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An equity pledge helped drive Cambridge Savings Bank to start a small business mentorship program, open to all but part of outreach to minority entrepreneurs, which opens access to lines of credit from the bank.

The pandemic startup surge is showing little sign of abating, and some local banks are expanding their financial education programming to support new – particularly minority – business owners, and perhaps win new customers along the way. 

“It’s a big commitment and a risk on their part to launch a small business,” said Carol Sexton, senior vice president and head of retail banking at Cambridge Savings Bank, which recently launched its own programs based on feedback from local businesses. “We wanted to develop a program that really helped them through that entire journey – from launching to establishing to starting to growing.” 

These programs also present opportunities for banks to reach existing businesses in low- and moderate-income communities, whose struggles to access credit the pandemic highlighted in stark relief.  

Startup Surge Fuels Need 

The last two years have seen a large and durable rise in entrepreneurship nationwide. Commentators have linked it to the millions of layoffs early in the pandemic and many Americans’ reassessment of their lives and goals after the intense experiences of 2020. 

Census Bureau data compiled by the Federal Reserve Bank of St. Louis shows the number of applications to start businesses in Massachusetts jumped 34 percent between the second quarter of 2019 and the second quarter of 2021. The second quarter of 2022 saw 22 percent more applications than the same quarter in 2019, and Census statistics on business formation show Massachusetts has double-digit percentage growth in the number of new businesses launched over 2019 figures each month since July 2020.  

The Massachusetts Small Business Development Center offers another barometer that shows demand for education from current and aspiring business owners is significantly up.  

Supported by the U.S. Small Business Administration, the MSBDC offers group workshops and one-on-one counseling, including assisting with business plans and helping businesses apply for loans. 

In addition to a course on how to start a company, small business owners are most in need of financial education classes, said Nancy Gerardi, director of the MSBDC’s Northeast regional office based at Salem State University, including ones about credit scores and financial recordkeeping. She added that financial recordkeeping problems, in particular, created a barrier for small business owners seeking Paycheck Protection Program loans and Economic Injury and Disaster Loan funds. 

The office has provided counseling to about 825 people in the first nine months of its current fiscal year, 65 percent more than had been forecast for the entire fiscal year. And 30 workshops had been held during those nine months with about 735 people attending after the office had expected 19 workshops for the entire year.  

“It tells me that there’s a need out there,” Gerardi said. “So that’s good – if people want to start businesses, it means that they’re getting a good pulse on the economy.” 

Programs Blend Coaching and Credit 

Some banks have long included small businesses owners in their financial education programming.  

Santander, which has its U.S. headquarters in Boston, launched a free program in 2017 to help early-stage entrepreneurs in the food industry – with a focus on women, minorities and immigrants – build their businesses.  

We thought there was a need specifically around food services,” said Patrick Smith, Santander’s head of consumer and business banking. “I think that need has become even more pronounced during and following the pandemic.” 

Called “Cultivate Small Business,” the program is held in partnership with Commonwealth Kitchen, Initiative for a Competitive Inner City and Babson College, and 150 Boston-area business owners have participated, Smith said. The program also includes opportunities for grants, and Smith said the bank has invested $1.6 million in the program. 

A financial education program through Brockton-based HarborOne Bank gives small business owners, including those just getting their business started, an opportunity to apply for a loan or line of credit at the bank. 

HarborOne has offered financial education programming since 2007, naming the initiative HarborOne U in 2010. After offering well-attended classes for a few years for small businesses, the bank recognized that prospective businesses needed capital in the early stages, said Maureen Wilkinson, first vice president of community education at HarborOne. 

The bank launched “Success for Small Business” in 2015, offering five required courses and additional classes as well. Participants do not need to be HarborOne customers, and anyone who completes the required courses can apply for a $5,000 loan or line of credit, with an opportunity to increase the loan to $10,000 after a year. 

While the loan amount is relatively small, Wilkinson said the funds can make a difference in the early stages for buying equipment and other needs. 

Even so, many participants have told the bank that the education was more important than the loan, Wilkinson said. The program has had 700 participants since 2015, she said, but not everyone who takes the course ends up applying for a loan or even opening a business. The bank has had 100 participants apply for loans, and as of June 30 had 75 loans totaling $250,000 in the program. 

The courses switched to a virtual format during the pandemic, and Wilkinson said the bank will keep this format going forward. HarborOne was initially concerned that the switch to virtual programs would affect its reach into low- and moderate-income communities in its market, said Wilkinson, who is also the bank’s Community Reinvestment Act officer.  

Instead, she said, a recent analysis of participants’ addresses has shown that the bank has seen increased participation from low- and moderate-income Census tracts. 

CSB Offers Mentorship 

Cambridge Savings Bank recently launched small business training programs in partnership with several nonprofit organizations.  

Sexton, Cambridge Savings Bank’s head of retail banking, said the program launched in responses to feedback from small businesses that they need help in a variety of areas, including cashflow and marketing. The courses are offered both in-person and virtually, depending on how the partner delivers the program.  

Participants, who do not need to be bank customers, can complete the four-course program and apply for a line of credit to help them start their business, Sexton said. 

Diane McLaughlin

They might not have the typical credit score that we look for, but I think we do a really good job of understanding the story behind the business and connecting dots to make a transaction work for a small business customer,” she said. 

Everyone who completes the financial education program will have a Cambridge Savings Bank employee as a mentor who will continue to interact with the business owner, said Brad Fitts, Cambridge Savings Bank’s first vice president and small business development team leader.  

The program is part of a commitment that Cambridge Savings Bank has made to working with minority-owned and other underserved business that have had lacked opportunities to access capital, Fitts said.  

“There’s some additional risk there, but we are committed to do that, and that’s from the top down,” Fitts said. “I think the financial education and the mentorship is what’s going to create success for those business owners that maybe didn’t have access to that before.” 

Correction 1:00 p.m., Aug. 23, 2022: This article has been updated to correct the spelling of Maureen Wilkinson’s name.

Banks Respond to Equity Concerns with Financial Education for New Entrepreneurs

by Diane McLaughlin time to read: 5 min