Access to Credit for Entrepreneurs with Disabilities: With more than twenty five years of collective experience serving entrepreneurs with disabilities in gaining access to capital, the staff at The Abilities Fund (AF) recently sat down with WID to discuss business funding resources.

Through the business planning process, attention to capitalizing a good business idea becomes one of the keys to the reality of start up.With more than twenty five years of collective experience serving entrepreneurs with disabilities in gaining access to capital, the staff at The Abilities Fund (AF) recently sat down with WID to discuss business funding resources.

WID:  What is the most common resource for entrepreneurs trying to fund a business start up?

AF:  Believe it or not, the most frequent funders for microbusiness start up are friends and family.  This is true for any population that doesn’t always have access to traditional sources of capital – like banks.  Most of the time, their participation is through a cash loan extended over a flexible period of time.  However, we have seen family and friends contribute retail space, “elbow grease” as it relates to readying a business space, and even equipment.  Because loans from family and friends are so common, there are even firms that assist in preparing contracts between the entrepreneur and the family member/friend.     

WID:  Some publications say that there is a lot of grant money just waiting for entrepreneurs.  Is this true and is it a viable way to fund a business?

AF:  You know that guy on late night infomercials that has question marks all over his suit?  He actually runs a website that boasts a “free money club through government grants.”  While I don’t have a lot of faith in those types of offers, in truth, there are relatively few grants available outside of vocational rehabilitation systems.  Consequently, it means that if an individual is set on finding grant money, he or she needs to connect with his or her state’s vocational rehabilitation office, services for the blind, or Veterans Affairs office.  Obviously, public agencies are all going to have their own requirements for accessing funding.  Particularly with vocational rehabilitation, the rules are often times different from state to state.  But it can definitely be worthwhile and we always remind individuals that it could be a viable resource.  In this case, patience is necessary.

For individuals receiving Social Security, the SSA work incentives, including Plans for Achieving Self Support (PASS), can contribute to the monthly financial needs of the business.  For more information, visit http://www.ssa.gov/pubs/11017.html.

One other note about grants - each year, the Abilities Fund runs a nationwide grant program for women with disabilities.  Be sure to take a look at the Program of the Month in this newsletter to read more about the Women and Company® Microenterprise Boost Program.  Also, check out the website regularly as this is where we announce the availability of any and all grant opportunities that we offer, www.abilitiesfund.org.

WID:  Does the entrepreneur have to financially contribute to the start up?

AF:   Simple answer--yes.  Individuals should be ready to contribute to their own future.  Anybody that thinks that the government or others should take all the risk involved with funding business start up is not being realistic.  However, while “skin in the game” is important in all cases, many entrepreneurs with disabilities simply don’t have any cash to contribute.  Regardless, we always ask that the individual tally up the value of anything they are personally bringing into the business that is critical to the operation, such as equipment, inventory, or even business filing fees that they may have paid.  In the business plan, they should reflect that those are all necessary to the start up and, therefore, part of their contribution.  Word of warning: we have had more than one restaurateur who wanted to place a value on recipes.  If you are going to tally up your personal investment, apply it to actual investments you have made where you can produce a receipt.  Think of it in these terms: the personal investment should be considered acceptable to the IRS.

WID: What about microlenders?  Are they a good resource for start up capital?

AF: Yes, they are a great resource.  Truth is, microlenders come in many shapes and sizes and are different from state to state.  The Abilities Fund is the first and only national microlender focused on disability owned businesses and offers loans in 45 states (to learn more about Abilities Fund loans, visit  http://www.abilitiesfund.org/programs_and_services/increasing_options_microloan.php).  Some states have microlenders that include people with disabilities in their target markets (visit http://www.microenterpriseworks.org/index.asp?bid=282 to find a microlender near you).  About 20 states or so have Telework loan programs that lend for home-based businesses (visit http://www.resnaprojects.org/AFTAP/state/RESNA.html to see the listing of states with Telework programs). 

Generally speaking, microlenders have loans that range from $500 to $35,000 and also provide training and technical assistance to help entrepreneurs prepare for successfully accessing capital.  One of my favorite features of microlenders is their ability to be more flexible in repayment terms than traditional banks.  Their staffs understand that credit may be an issue and are ready to work with the entrepreneur by providing financial education.

WID:  What about the Small Business Administration (SBA)?  Do they lend to small business owners?

AF:  No, but they do provide loan capital to microlenders who, in turn, lend to the individual.  The SBA also guarantees loans to banks when the applicant/business owner either doesn’t have enough collateral to secure it or the risk in the deal is too great for the bank.  We get a dozen calls a month from people who are convinced that the SBA is going to make them a loan.  The way to get those loans is either through a microlender or a bank.