Access To Capital: Issues For Micro-Entrepreneurs in Halton is a discussion paper of the Halton Social Planning Council that provides information on the issues of access to capital for micro-entrepreneurs. The Halton Social Planning Council's research and community development work with low income groups has identified unavailable and/or inaccessible micro financing for the poor who are striving to become self-sufficient through self employment.
The purpose of the discussion paper is to consider:
Data indicates that the most significant source of new jobs in the 1990s has been the rapid growth of self employment or micro-entrepreneurship. Between 1982 and 1995 the number of self employed Canadians between the ages of 25 and 54 increased by 70%, compared to a 45% increase in paid employment. Job growth in Halton also reflects these patterns. Halton Region has recorded a 141% increase in home-based business for the 1986-1996 period.
The main issue affecting micro-entrepreneurs is access to small amounts of capital necessary to begin a micro-enterprise. Access to capital is particularly difficult for groups with specific needs, which include youth, women, the poor and new Canadians. Anyone with bad or insufficient credit ratings, lack of savings or other forms of collateral, will find business loans are inaccessible.
Over the last decade numerous public and private sector services have emerged to assist entrepreneurs to be successful in their self employment and to enable poor or unemployed persons to effectively participate in the new economy. The following provides an overview of the types of programs or services that are available. It is not an all-inclusive inventory.
Regional or local business centres exist designed to provide 'one-stop' shopping to people seeking information on starting a small business. These centres can be sources of information and provide services to assist entrepreneurs.
Ventures Burlington is one of the Community Investment Plan pilot sites. This site focuses on two primary services. The first provides the counselling and preparatory work required to make small businesses ready to attract investment capital. The second assists with the sourcing of venture capital
As well as federal and provincial government financing programs for entrepreneurs, private financing sources are available to individuals starting or operating small businesses. The most common private source of financing for small business is the chartered bank.
Most banks offer services to small business entrepreneurs. Banks can provide a number of financing options, such as short-term loans, long-term mortgage loans, loans against inventory or accounts receivable, lines of credit and credit cards.
Credit Unions play an integral role in their communities by investing in community projects, sponsoring local activities and promoting community development. Credit unions are financial service co-operatives owned and controlled by their members. Over the years, credit unions have taken the lead in developing and introducing innovative financial service products.
Services include business advising and consulting, financial services and various types of loans. Credit unions work in partnership with governments, community organizations and other financial institutions to assist entrepreneurs.
- Assistance with the development of a comprehensive business start-up plan
- Support in new business launch
- Training in basic accounting
- Access to program counsellors, computer technology, international and local enterprise networks, mentoring and information about new business trends and systems
- Monitor progress and evaluation
Women and Rural Economic Development is a federally incorporated, not-for-profit organization dedicated to enhancing the sustainability of rural Ontario communities. Their goal is to promote economic opportunity through equitable local control and ownership by providing programs that enhance business development, life skills and networking. Emphasis is placed on providing access to capital, information and markets and on developing an awareness of rural community economic development.
However, despite the various public and private lending programs, the lack of access to capital still remains the main barrier to micro-entrepreneurs thus perpetuating the cycle of dependency, lost productivity, lost opportunity for economic and social benefits, and increased social costs. Consequently, local communities have begun experimenting with a range of different credit delivery models and community initiatives. The document highlights some of these models and examines the following:
The results of these programs illustrate clearly that with the appropriate supports and services the poor, working poor and unemployed have the capacity to become self sufficient through self employment. The challenge is to devise a new framework, within the structure of Canadian financial institutions and in keeping with good business practices, which will enable access to micro financing options for poor, working poor, unemployed, and vulnerable Canadians.
In regard to this, research points to several policy options and programs that could be pursued at the Canadian federal and provincial government levels, as well as at the local community level to increase access to capital for micro-entrepreneurs. This discussion paper has recommended several options, they are:
Each element is important in a strategy to best support the needs of entrepreneurs, with the key being the linking of public and private resources, strategically organized on a local, provincial and federal level.
Produced by the Community Development Halton
860 Harrington Court
Burlington, Ontario L7N 3N4