Does The JPMorgan Chase and LiftFund Partnership Help Underserved Entrepreneurs Get Financing?

Findings From Forbes….

Recently, Robert Harrow from Forbes reported that JPMorgan Chase & Co has partnered with microlender LiftFund to make debt more available to underserved small business owners in a campaign called LiftUP.

About The Campaign

The campaign aims to give women, veterans, and minority small business owners faster access to debt financing in cities across the Southern part of the U.S.

JPMorgan Chase & Co has initially contributed $4.6 million towards this effort which conservatively allows a few thousand business owners to be funded at any one time.

This is a small drop in the ocean compared to the millions of small businesses owned by veterans, women, and minorities across the country that could benefit from such financing. I would imagine that positive results during the initial stages in this campaign will propel JPMorgan Chase & Co as well as other big banks to contribute more capital towards a similar cause.

How Small Business Owners Currently Get Financing

Most small business owners turn to Small Business Association (SBA) loans for microloans which are:

• Loans in amounts of up to $50,000.
• Designed to help small business owners for expenditures related to working capital, inventory or supplies, furniture and fixtures, and machinery or equipment
• Generally carry an annual interest rate between 8%-13%

This funding, however, cannot be used towards paying back existing debt and has a maximum repayment term of 6 years.

Oftentimes, when small business owners are rejected from obtaining an SBA microloan they turn to private lenders that can charge an annual interest rate of up to 40%. The LiftUP program promises less stringent standards than commercial banks and financial institutions while still charging an affordable annual percentage rate.

Underserved business owners that the program aims to target, such as women, veterans, and minorities, will substantially benefit from this programs as current market conditions prevent them from otherwise obtaining similar affordable financing options.

Takeaways:

As a business accountant, I understand that the availability of debt plays an integral role to the growth and survival of many small businesses across the country.

Although readily available debt financing options can promote small business growth among financially disadvantaged communities, I strongly believe greater emphasis should be placed on:

• Financial education
• Structured business planning

When economic conditions are tough, business owners quickly and desperately turn to debt as a lifeline without understanding the ramifications of acquiring such an instrument. Most businesses that are operating on a small operating cash flow can only benefit from a microloan granted that the proceeds of the loan are enough to generate a profit after principal, interest, and operating expenses have been paid. Failure to do so will heighten risks of bankruptcy as business owners will be unable to meet financial obligations.

With careful guidance from financial experts, the LiftUP campaign will provide more opportunities to underserved entrepreneurs. Prolonged poor financial management of funds by such debtors will deem the program a failure and will restrict capital access for the current and future generations should related defaults create substantial losses to LiftFund and associated financial institutions.

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