Small Business Technical Assistance: Helping
This report is the work of a task force formed out of three regional
California technical assistance forums sponsored in 1998 by the California
Reinvestment Committee (CRC) and the Community Affairs unit of the Federal
Reserve Bank of San Francisco (see Appendix A for more information on
these forums). Bankers and economic development professionals attended
these forums to find ways financial institutions and technical assistance
providers could jointly expand access to management training and credit
for small businesses, which make up a large part of California's business
sector. Forum participants agreed that attracting resources to the technical
assistance industry, which provides services essential to the success
of many small businesses, would require a task force be formed to identify
high-quality products and services.
Financial institution lending to small businesses has expanded dramatically
in recent years. However, even with this growth there are thousands of
micro, very small and small businesses that have not yet gained access
to credit from conventional financial institutions. These businesses include
many that are located in low-income communities or are owned by women
or people of color. Lack of capital can mean these businesses are unable
to secure funding needed to improve operations or to hire consultants
who can assist with business planning or securing funding. These businesses
represent a potential market for financial institutions and other funders,
but first may need technical assistance such as management or loan packaging
There are important reasons to focus on the needs of small businesses.
According to the California Trade and Commerce Agency, half of all employment
in California is by small businesses and, over the last several years,
more new jobs were created in small businesses than in large businesses.
The Agency reports that in 1997, more than 6.9 million workers were employed
in business establishments with fewer than 100 workers. To say small businesses
drive America's economic engine underestimates their impact, because they
affect American life not only in the aggregate, but also in personal,
local, and sociological ways. Small businesses sustain the families of
their owners and the neighborhoods in which they reside. When small businesses
succeed, they bring services and employment to their locales. When they
fail, the impact jars their local economies. Unfortunately, statistics
show that small businesses fail at a faster rate than larger businesses.
California's smallest enterprises exhibit the same needs as larger ones,
often with greater intensity and less power to resolve problems. Small
businesses require capital, management support, mentoring and guidance,
community-oriented financing options, and the power conferred by peer
associations. They need these services at rates they can afford and tailored
to the specific needs of their size, growth rate, culture, and business
type. When they get such support, they are as likely to prosper as larger
ventures. When they do not, they are more likely to fail.
The needs of small and start-up businesses have created a management
and technical assistance industry. Today, this industry includes for-profit
consultants, not-for-profit economic development organizations, churches,
professional and neighborhood associations, and financial institutions.
As with all developing industries, nonprofit technical assistance providers
began as a tremendously diverse group serving different community and
business needs. Some of these organizations simply offered neighborhood
business courses while others maintained incubation facilities. Regardless
of structure, an advantage most technical assistance providers have had
in supporting local businesses is their ability to be responsive to local
needs, such as by working with diverse languages and cultures.
This report defines technical assistance providers as those nonprofit
organizations that provide appropriate business resources to entrepreneurs
to start, stabilize and grow successful businesses. Cash-poor small business
owners can turn to nonprofit technical assistance providers for assistance
in designing, managing or financing their businesses. These technical
assistance providers are community-based organizations that assist current
or potential business owners with planning, managing or financing their
The conceptual framework and definitional categories in this report do
not necessarily represent all the actual or specific programs or organizations
in the field. The products and services described are the most basic and
common and are therefore likely to be included among the offerings of
all technical assistance providers. It is unlikely that all products and
services described in this report will be offered by any one technical
assistance provider but more often by a network of providers in a geographic
area. The products and services offered will depend on local needs and
Technical assistance providers are as diverse as the communities and
businesses they serve and they all must seek to work with clients with
varying levels of experience and should offer services that are appropriate
to each client. Businesses that use nonprofit technical assistance providers
vary in size, type, and time in business, but generally fall within certain
categories that are illustrated in the following Business Diversity Matrix.
This report will focus on core competencies for broadly defined groups
of technical assistance in these categories.
Business Diversity Matrix 1
||Owner or professional Management
1 This is not the U.S.
Small Business Administration definition of small business but is based
on the experience of technical assistance providers involved in the task
force and forums.
Technical assistance varies based on business and management
type, numbers of employees, and size of revenues and capital needs.
For purposes of this report, micro-businesses are generally considered
to be sole proprietorships, with at most 5 employees and annual sales
of less than $250,000. Very small businesses are considered to be those
managed by their owners, with more employees than micro-businesses,
and with annual revenues that are over $250,000 but less than $1.0 million.
Small businesses are considered to be those that may or may not be managed
by their owners, have up to twenty employees, and have revenues over
$1.0 million but less than $5 million.
The type of technical assistance needed by business owners
is not necessarily related to business size or type of business. Businesses
of the same size can have tremendously different training and resource
needs depending on where they are in the business growth cycle. Technical
assistance providers must be able to judge the specific needs of business
clients based on complex sets of needs identified by these clients.
Sustainable Economic Development - Developing
Effective Partnerships Between Banks and Technical Assistance Providers
Helping Small Businesses Grow - Core Competencies
of the Nonprofit Technical Assistance Industry
Directory of Small Business Technical Assistance
Providers in California (May 1999)
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