaion from IRS-crifi volunrs. Th program s capaciy o srv a larg volum of LMI microbusinss ownrs is limi by funing an program ruls ha prclu VITA sis from prparing all bu h simpls Schul C forms. Rsarch from CFED s Slf-Employmn Tax Iniiaiv (SETI) shows ha VITA sis ar capabl of an willing o xpan hs srvics o microbusinsss if hy wr prmi o o so. 0 SPEC has h auhoriy o lif h rsricions on Schul C prparaion a is iscrion, wihou iniiaing h lnghy procss of proposing a rgulaion for public commn. Th 5

6 U p Enrprnur Sar-Up Growh Ac, inrouc in 0 by Rprsnaiv Juy Chu (D-CA), propos a pilo program o s h fasibiliy of xpaning VITA suppor o slf-mploy ax filrs. Tha lgislaion provis a a mol for aminisraiv or lgislaiv proposals. Congrss shoul provi aiional funing o xpan VITA s srvics for h slf-mploy. VITA sis ha hav paricipa in h IRS-SETI-Naional Communiy Tax Coaliion (NCTC) sponsor Schul C pilo consisnly rpor challngs rla o raising h aiional funing n o incras srvics provi o low-incom Schul C filrs. On way o nsur ha hs srvics O ar susainabl is o auhoriz VITA sis o s h fasibiliy of implmning pay-wha-you-can sliing-scal c clin fs for crain srvics byon prparaion of basic ax rurns. o b Microbusinss ownrs houshols frqunly suffr grar financial r insabiliy u o vulnrabiliis in hir businsss. For xampl, many microbusinss ownrs will lay or ruc hir own paychcks o mainain posiiv cash flow aking incom away from hir houshols. Two-hirs of hos who say hy sruggl wih cash flow hav skipp paying hmslvs aloghr. An whil hos wihou cash 0 flow problms wr mos likly o b builing prsonal savings for long-rm asss such as rirmn an highr ucaion, hos wih cash flow problms wr lss likly o b rying o buil mrgncy savings, or o lack savings goals. Givn h clos rlaionship bwn businss balanc shs an houshol balanc shs, policis ha hlp microbusinss ownrs buil grar financial capabiliy can also hav posiiv impacs on financial sabiliy a h family lvl. Currn small businss policis o no ffcivly or comprhnsivly arss businss ownrs financial capabiliy, bu hr ar opporuniis o o so hrough xising fral programs. Policis sign o boos microbusinss ownrs financial capabiliy mus provi ffciv financial raining an ucaion, incnivs o sav an accss o appropria amouns an yps of cri. To achiv hs goals, w rcommn: Th Small Businss Aminisraion (SBA), Communiy Dvlopmn Financial Insiuions Fun (CFDI Fun) an ohr agncis proviing microbusinss chnical assisanc shoul work oghr o vlop rsourcs ha ffcivly incras clins financial managmn skills. Th fral govrnmn provis an array of ucaion, chnical assisanc an on-on-on counsling o microbusinss ownrs. Th Small Businss Aminisraion aminisrs h Small Businss Dvlopmn Cnrs (SBDCs), Srvic Corps of Rir Excuivs (SCORE), Womn Businss Cnrs (WBCs), an Program for Invsmn in Micro-Enrprnurs (PRIME). CDFI Fun awars grans o microbusinss vlopmn organizaions (MDOs) across h counry o provi chnical assisanc o LMI nrprnurs. Smallr programs ailor o microbusinss ownrs xis wihin h Dparmn of Agriculur (USDA) an Dparmn of Commrc. All hs programs provi som financial ucaion o clins, bu h majoriy of grans programming concnras on h financial knowlg an skills n o sar a businss, such as how o cra a businss plan, how o kp rcors ocumning your xpnss an incom an how o mak a profi an loss sh. Ths ar worhwhil opics, bu hy ar incompl wihou aiional skills such as forcasing rvnus an xpnss, ax complianc an planning for growh. Mor anion shoul also b pai o nhancing businss ownrs abiliy o balanc h halh of hir businss financs an hir prsonal financial scuriy. SBA an h CDFI Fun shoul coorina wih ohr microbusinss-srving agncis o cra rsourcs an vlop sanars ha ncourag chnical assisanc provirs o implmn ffciv sragis o boos clins financial capabiliy. This suppor coul ak h form of shar funing prioriis across mulipl parmns, ponially highlighing financial coaching as a mor ffciv approach o financial ucaion. 6

7 Th SBA an CDFI Fun shoul hlp microloan borrowrs vlop businss savings. SBA an CDFI Fun aminisr microfinancing programs hrough h SBA Microloan Program an CDFI loans o microfinanc inrmiaris. Each agncy shoul xplor an vlop pilo programs o provi microbusinss ownrs rciving hs loans wih an opional savings faur. Savings faurs coul b mol afr proucs ha alray xis, such as h Borrow an Sav consumr loan programs implmn by som CDFI-crifi an low-incom signa cri unions. 4 Boh long-rm an shor-rm savings shoul b prmi, allowing microbusinss ownrs o assss an arss hir savings ns accoring o hir own goals. As posiory insiuions may b ncssary parnrs for organizaions ha only provi loans, SBA an CDFI Fun coul ncourag parnrships bwn loan funs an CDFI-crifi banks an cri unions o provi savings proucs o microbusinss ownrs. Th Consumr Financial Procion Burau (CFPB) shoul provi clar guianc o Fair Cri Rporing Ac (FCRA) rgula firms on h us of alrnaiv cri aa o nsur ha all consumrs, incluing nrprnurs, hav h opporuniy o buil cri. Cri is on of h primary ools ha microbusinss ownrs can us o manag cash flow, bu many LMI businss ownrs lack accss o basic mainsram proucs such as cri cars an lins of cri. CFED s rsarch foun ha among microbusinss ownrs who hav appli for an bn ni loans, 8% ci insufficin cri hisory as h rason. 5 Thy ar among as many as 54 million cri invisibl Amricans who hav insufficin cri hisory o gnra a cri scor. Wihou sablish cri hisoris, consumrs mus rly on payay loans an ohr high-cos alrnaiv financial srvics. 6 For microbusinss ownrs, his may man mrchan cash avancs cash infusions offr in xchang for assigning a s prcnag of fuur rvnus o h lnr. Th Fair Cri Rporing Ac (FCRA) rgulas companis involv in craing cri hisoris. FCRA impacs wha informaion cri rporing agncis (CRAs), such as Exprian an TransUnion, inclu in iniviual consumrs cri rpors. Th Ac also influncs h informaion abou iniviual consumrs ha aa furnishrs provi o CRAs, such as morgag paymns. Alrnaiv aa collcion an analysis mhos go byon h aa ypically collc an mainain by h major consumr cri buraus hol h ponial o provi a mor compl picur of an iniviual s cri hisory. Common yps of alrnaiv aa inclu rn, uiliy an phon paymns. Alrnaiv aa policis woul bnfi a broa populaion of iniviuals byon LMI microbusinss ownrs, bu hin-fil microbusinss ownrs may hav h mos o gain. Using alrnaiv aa o sablish cri hisoris woul hlp millions of microbusinss ownrs who can borrow a all gain accss o basic cri proucs such as prsonal an businss cri cars, businss lins of cri, an ohr low-balanc, afforabl proucs. Alrnaiv aa cri rporing has akn hol o som gr in h priva scor, bu i rmains ousi of h mainsram. Concrn abou Fair Cri Rporing Ac (FCRA) complianc is an imporan conribuing facor o lnrs rlucanc o rly mor on alrnaiv aa. FCRA clarly auhorizs aa furnishrs an CRAs o rpor an ocumn paymns on rm loans an rvolving cri accouns. I also prohibis h inclusion of crain yps of informaion in cri rpors. Bu alrnaiv aa falls ino a gray ara. Th CFPB, as h primary rgulaor implmning an ovrsing FCRA-covr financial insiuions, coul provi suprvisory guianc ailing criria ha firms coul us o rmin wha forms of alrnaiv aa ar accpabl o us for unrwriing an vn o incorpora ino bouiqu an mainsram cri hisoris. 7 Congrss coul also spur acion hrough h lgislaiv procss, using h 0 Cri Accss an Inclusion Ac (H.R. 58 in h Hous; S. 6 in h Sna) as a mpla. 8 7

8 U p a Th Dparmn of h Trasury an Congrss shoul provi accss o myra o h slf-mploy. In arly 04, Prsin Obama announc uring his Sa of h Union arss ha h Dparmn of h Trasury woul cra a nw rirmn savings vhicl inn o xn accss o simpl, afforabl rirmn savings accouns o h 70 million workrs who lack accss o mployr-bas rirmn. Whil O many wag mploys hav accss o mployr-sponsor rirmn savings accouns, fw LMI c microbusinss ownrs ar abl o accss h yp of accouns ncssary o plan for a scur rirmn. Th My Rirmn Accoun (myra) 9 will b pilo in wih a rang of mployrs an workrs, hn o graually roll ou o all mployrs, no mar how small, as an opional bnfi for mploys. MyRA is buil b on h Roh IRA plaform, 0 which mans ha conribuions ar ligibl for h Savr s Cri an may b us flxibly o m shor-rm savings ns, ofn wihou incurring pnalis. Tha flxibiliy coul b an spcially valuabl faur for microbusinss ownrs facing occasional r cash flow ifficulis. Prospciv nrprnurs who hav myra accouns coul also us hm o srv as sarup quiy whn saring a businss. 0 As Congrss an h Dparmn of h Trasury plan for fuur ffors o xpan myra from h pilo sag o wispra accss, hy shoul consir h million slf-mploy Amricans who hav h las accss o afforabl, asy rirmn savings accouns. Simply making myra availabl o h slf-mploy woul graly improv hir capaciy o achiv long-rm financial scuriy. This coul b accomplish in svral ways; on opion is o mak i possibl o opn an mak posis ino a myra accoun hrough h IRS 040 ax form. Anohr opion is o work wih mmbrship associaions ha provi srvics such as insuranc o h slf-mploy o a myra o hir prouc offrings, coupl wih assisanc sing up rgular conribuions. Th CDFI Fun shoul cra an innovaion iniiaiv o parnr wih CDFIs o vlop nw financial proucs an srvics sign o m h ns of h avrag microbusinss ownr. A final opporuniy for h CDFI Fun is o parnr wih CDFIs o ircly suppor h vlopmn of innovaiv, afforabl proucs an srvics ha arss financially vulnrabl microbusinss ownrs ns. Th CDFI Fun is h bs-posiion agncy o hos such an iniiaiv bcaus i has consirabl flxibiliy o alloca is bug o aras an projcs ha i prioriizs. I also has h srongs is of any fral agncy o h fil of narly 900 nonprofi an for-profi financial insiuions ha ar crifi CDFIs. Th variy of CDFI yps loan funs, cri unions, banks an vnur capial funs is also a bnfi, as iffrn yps of organizaions hav iffrn capaciis o livr proucs an srvics. Thr is prcn for his yp of iniiaiv, boh wihin h CDFI Fun an a ohr fral agncis. Th CDFI Fun s Naiv Amrican CDFI Assisanc Program (NACA) has awar chnical assisanc funs o Naiv Amrican CDFIs ha ar vloping nw proucs an srvics. Ousi of h CDFI Fun, Projc Caalys a h CFPB is an ongoing iniiaiv ha parnrs wih financial srvics provirs o vlop an s innovaiv nw proucs an srvics ha m h financial managmn ns of consumrs. Is arly parnrships arss issus such as auomaic bill paymn an us of prpai cars. A ims, Congrss has also play a rol in iniiaing hs parnrships, such as DOL s Workforc Innovaion Fun. 4 Taking larship on his issu by invsing rsourcs o spur innovaion will la o a grar variy of financial managmn ools for microbusinss ownrs o ovrcom common financial challngs, which, in urn, incrass hir capaciy o achiv financial scuriy hrough businss ownrship an grow hir businsss in ways ha cra jobs. This iniiaiv shoul focus on proucs an srvics ha rla ircly o 8

9 microbusinss ownrs financial challngs, paricularly: ) lack of liqui savings; ) inabiliy o accuraly forcas fuur rvnus an xpnss; an ) insufficin cri hisory o hav accss o mainsram borrowing opions. I shoul b no ha h prouc an/or srvic soluions o h financial challngs lis abov will vary in sign as wll as provir. For xampl, h lack of liqui asss can b arss ihr hrough nw savings proucs an incnivs or wih shor-rm cri proucs, an iffrn CDFIs will bring iffrn soluions o h abl. Morovr, h inabiliy of small businsss o accuraly forcas rvnus will rquir boh chnical assisanc an financial srvics, such as mobil apps, o ffcivly arss. Thus, w rcommn ha an innovaion invsmn iniiaiv a h CDFI Fun shoul sk ou a rang of approachs o ffcivly mach h ivrsiy of challngs ha microbusinss ownrs fac. Many CDFIs woul b capabl of implmning wll-sign proucs an srvics an coul offr hm a lowr cos han mainsram financial srvics firms. Thy ar no, howvr, capabl of invsing significan sums in prouc vlopmn, as hy rly on CDFI Fun grans an loans, ohr public programs, an philanhropy for h majoriy of hir funing. By parnring wih hs CDFIs, h CDFI Fun woul subsiiz h coss of prouc vlopmn an cra uniqu nw rsourcs for h fil bas on h finings an oucoms of h iniiaiv. From iaion an sign o sing, piloing an prparing for implmnaion a scal, h CDFI Fun can livr valuabl chnical assisanc an xpris, as wll as provi rsarch an valuaion capaciy ha h paricipaing CDFIs ar unlikly o hav on hir own. Bcaus significan proporions of ponial parnrs ar posiory insiuions, h CDFI Fun shoul consul wih rgulaors for communiy banks an cri unions, h Naional Cri Union Aminisraion (NCUA) an h Fral Dposi Insuranc Corporaion (FDIC). Consuling wih CFPB woul also b hlpful, as h Burau has rgulaory auhoriy for h yps of financial srvics ha may b vlop. Th rcommnaions in his rpor will assis avocas an policymakrs in nw ffors o suppor nrprnurship as a sourc of family financial scuriy, job craion an conomic growh. Ths pracical, acionabl rforms will nabl millions of financially vulnrabl microbusinss ownrs o achiv financial succss in hir businsss an hlp hir familis grow walh an mov up h conomic lar, whil nhancing h capaciy of h microbusinss scor o cra jobs an growh for h U.S. conomy. Wolff, Ewar N., Th Ass Pric Mlown an h Walh of h Mil Class, Th US00 Projc, May 0. Corporaion for Enrpris Dvlopmn, Sarup Businsss Driv Amrican Job Growh: Why Lvrag Tax-Tim o Rach an Suppor Low-Incom Sarup Businsss. Williams, Laurn, an Kasy Wirich, In Sarch of Soli Groun: Unrsaning h Financial Vulnrabiliis of Microbusinss Ownrs, April 04. Pg.. 4 Williams an Wirich, 04. Pg.. 5 Lucas McKay, Kahrin, Microbusinsss: Amrica s Unsung Enrprnurs, Corporaion for Enrpris Dvlopmn, May 0. 6 Auhor s calculaion of h man numbr of pai mploys (6,086,9) o mployrs (,67,764) for microbusinss mployr firms wih - 4 mploys, using aa from U.S. Cnsus Burau, Saisics abou Businss Siz (Incluing Small Businss), hps:// 9

10 7 Auhor s calculaion, bas on AEO aa, of h iffrnc bwn h 4.87 rillion conomic impac of microbusinsss an h sum of h $.6 rillion inuc oupu an $64 billion inirc oupu. S Associaion for Enrpris Opporuniy, 0. Pg U.S. Cnsus Burau, Saisics abou Businss Siz (Incluing Small Businss), hps:// 9 MBO Parnrs, Th Sa of Inpnnc in Amrica, Spmbr 0. 0 Associaion for Enrpris Opporuniy, 0. Pag 5. FIELD a h Aspn Insiu, Incom Paching Among Micronrprnurs, January 0. Associaion for Enrpris Opporuniy, 0. Pg. 9. Lucas McKay, Kahrin, Laurn Williams, Alicia Akinson an Ezra Lvin, Enhancing Suppor for Lowr Incom Enrprnurs Through Major Public Sysms, January Michalis, Marios an Jacob Bnus, Ar Slf-Employmn Training Programs Effciv? Evinc from Projc GATE, IMPAQ Inrnaional, April 0. 5 WIOA, which bcam law in July 04, rauhoriz h Workforc Invsmn Ac (WIA). WIA s Common Masurs hav bn rvis, an DOL mus now implmn ruls on how sas an workforc organizaions apply h nw WIOA Prformanc Masurs. For mor ail on h iffrncs bwn prformanc sanars in WIA an WIOA, s DOL s WIOA FAQ an Fuur Work Sysms analysis. 6 Uni Sas Dparmn of Labor, Eucaion an Training Aminisraion, Training an Employmn Guianc Lr -0: Supporing Enrprnurial an Slf-Employmn Training Through h Workforc Invsmn Sysm, Novmbr 5, Ashmor, Cahy, Think Enrprnurs: A Call o Acion, Ingraing Enrprnurship Ino h Public Workforc Sysm Throughou Amrica, Consorium for Enrprnurship Eucaion, 009. Pg For xampls of propos alrnaiv prformanc mrics, s Ashmor, 009 an Lucas McKay, Williams, Akinson an Lvin, Lucas McKay, Kahrin, Cash Flow is King: Microbusinsss Gras Financial Ns, Corporaion for Enrpris Dvlopmn, April Corporaion for Enrpris Dvlopmn, Th VITA Valu Proposiion: Expaning Fr Tax Assisanc Program Paramrs o Empowr Mor Low-Incom Microbusinsss. H.R. 57 ( h ): Enrprnur Sarup Growh Ac of 0, hps:// Williams an Wirich, 04. Pg. 7. Williams an Wirich, 04. Pg Naional Fraion of Communiy Dvlopmn Cri Unions, Borrow an Sav o b s in Filn Rsarch Insiu s accssibl financial srvics incubaor, Novmbr, 0. 5 Williams an Wirich, 04. Pg. 6 Turnr, Michal, Parick Walkr an Karina Dusk, Nw o Cri from Alrnaiv Daa, PERC, Lucas McKay, an Alicia Akinson, Alrnaiv Daa Hlps Familis Buil Cri an Walh, Corporaion for Enrpris Dvlopmn, April S. 6 ( h ): Cri Accss an Inclusion Ac. 9 Th Whi Hous, Offic of h Prss Scrary, Fac Sh: Opporuniy for All: Scuring a Dignifi Rirmn for All Amricans, January 9, Lucas McKay, Kahrin an Ezra Lvin, Rirmn Scuriy for All Workrs, Corporaion for Enrpris Dvlopmn, Fbruary 04. Cramr, Ri, Obama s myra proposal ns flxibiliy, Th Hill, Jun, 04. Lucas McKay, Williams, Akinson an Lvin, 04. Pgs S h CDFI Fun s NACA awars announcmn for FY 0 for xampls: Trasury Announcs $.4 Million in Assisanc o Naiv Communiis, Spmbr 9, 0. 4 U.S. Dparmn of Labor, Abou h Workforc Innovaion Fun. p a O c o b r 0 U 0