What States and Cities Are Doing to Help Small Businesses

Elizabeth Olson
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While Washington debates how to help the country’s struggling small businesses, states and municipalities have stepped up with an array of initiatives to stanch closings and save jobs.

The local approaches are as varied as subsidizing wages for new hires, running a $100,000 regional business-plan competition and giving out grants to help small manufacturers reposition themselves. Some states and cities are using federal stimulus dollars, and others are mixing federal, state and private dollars.

Here are some examples:

A 100 Percent Hiring Subsidy

San Francisco is using federal stimulus funds to give immediate aid to small-business owners. Its $25 million program reimburses owners for 100 percent of the wages for certain new hires. So far, restaurants, cafes, delivery services and even law firms have hired nearly 1,800 people through the program, called Jobs Now.

Employers do have to pay for Social Security and unemployment insurance, and the program requires those hired to have been unemployed for 30 days or longer. More than 800 businesses have signed up for the program, and the city is pushing to extend it beyond its September expiration.

At first, said Steven B. Falk, chief executive of the San Francisco Chamber of Commerce, “businesses had to warm up to the idea of turning to the government for hiring. Now, small businesses are telling me this is the motivation that pushed them to hire.”

Encouraging Customer Loyalty

A Cleveland-area small-business council is trying to shore up its 17,000 member businesses with a program that encourages consumers to patronize locally owned enterprises instead of big-box chains or Internet sites.

Last year, the Council of Smaller Enterprises began a Web site called “I Buy NEO” — that’s Northeast Ohio — where consumers can search for discounts and bargains at participating local businesses. So far, about 300 businesses as diverse as art galleries and home-improvement stores have signed up to offer rebates or discounts. About 11,000 cards, which cost $10, have been sold. “When a resident buys locally,” said Dan Roman, the council’s director, “independent studies have found 68 cents of each dollar stays in the community.” The current average for the region is 43 cents.

There is no charge for small businesses to join, and about two dozen companies have been signing up each month. Even though the program’s $150,000 budget for marketing, Web development, printing and postage is modest, Mr. Roman says, sales activity tied to the loyalty cards has increased 40 percent over the last six months.

Training for Laid-Off Workers

Last June, the Michigan Small Business and Technology Center began to train laid-off workers to start new ventures.

So far, 527 people have taken the course, which the center offers in partnership with the Ewing Marion Kauffman Foundation. To date, 160 people in the Michigan program have introduced new business ventures, and more than 125 owners of existing businesses have enrolled in separate courses to bolster their chances of surviving. Another 1,000 would-be entrepreneurs are expected to complete the program this year.

Small Businesses Hiring Again

The unemployed workers, many laid off from the auto industry, come to the program with an idea for a small business and must search for capital on their own. The program, said a spokeswoman, Jennifer Deamud, “preps the company for a loan and makes connections for the owner.”

Of course, the training is no guarantee of success. Only about half of the enterprises are likely to survive beyond three years, according to the Kauffman Foundation, which has been offering training since March 2009, in New York City, Philadelphia, Kansas, Missouri, Colorado and Minnesota.

When Tracy Pospeshil, 37, of Fenton, Mich., lost his job at an automotive supply company, he enrolled in Michigan’s program and started a new business last spring selling engine-warming heaters for trucks and buses. He says he’s on track to make a mid-five-figure income by this summer.

Helping Small Manufacturers Retool

Connecticut is using state money to set up a matching grants pilot program to help its small manufacturers — many of them in the aerospace industry — aim at the growing medical products market. The state budgeted $250,000 and is accepting applications for grants of $5,000 to $25,000, said Deborah Santy, director of the Connecticut Small Business Innovation and Research Office.

Firms applying must provide at least three years of financial information, be located in Connecticut and be registered as a manufacturing company and keep their manufacturing in the state. Ms. Santy said she had received more than 60 applications for the program so far. Kristen Muschett, chief executive of aerospace test-equipment maker Habco, said the $35,000 matching grant was helping her explore the feasibility of manufacturing and marketing a new machine that helps stroke victims and other neurologically impaired patients learn to walk again.

Providing On-Site Financial Expertise

Last year, North Carolina began a $600,000 pilot program called BizBoost to help the Charlotte area rebound from the big-bank layoffs. The program has provided financial guidance to 158 small businesses, typically with 10 or fewer employees, since last fall.

In January, Gov. Beverly Perdue announced the program would be expanded to the entire state, with $2.4 million in state and federal funds that will be used to add additional experts, including accountants and managers with small-business experience. The goal is to help small businesses with the nitty-gritty of managing cash flow and lining up financing. “We are helping businesses manage their customer base, restructure their debt and position themselves to grow,” said George McAllister, regional director of the North Carolina Small Business and Technology Development Center.

Still, Mr. McAllister conceded, it is hard to measure the program’s success. One client, John Meeks, owner of AppleBlossom Insulators, said his insulation business got help from a BizBoost expert who did a financial analysis of his books, developed cash-flow projections, helped him ready his finances to seek an angel investor and helped him produce a 5 percent increase in revenue in a tough year.

Loans and a Business-Plan Competition

In Missouri, Charlie A. Dooley, chief executive of St. Louis County, had heard complaints from owners who could not get bank loans, so he decided to spearhead a new small-business loan program called Boost. The program is administered by the St. Louis County Economic Council and uses county funds and a $5 million line of credit from PNC Bank, a Pittsburgh-based financial institution that had recently bought a St. Louis bank.

The program is aimed at owners who want to purchase land, machinery, equipment or buildings but do not have adequate income or net worth to qualify for conventional bank loans. The maximum loan is $500,000, and in the few weeks since Boost was announced, Mr. Dooley said, more than 100 owners have applied.

The county also started a business-plan competition featuring $100,000 in cash prizes and in-kind professional services. The competition, with money provided by the St. Louis-based financial services firm, Edward Jones, will announce its winners in June. So far, it has received applications from more than two dozen hopefuls, including would-be microbrewers and laid-off scientists.

Helping Businesses Expand

Last year, Florida introduced a state-financed program to help businesses keep their employees by expanding their customer base. The GrowFL program helps established companies identify new markets, research industry developments and maximize their use of social media. The program has a team of business analysts whose assistance is free to companies with at least $1 million in annual sales and 10 or more employees.

So far, the program, operated by the Florida Economic Gardening Institute, has enrolled 13 companies, including a Jacksonville industrial pump manufacturer that is trying to locate new customers after sales declines forced it to lay off workers. Another 72 established companies are in the pipeline for help. Gov. Charlie Crist has asked the legislature to add $3 million to the program’s $1.5 million budget.

Other areas, including Portland, Ore., have started similar programs.