Starbucks Tries to Jolt the Economy
Starbucks is hoping when patrons walk into one of their stores beginning Nov. 1, that along with their morning jolt of caffeine, they will also want to give a jolt to small businesses.
The company’s Create Jobs For USA initiative is an attempt to jump-start hiring where many people say it matters most — on the small business level.
“Small businesses are the backbone of America, employing more than half of all private sector workers, but this critical jobs engine has stalled,” Starbucks CEO Howard Schultz declared when he announced the initiative in early October. The key to job creation, he says, “is to thaw the channels of credit so that community businesses can start hiring again.”
Schultz and a team of Starbucks executives came up with the idea of partnering with Opportunity Finance Network, a national network of community development financial institutions, or CDFIs, that has experience putting money into the hands of businesses in underserved communities.
Main Street has been hit particularly hard in the recession that began in 2008. As banks dealt with mortgages gone wrong and decreases in assets, lending for small businesses dried up. Without operating capital, small businesses had to lay off employees and close altogether.
“We felt that this was an emergency,” said Adam Brotman, senior VP and general manager, digital ventures at Starbucks, among the Starbucks executives who cooked up the idea while sitting around Schultz’s dining room table one evening in late August. “Not only are a significant number of people out of work, but many are underemployed, as well.”
Starbucks patrons can donate at the store (a donation of $5 or more will get you a wristband with the word “Indivisible”). In addition, a website is set up to take donations online at www.CreateJobsForUSA.org. The Starbucks Foundation has kicked in $5 million to start.
Some creative networking led Brotman to Mark Pinsky, the man behind OFN, a national network of CDFIs that provide loans to businesses that can’t qualify for traditional loans. That’s something many small businesses, underserved community or not, can understand, as banks have reined in lending to all but the most stable businesses.
By teaming up with OFN, says Brotman, Starbucks is doing all it can to ensure that 100 percent of money collected through donations and purchases of wristbands will go straight to the people who can create jobs: small businesses.
OFN has created a dedicated fund with the goal of granting money within 30 days of its receipt. These loans, usually in the amount of $200,000 to $300,000, are repaid within six to seven years, according to Pinsky. OFN, which has loaned more than $30 billion over the past 30 years, has sustained losses of just 2 percent. That means 98 percent of loans — to businesses that would have otherwise had a hard time getting a loan — have been repaid. That’s an enviable repayment rate for any bank, much less one lending to the riskiest prospects.
Small business owners can learn more about the requirements for loans, says Pinsky, by contacting CDFIs in their area.
Whether this will put a dent in the unemployment rate is unknown, but, says Brotman, “we’ll look at who has got the best capability to do the most they can in terms of job creation. We will track and report on the jobs that are created.”
Adds Pinsky: “We talked about goals. But no one has done anything like this before. What we do know is there is a need. And we think people will step up, when they see it’s neighbor helping neighbor.”
It’s a start. And there’s no expiration date.
Says Brotman, “We don’t know how long we’ll be doing it. We are committed to this for one year. We think it could go beyond that. As long as we see a need, I think we can continue it.”