Alabama Small Business Development Center Network Strengthening Alabama’s Economy, One Small Business at a Time. 2016 Alabama MicroEnterprise Network 5th Annual Forum September 13, 2016 Montgomery, AL

Closing the MicroEnterprise Wealth Gap! The State of MicroEnterprise in Alabama – Bill Cummins, Alabama SBDC State Director

THE MICROENTERPRISE LANDSCAPE IN ALABAMA INTRODUCTION – BILL CUMMINS FILLING IN FOR DR. SAM ADDY! Dr. Samuel Addy Director & Research Economist Center for Business and Economic Research & Associate Dean for Economic Development Outreach Culverhouse College of Commerce University of Alabama

THE MICROENTERPRISE LANDSCAPE IN ALABAMA Topic Outline – I. A Look at the Numbers for MicroEnterprises in Alabama (Sam’s data) II. Brief Overview of SBDCs (Nationally and in Alabama) III. Alabama SBDC & MicroEnterprise Development IV. Observations on the Core Issue for Micro & Small Business in Alabama – Access to Capital

A Look at the Numbers for MicroEnterprises in Alabama (Sam’s data)

Alabama Establishments by Employment Size Number of Employees Number of business establishments Paid employees for pay period including March 12 (number) Annual payroll ($, Thousands) All 97,578 1,603,100 62,408,287 1 to 4 (% of All) 48,411 (50%) 93,476 (6%) 3,419,528 (5%) 5 to 9 20,811 137,266 4,435,722 10 to 19 13,652 184,017 6,186,822 20 to 49 9,383 280,622 9,741,273 50 to 99 2,897 198,360 7,294,450 100 to 249 1,674 249,220 9,749,242 250 to 499 473 162,443 6,814,724 500 to 999 189 131,562 6,200,852 1,000 or more 88 166,134 8,565,674 Note: Data excludes most government employees, railroad employees, and self-employed persons. Source: U.S. Census Bureau, 2013 County Business Patterns.

MicroEnterprise in Alabama 355,000 Microenterprises in Alabama 88% of Total Businesses 20% of all Jobs Source: AMEN website

Alabama Establishments with Employees (2014) Number of Employees Number of business establishments Paid employees for pay period including March 12 (number) Annual payroll ($, Thousands) All 97,714 1,604,016 64,291,502 1 to 4 (% of All) 48,319 (49.5%) 92,653 (6%) 3,451,814 (5%) 5 to 9 20,741 137,019 4,496,433 10 to 19 13,759 185,488 6,423,509 20 to 49 9,511 285,878 10,117,574 50 to 99 2,975 203,956 7,802,478 100 to 249 1,660 247,434 9,944,957 250 to 499 477 163,087 7,236,045 500 to 999 184 125,605 6,083,801 1,000 or more 88 8,734,891 Note: Data excludes most government employees, railroad employees, and self-employed persons. Source: U.S. Census Bureau, 2014 County Business Patterns.

Alabama Establishments with Employees (2013) Number of Employees Number of business establishments Paid employees for pay period including March 12 (number) Annual payroll ($, Thousands) All 97,578 1,603,100 62,408,287 1 to 4 (% of All) 48,411 (50%) 93,476 (6%) 3,419,528 (5%) 5 to 9 20,811 137,266 4,435,722 10 to 19 13,652 184,017 6,186,822 20 to 49 9,383 280,622 9,741,273 50 to 99 2,897 198,360 7,294,450 100 to 249 1,674 249,220 9,749,242 250 to 499 473 162,443 6,814,724 500 to 999 189 131,562 6,200,852 1,000 or more 88 166,134 8,565,674 Note: Data excludes most government employees, railroad employees, and self-employed persons. Source: U.S. Census Bureau, 2013 County Business Patterns.

Alabama Establishments by Employment Size & Legal Form (2014) Employment size All Corp. S-Corp. Sole P/ships Partner-ships Non-Profits Govt. Other 97,714 28,626 36,425 11,603 11,043 9,161 205 261 1 to 4 48,319 9,922 18,823 8,841 5,883 4,656 114 80 5 to 9 20,741 7,097 7,657 1,758 2,057 2,054 45 73 10 to 19 13,759 5,313 5,071 615 1,519 1,179 5 57 20 to 49 9,511 3,672 3,372 255 1,342 846 24 50 to 99 2,975 1,261 981 85 400 238 3 7 100 to 249 1,660 897 393 34 176 136 10 14 250 to 499 477 311 84 9 37 25 8 500 to 999 184 106 4 12 13 1,000 or more 88 47 2 Source: U.S. Census Bureau, 2014 County Business Patterns.

Alabama Establishments by Employment Size & Legal Form (2013) All Corp. S-Corp. Sole P/ships Partner-ships Non-Profits Govt. Other 97,578 30,516 35,304 11,063 11,048 9,213 208 226 1 to 4 48,411 11,097 18,158 8,574 5,709 4,681 115 77 5 to 9 20,811 7,508 7,458 1,658 1,960 2,106 45 76 10 to 19 13,652 5,420 4,900 550 1,540 1,208 4 30 20 to 49 9,383 3,795 3,356 195 1,227 792 2 16 50 to 99 2,897 1,319 905 51 376 235 3 8 100 to 249 1,674 911 395 21 185 136 12 14 250 to 499 473 309 87 34 24 500 to 999 189 110 35 5 11 10 1,000 or more 88 47 1 6 15 9 Source: U.S. Census Bureau, 2013 County Business Patterns.

Distribution of Establishments by NAICS Sector NAICS Code NAICS Code Description Micro-Establishments All Establishments Establishments Share (%) - Total 48,319 100.0 97,578 1 Agriculture, Forestry, Fishing & Hunting 394 0.8 796 2 Mining, Utilities, & Construction 4,472 9.3 8,039 8.2 3 Manufacturing 1,338 2.8 4,199 4.3 4 Trade and Transportation 11,752 24.3 26,302 27.0 5 Info., Fin., R.E., Prof. & Bus. Services 14,218 29.4 26,535 27.2 6 Education & Healthcare 4,325 8.9 11,157 11.4 7 Arts, Accommodation, & Food Services 2,815 5.8 9,474 9.7 8 Other Services (Except Public Admin.) 6,633 13.7 10,958 11.2 9 Industries Not Classified 158 0.2 118 0.1 Note: Micro-establishments are establishments with 1 to 4 employees. Source: U.S. Census Bureau, 2014 County Business Patterns.

Distribution of Establishments by NAICS Sector NAICS Code NAICS Code Description Micro-Establishments All Establishments Establishments Share (%) - Total 48,411 100.0 97,578 1 Agriculture, Forestry, Fishing & Hunting 388 0.8 796 2 Mining, Utilities, & Construction 4,532 9.4 8,039 8.2 3 Manufacturing 1,355 2.8 4,199 4.3 4 Trade and Transportation 11,930 24.6 26,302 27.0 5 Info., Fin., R.E., Prof. & Bus. Services 16,262 33.6 26,535 27.2 6 Education & Healthcare 4,303 8.9 11,157 11.4 7 Arts, Accommodation, & Food Services 2,866 5.9 9,474 9.7 8 Other Services (Except Public Admin.) 6,662 13.8 10,958 11.2 9 Industries Not Classified 113 0.2 118 0.1 Note: Micro-establishments are establishments with 1 to 4 employees. Source: U.S. Census Bureau, 2013 County Business Patterns.

Distribution of Enterprises by NAICS Sector (D & B) NAICS Code NAICS Code Description Micro-Enterprises All Enterprises Enterprises Share (%) 1 Agriculture, Forestry, Fishing & Hunting 5,590 3 2 Mining, Utilities, & Construction 14,635 9 20,225 13 Manufacturing 4,885 25,110 16 4 Trade and Transportation 29,441 18 54,551 34 5 Info., Fin., R.E., Prof. & Bus. Services 64,762 40 119,313 74 6 Education & Healthcare 13,854 133,167 82 7 Arts, Accommodation, & Food Services 5,932 139,099 86 8 Other Services (Except Public Admin.) 21,551 160,650 99 Public Administration 868 161,518 100 Note: Micro-enterprises are establishments with 1 to 4 employees. Source: Dunn & Bradstreet (Hoover’s), and Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama.

Number of Enterprises and Revenue by Employment and Ownership Categories (D & B) Employees Total Number of Firms Total Revenue $millions Minority Owned Revenue $millions Female Owned Companies Revenue Female Minority Owned Total (% of) 161,518 68,164 4,734 (2.9) 3,458 (5) 13,110 (8.1) 4,592 (6.7) 2,118 (1.3) 1,252 (1.8) 1 to 4 (% of) 135,580 21,417 3,372 (2.5) 614 (2.8) 10,300 (7.6) 1,370 (6.3) 1,564 (1.2) 225 (1.1) Share of total 83% 31% 71% 18% 79% 30% 74% 5 to 9 19,724 10,904 968 503 2,173 1,007 400 192 10 to 19 2,746 3,786 165 209 322 374 69 114 20 to 49 1,943 9,745 112 531 178 701 45 294 50 to 99 491 5,597 39 51 397 10 77 100 to 249 225 5,993 19 432 471 9 232 250 to 499 57 2,845 4 358 3 61 2 60 500 to 999 33 3,079 1 190 49 - 1,000 to 4,999 8 1,388 Not Declared 710 345 54 247 62 160 * Some data was omitted. Source: Dunn & Bradstreet (Hoover’s), and Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama.

Annual Survey of Entrepreneurs New Annual Survey by U. S. Census to supplement the Survey of Business Owners @ five years Source Data: IRS Tax Returns from 2014 for firms reporting receipts of $1,000 or more AND with one or more paid employees (about 300,000 returns were selected for use in this survey – 23 page questionnaire) Total 5.4 million U. S. Firms with Paid Employees (about 85,000 in Alabama; plus about 200,000 self-employed/non-employee firms)

Annual Survey of Entrepreneurs Age of Businesses ALA USA < 2 Years 7% 9% 3 to 10 Yrs. 40% 44% Over 1o Yrs. 53% 47% Source: U. S. Census (2014 data)

Annual Survey of Entrepreneurs Ownership of Businesses (2014) ALA USA Minority Owned 11% 18% .

Annual Survey of Entrepreneurs Ownership & Age of Businesses in ALABAMA Under 5 Years Minority Owned 42% _____________________________________ African American 36% Amer. Indian 28% Asian 48%_________ White Owned 27%

Annual Survey of Entrepreneurs Ownership & Gender of Businesses in ALABAMA Female Owned 33% Male Owned 64% Publicly Held/ 3% Other Source: U. S. Census (2014)

Alabama Microenterprise Ownership (CFED) State Data US Data Rank Microenterprise Ownership Rate* 15.9% 16.6% 26 Small Business Ownership Rate* 1.36% 1.38% 37 Business Creation Rate** 6.6 9.3 49 *Per 1000 workers (2013) ** No. of new establishments per quarter/1000 workers (2011) Source: CFED 2016 Assets & Opportunity Scorecard. Note: About 8,000 to 10,000 new businesses (w/employees) per yr. in Ala. (SBA)

Enterprises with 1 to 4 Employees Dunn & Bradstreet Data Source: Dunn & Bradstreet, and Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama. Source: Dunn & Bradstreet, and Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama.

Establishments with 1 to 4 Employees U.S. Census Bureau, 2013 County Business Patterns. Source: U.S. Census Bureau, 2013 County Business Patterns, and Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama.

A Look at the MicroEnterprise Landscape Center for Business and Economic Research University of Alabama cber.culverhouse.ua.edu Thank You Sam!

Alabama Small Business Development Center Network Brief Overview

ALABAMA SMALL BUSINESS DEVELOPMENT Small Business Development Centers – SBDC WHAT WE DO IN SMALL BUSINESS INCLUDES THE MICROENTERISE SEGMENT AND UNDERSERVED MARKETS OUR FOCUS IS ONE-ON-ONE BUSINESS COUNSELING AND TRAINING SOME OBERVATIONS ON THE CORE ISSUE IN ALABAMA OF ACCESS TO CAPITAL

AMERICA’S SBDC Nationwide Footprint Most comprehensive small business assistance network in the United States and its territories. About 4,500 employees in over 1,000 service centers nationwide, covering rural, urban, and suburban locations. SBDC’s helped clients obtain $4.85 billion in financing in 2015. Last year, SBDC clients received 2.8 million total hours of consulting and training services.

Partnership Program between the U. S Partnership Program between the U. S. Small Business Administration, Higher Ed & State Governments 67 Networks 36th Year Alabama was a Founding Member

Serving All Sectors FOR 2015, SBDC’s consulting clients: 46% of SBDC were women, 36% were minorities, 9% were veterans.

America’s SBDC National Impact 2015

Alabama SBDC Network

Alabama SBDC The Alabama SBDC Network serves a wide spectrum of small businesses* (all stages, types, sizes and industries). 10 CENTER LOCATIONS WITH STATE WIDE COVERAGE 24 FULL TIME BUSINESS ADVISERS AND 6 SPECIALTY CONSULTANTS * As defined by the U. S. Small Business Admin.

SBDC Core Services No-Cost, Confidential, One-on-One Counseling and Training Grow Your Business SBDC GrowSmart Start Your Business Online Training: SmallBizU, Pitch-then-Plan, Money Training Academy Alabama’s Answers: Small Business Guide for Alabama Finance Your Business Workshops Free or low-cost Management, Marketing, Finance

Specialty Programs: PTAC & CAP Procurement Technical Assistance Center Statewide coverage with 7 locations Certified Contracting Specialists Set-Aside Program for Small Businesses, Minorities Free Bid-Matching System Capital Access Program Over $50 Million in loans & equity funding / yr.

Specialty Programs: AITC Alabama International Trade Center Export Market Research Trade Consulting & Training Program Export Readiness Assessment Trade Finance Programs Export Alabama Trade Alliance http://AITC.ua.edu

Alabama SBDC Impact / Results Over the last 5 years, ASBDC counselors: Worked 1-on-1 with 3,100 AL small businesses per year. Provided training to 6,500 people per year. In 2015, the Capital Access Program: Helped clients obtain $40.5 Million in Small Business Loans Helped clients with $22.8 Million in Equity Funding Clients working with the Procurement Program: Were awarded over $2.3 Billion in contracts over the last 6 years. The Alabama International Trade Center: Statewide coverage, collaborating with the Export Alabama Alliance. AITC clients: $19 million in export sales, $11 million in export finance

2012 – 2015 SBDC Client Results Sales Growth (Existing Small Businesses) AL State Average: 2.7% AL SBDC Client Average 12.8% Job Growth (Existing Small Businesses) AL State Average: 1.1% AL SBDC Client Average 5.6%

Alabama SBDC & MicroEnterprise FY16 (8/31): 811 clients with 1-5 employees Last five years: 10,739 clients with 1-5 employees On average, 48% of Alabama SBDC clients have fewer than 5 employees Last five years: Clients with 1 – 5 employees, 45% minority owned

Observations on Capital Access in Alabama for Micro & Small Business Closing the MicroEnterprise Wealth Gap!

Common Sources of Debt Capital for Micro and Small Business in Alabama Regional and Community Banks (& Loan Gty Programs) Credit Unions & Thrifts FinTech (Online Funders) Commercial Finance Companies (incl. factoring) Consumer Credit Cards Pay Day Lenders Regional Planning Commission Loan Funds Various Community Loan Funds CDFIs (small business loan funds) Source: Access to Capital for Small Business & The Prospects for CDFIs in Alabama (ARC/ADECA/AL SBDC Feb 2015)

Small Business Loans* Outstanding – ALABAMA 2007 $20,800,000,000 -------------------------------------------------------------- 2014 $14,350,000,000 2015 $13,788,000.000 2016 (6/30) $13,916,000,000 *Business loans under $1,000,000 (incl R/E + C & I) Source: Alabama Banking Department (Call Reports); State Chartered Banks

Indicators of Micro and Small Business Lending in Alabama SBA Loan Volume in Alabama (60 Lenders): FY14 $234 Mil FY15 $249 Mil FY16 $224 Mil (11 Months) Annualized FY16 $244 Mil (est.) (Source: SBA AL District Office)

Indicators of Small Business Lending in Alabama 504 SBA Loans in Alabama: FY14 $32 Mil (58 Loans) FY15 $36 Mil (61 Loans) FY16 $18 Mil (11 Months/42 Loans) Annualized FY16 $19.6 Mil /46 Loans (est.)

Indicators of Micro & Small Business Lending in Alabama 7 (a) SBA Loans in Alabama: FY14 $202 Mil (397 Loans) FY15 $214 Mil (475 Loans) FY16 $204 Mil (11 Months/455 Loans) Annualized FY16 $222 Mil /496Loans) (estimate)

Indicators of Micro Business Lending in Alabama 7 (a) SBA Loans in Alabama < $50,000 (est.) 11 Months Ending 8/31/2106: 214 Loans by 9* Lenders Totaling $8,568,400 Annualized FY16 282 Loans for $9,347,345 AVERAGE LOAN SIZE: $40,000 *79% accounted by two banks (SBA Express)

Indicators of Small Business Lending in Alabama SSBCI Loan Volume (Gty Program with about 56 Community Banks): FY14 $41 Mil (136 Loans) FY15 $60Mil (152 Loans) FY16 $52 Mil (11 Months/121 Loans) FY12 – FY16 Total Loan Volume of $203,000,000 Source: ADECA

Indicators of Small Business Lending in Alabama SSBCI Loan Volume – 136 Loans* < $50,000 *74% by one bank Source: ADECA

Micro & Small Business Lending in Alabama CDFI (Small business LOAN FUNDS) -- A Desert in Alabama ? North Alabama Revolving Loan Fund (Huntsville) RPC/CDFI (BHM) Liftfund* (BHM) TruFund (BHM) Community Enterprise Investment* (Pensacola) United Bank (Atmore/BANK CDFI) Ala small business opportunity Fund (BHM) NOTE: Over 75 CDFI Loan Funds in the Southeast * SBA Micro lender

The State of Microbusiness in Alabama Conclusion — My Two Cents? Alabama has a proportionate, average size pool of microenterprises (probably most are undercapitalized), The challenge for Econ Dev is how to attract more money to this segment to lend and invest in microenterprise, plus More money and resources for Technical Assistance (otherwise a recipe for failure). 

Bill Cummins Executive State Director Alabama SBDC Network The University of Alabama ASBDC.org 877-825-7232

Closing the Microenterprise Wealth Gap! Food for thought? 48,000 microenterprises (1 to 5 employees) in Alabama (D & B data) GOAL: Increase by 10% or 4800 new businesses by 2020 4800 with average need for (debt) capital of ,$15,000 (an educated guess) per business = $72,000,000 in additional capital

Closing the MicroEnterprise Wealth Gap! Food for Thought? How to attract $72,000,000 for microbusiness in Alabama by 2020? Banks – ? FinTech – ? CDFIs – ? SSBCI/SBA – ? Other -- ?

Bill Cummins Executive State Director Alabama SBDC Network The University of Alabama ASBDC.org 877-825-7232

Alabama SBDC Micro & Small Business: 2017 Initiatives Strategic Plan Update (Jan 2017) Increasing Capacity for Cap Access Technical Assistance Alabama Small Business Opportunity Fund (Partnership Program with ARC, ADECA, SBDC and Pathway Lending) Development of the Alabama Small Business Access to Capital Improvement Act (SSBCI and CDFI)

Current Topics in SBDC Field 1. Cyber Security 2. FinTech

Alabama Small Business Development Center Network Strengthening Alabama’s Economy, One Small Business at a Time. Bill Cummins Executive State Director Alabama SBDC Network 205-348-1582 ASBDC@ua.edu http://ASBDC.org

Alabama Small Business Development Center Network Strengthening Alabama’s Economy, One Small Business at a Time.