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Entrepreneur program to offer training, microloans to 50 ex-inmates in Detroit

The federal agency tasked with helping small-business owners opted last year to make it easier for convicted felons to take part in its microloan lending program, a rule change that will open new options for former prisoners previously excluded from such financing.

That decision by the U.S. Small Business Administration in 2015 laid the groundwork for a new pilot project that will roll out in Detroit in coming months. Roughly 50 ex-offenders in the city will be eligible to receive up to $50,000 in microloans through the agency and entrepreneurship training designed to help them start and grow a business.

Called the Aspire Entrepreneurship Initiative, the $2.1 million program is the latest in a series of efforts to help connect convicted felons with employment opportunities.

The three-year project is launching in Detroit and three other cities — Chicago, St. Louis and Louisville, Ky. — in conjunction with Battle Creek-based W.K. Kellogg Foundation and Justine Petersen, a St. Louis-based organization that helps low-income people with credit building and other financial needs. If it works, organizers hope to expand it nationally.

By next month, Justine Petersen, which will operate the program, plans to name a Detroit-area service provider that has experience working with ex-offenders to help identify participants, spokesman Galen Gondolfi said. Priority will be given to ex-inmates with children, particularly those from birth to 8 years old, he said.

“This is about life skills as it relates to financial asset-building,” Gondolfi said. “The goal of this program is about stabilizing households, raising household income and, to be honest, even impacting neighborhoods and communities at large.”

About 200 people will participate across the four cities, SBA spokeswoman Andrea Roebker said. Training will include classroom instruction, mentoring and financial coaching. Those who complete the training and show they’re able to start a business will qualify for microloans. The average microloan awarded under the SBA program is worth $13,000.

Roebker said the pilot expands the audience for other agency programs, including business plan counseling.

Organizers have an initial goal of 50 participants in each of the four cities, with 30 completing the entrepreneurship training and 25 closing on a microloan, Gondolfi said. Course work could begin in the spring.
Gondolfi said participants will study the Ice House Entrepreneurship Program, an experience-based course offered through the Kansas City, Mo.-based Ewing Marion Kauffman Foundation and Entrepreneurial Learning Initiative Inc., of Mentor, Ohio. Two classes of participants are expected to go through the nearly five-month course throughout the three-year grant period, Gondolfi said.

The small-business agency will manage the project and access to capital for the microloan portion of the program. The Kellogg Foundation will fund much of the effort, including matching dollars for a revolving loan fund, and work with the SBA on a report evaluating the pilot’s results. (Disclosure: Kellogg is a funder of The Center for Michigan, which includes Bridge Magazine).

Gondolfi said the foundation “strongly recommended” Detroit be included on the list of inaugural cities.

“Detroit is really at a place where the time is right,” said Jeanne Wardford, a program officer with the Kellogg Foundation’s family and economic security team. “We’ve seen a lot of new development with small businesses in the city, and I think this opens up another aspect of that.”

Kellogg will fund close to $1.5 million of the project cost, with SBA contributing $650,000, Wardford said. The goal of the revolving microloan fund is to have a pool of money that can exist once the pilot program has ended, she said.

The partnering organizations also will evaluate its results to determine whether the entrepreneurship training supports a real change in household income, Wardford said, adding: “To our knowledge, there have been some smaller studies done, but this is one of the largest, most-comprehensive studies that are going to happen around this population with micro enterprise.”

Roebker said organizers will study several outcomes — including family economic security, skills development, training satisfaction, participants’ ability to start a business or find a job — and recommend best practices for future entrepreneurship training.

The evaluation also could include such benchmarks as household income, credit scores, business growth and job creation, Gondolfi said. If successful, he said organizers hope the program could lead to more private investment from new participating banks and foundations.

The entrepreneurship pilot is not being run in conjunction with the Michigan Department of Corrections, though spokesman Chris Gautz said the department has contacted its organizers.

Corrections administrators have created a residential vocational training program at two state prisons near Ionia and Jackson, which offer training and certification in trades such as automotive repair and construction. And the department is working with three Michigan community colleges on a federal program that will extend Pell Grants to incarcerated students, in hopes their education will help them find jobs once they’re released.

Efforts to “ban the box” nationally focus on removing the checkbox on job applications that require applicants to disclose felony convictions up front. Indeed, some Michigan employers have moved that conversation until later in the hiring process. Yet many employers hesitate to hire workers with felony records.

Gondolfi said entrepreneurship training could help some ex-offenders who struggle to find “mainstream employment” become self-employed instead.

The SBA last year said its rule change allowing small businesses owned by people on parole or probation to qualify for microloans is intended to help remove employment barriers for ex-inmates and prevent them from becoming repeat offenders.

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