Small Local Actions Make a Big Impact on Small Businesses Growth

To learn more about how your city can provide access to capital for small businesses, please join NLC at our upcoming training in Kansas City, MO on Oct. 8-9.

Several years ago, Julio and William needed additional financing to expand their growing plumbing and repair company in the greater Los Angeles area. The father-son duo estimated that the price of a business office, advertising fees, and other necessary expenses would cost about $5,000 more than what they had in the bank.

What happened next is very typical for small business owners – they decided to apply for a loan that would cover these expansion costs. What is unusual, however, is that this funding didn’t come from a bank or traditional lender. Instead, the funding came from a diverse group of complete strangers who made small donations online from as far away as Minneapolis, Pittsburgh, and even London.

Julio and William received the funding through Kiva City Los Angeles, one of the programs highlighted in the National League of Cities’ recent report, Big Ideas for Small Business. The Kiva City program helps fill lending gaps by making microloans available to small business owners in major U.S. cities. A particularly important aspect of the program is that microloans are available to businesses that may not meet traditional lending criteria. In Los Angeles, the local program has already provided over $550,000 in loans to 110 small businesses.

The success of the Kiva City Los Angeles program, and similar programs in other cities, relies on partnership and support from civic and local leaders. In order for Kiva City programs to be successful, there must be collaboration among all of these groups to recruit local businesses, promote their stories, and partner with local financial institutions to manage the microloan process.

Small businesses have always needed to interact with city hall to obtain permits and licenses, but many local leaders are taking a more proactive role in supporting business owners beyond just serving as a regulatory rubber stamp. Local leaders are in a unique position to support and develop their city’s small business community. City officials and staff, like those in Los Angeles, can use their leadership roles, cross-departmental resources, and community partnerships to build an ecosystem that proactively supports the development of new and existing small businesses.

A supportive small business ecosystem connects entrepreneurs to mentorship and technical assistance, reduces timely and unnecessary business regulations, and alerts owners to innovative funding opportunities, like Kiva City. That National League of Cities report shares these best practices in an effort to help other cities replicate their success.

Cities that implement these proactive approaches often experience a positive impact. That’s because small businesses create well-paying jobs, deliver vital goods and services, generate sales tax revenue, and contribute to the character and livability of neighborhoods. In Los Angeles, thanks in large part to the efforts of local leaders, the area saw slightly higher new start-up job growth than in the heart of Silicon Valley in 2012.

Meanwhile, Julio and William have paid off their initial Kiva loan and applied for a second one earlier this year to purchase an equipment van. Within two months, they had fulfilled their funding goal. In online comments to his Kiva City donors, Julio said, “Thank you everyone that lent to our cause and believes in our business. This one was a real nail biter. I was dreading the idea of other ways to raise money for our van.” Julio and his son received donations from 351 individuals and organizations.

Even though the funding for Kiva City Los Angeles businesses comes from individuals who live across the country and the globe, the first real investment originated in Los Angeles with the commitment and leadership of local officials who helped launch the program. We encourage other local leaders, community activists, and residents to support these types of proactive and innovative programs that assist small businesses and build better communities.

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