CIE Spotlight: How El Paso is Supporting Small Businesses

By:

Lauren Boswell

March 3, 2022 - (6 min read)

Alongside its military bases, oil refineries, manufacturing companies, universities, and an innovative healthcare infrastructure, the City of El Paso, TX also has a robust network of Hispanic-owned businesses. The ability of these businesses to grow and sustain their operations will be critical to the economic vitality of the city and the West Texas region in the coming decades.

As a result of the economic consequences of the pandemic, El Paso leadership has increasingly looked to Community Development Financial Institutions (CDFIs) as a critical resource for increasing local business owners’ access to capital. A successful small business owner himself, El Paso Mayor Oscar Leeser understands the need to engage with small businesses at a grassroots level, cultivate a strong network of entrepreneurs, and provide accessible financial literacy and knowledge opportunities for emerging and longstanding businesses.

The Challenge

The infusion of federal relief the city is receiving from its American Rescue Plan Act (ARPA) and CARES Act funding is enabling El Paso to address some of the most pressing challenges its small businesses faced during the COVID-19 pandemic, including:

A severe lack of relationships with traditional banks. One survey conducted by the U.S. Office of Economic Development found that out of 1500 respondents, only 11% had a relationship with a traditional bank.
Cultural and language barriers that are preventing Hispanic entrepreneurs from accessing debt capital. As many as 84% of small businesses in the city need financial services translated.
A lack of financial documentation that would enable Hispanic-owned businesses to apply for and receive federal, state and local funding. Without financial records, many businesses were unable to prove they had been impacted by COVID-19 – a requirement for receiving aid from most relief programs.
Lack of trust in government. A common theme the city heard among businesses was the notion that “there is no way this money is free.”

How El Paso Is Doing It

Through NLC’s City Inclusive Entrepreneurship (CIE) Program, Mayor Leeser and the City of El Paso committed to connecting entrepreneurs and small business owners with CDFI financing. The city has chosen two CDFIs to work closely with, and the Office of Economic Development is joining them in a series of small business roundtables over the next quarter to identify at least 15 businesses suitable for financing to either start or grow their business. El Paso has also committed to conducting these roundtables in English and Spanish to reach far more businesses than ever before.

To create more equitable access to state and local funds, El Paso created a self-certification process for small businesses that could not provide traditionally-required documentation, such as profit/loss statements and tax returns. To prove they were impacted by COVID-19, businesses could present lease agreements, utility bills and bank statements as verifying documentation. El Paso’s mayor and city council are also drafting legislation that would allow federal funds to be used for financial literacy programs and help small businesses prepare loan documents.

What El Paso Has Accomplished

Since El Paso began connecting CDFIs to small businesses, it has made significant gains engaging with its small business ecosystem, funding options for small businesses and technical assistance for emerging enterprises.

Using CARES Act funding, El Paso has sponsored 10 companies to attend a 12-week program hosted by the Small Business Development Center and El Paso Community College. Through the curriculum, small businesses gained access to expert support in marketing, business planning, profit and loss evaluation, business law and even spoke to patent attorneys to prepare to apply for loans from local CDFIs.

To inform Hispanic small business owners about CDFIs and other nontraditional funding sources, the Department of Economic Development created the Economic Development Ambassadors program. The program centers grassroots efforts to include more Hispanic businesses in the established entrepreneurship ecosystem. Led by four volunteer fellows, the Ambassadors program’s mission is to reach out to businesses, ask them about their challenges and the support they need from the city, collecting data along the way. This data has informed city officials, nonprofits and other philanthropic organizations to pool resources where they are most needed.

In partnership with LiftFund and their technical assistance programs, El Paso small businesses are eligible to apply for a revolving line of credit at a reduced rate of 6% and receive a six-month payment deferment. Through this partnership, El Paso has responded to the need for more flexible funding options and loans that give entrepreneurs room to breathe financially, especially for startup enterprises. Over the course of the partnership, 10 loans have been administered — an accomplishment that took hours of technical assistance to prepare documentation, comprehensive loan packages and business plans.

Finally, El Paso’s mayor has made a financial commitment to support all the businesses they have reached. After impressively reaching over 1600 local businesses through CARES Act Funding outreach, the city committed an additional $3 million to support the pipeline of businesses the CARES Act funding could not support. Using city funds to supplement the CARES Act allocation not only supported more businesses financially, but signaled to small businesses that their voices were heard and the commitment to their sustainability and inclusivity was a priority.

Lessons from El Paso

Know Your Strengths/Collaboration: El Paso has a robust network of nonprofits responding to the needs of the community. The willingness of nonprofits to partner with the city to administer funds and prepare businesses to apply for CARES Act funding despite the barriers small business owners faced enabled the city’s success.

Respond to City-Specific Needs: By addressing language barriers and creating the Ambassadors program, Hispanic business owners reported feeling more support from the city and more trust in the processes required to access support. Ambassadors walking door-to-door and business-to-business allowed entrepreneurs of all sizes and industries to access more capital.

Engage Elected Officials: As a part of El Paso’s Economic Development Ambassador Program, data and findings are regularly presented to and reviewed by city council district representatives. The mayor has also committed to engaging with and listening to small business owners by attending small businesses roundtables and sharing his personal experience with owning a small business. By adding value to elected officials, support for Hispanic small businesses has grown and become a priority across the city.

Get to Know the CIE Network

The City Inclusive Entrepreneurship Network asks city leaders to commit to creating the right policies, programs and practices that drive inclusive, entrepreneurship-led economic growth in their community.

Learn more

This blog is part of a series highlighting NLC’s City Innovation Ecosystems (CIE) Network. Cities in the network have committed to implementing new policies, programs and practices that increase economic opportunity for residents through small business ownership and entrepreneurship.