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2014 CD Perspectives Report

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Visit FedCommunities.org CD staff also developed several initiatives to introduce lower-income small business owners to new sources of capital and raise awareness of potential risks associated with non-traditional financing options, such as those offered by alternative lenders. Other initiatives focused on the expanded use of technology to increase efficiency for microfinance lenders, sustainable small dollar loan programs, and ways that community development financial institutions (CDFIs) can play a role in addressing the financing needs of small businesses (read more on page 23). Resources for entrepreneurs Federal Reser ve Banks held programs in 2013 to help entrepreneurs in lower-income areas seeking to star t, maintain, or grow businesses. These programs covered business fundamentals, such as financial statement analysis and forming financial institution relationships. They also looked at sources and types of technical assistance, access to capital, and procurement oppor tunities. Some effor ts addressed entrepreneurship strategies targeted toward specific populations, such as returning veterans, Native Americans, minorities, and women. Other topics of focus included expanding networks and understanding roles and oppor tunities with respect to business incubators and anchor institutions. Finally, a number of programs provided oppor tunities for small businesses and microenterprises to share innovative strategies, such as advancements in financing mechanisms and the greater deployment of data to improve operations and generate stronger profits (read more on page 23). Looking forward There are a number of critical questions and challenges related to this work moving forward: What is the role of alternative lenders? Opinions vary on the value of alternative lending for small business owners with some proponents touting the wide range of credit products and technology that help to speed up underwriting. Opponents, though, note that loans from these lenders often carry relatively high interest rates, and the structure of some products may keep small business owners in a cycle of expensive borrowing. CD staff are exploring the role of alternative credit providers and the impacts of these institutions in lower-income communities. What are some examples of strategies that reinforce the connection between small businesses and employment, particularly for lower-income individuals or populations that are uniquely challenged? CD staff are exploring a range of alternative approaches that connect targeted populations like formerly incarcerated individuals, veterans, and disabled individuals with jobs at small businesses. Additionally, one Reserve Bank is involved in an effort to coordinate local employers, educational institutions, and nonprofits to provide training for lower-income individuals to become health care professionals, such as certified nurse assistants. 21

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