Page 141 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

130 Deborah M. Markley

Second, for some entrepreneurs, the cost of capital may prove to be a
significant challenge. High-interest costs may be difficult for an entrepre-
neur to handle during a time of inconsistent sales and cash flow. Flexible
loan terms and repayment schedules may be important to an entrepre-
neur, assuming there are sources of capital available in the community.
For most entrepreneurs, however, the primary concern is capital access
not cost.
At this stage, informal and nontraditional sources of capital continue to
predominate—family, friends, and personal savings/borrowing; microen-
terprise programs; and community or state revolving loan funds. Conse-
quently, for rural entrepreneurs, accessing capital to finance enterprise start-
up depends on the personal and family assets available to the entrepreneur
and the local availability of these types of alternative financing institutions.
Building assets to promote economic development in rural America is as
old as the original Homestead Act of 1862. Entrepreneurial spirits who saw
the opportunity inherent in the open spaces of the west used this public
policy intervention as a way to build assets that could, in turn, be used as
the seed stock for future generations. Rural America in the twenty-first cen-
tury presents new challenges to those trying to build assets in support of en-
trepreneurship, however.
As the economic base has shifted from agriculture and natural resource
extraction to routine manufacturing and now to services, the ability to build
assets has declined for many in rural America. Low-wage manufacturing
and service jobs make it difficult for rural residents to save and grow the as-
sets they might use for entrepreneurship, education and training, or home
ownership. If personal assets are a primary source of start-up capital for en-
trepreneurs, then building assets that rural residents can use to support en-
trepreneurship should be an important component of any entrepreneur-
ship development strategy.
One new policy intervention offers the potential to help entrepreneurs
build assets to use for business start-up—IDAs. IDAs are matched savings
accounts that allow low-wealth individuals to save for homeownership, ed-
ucation and training, and business ownership. According to CFED (2005),
approximately 50,000 individuals, both rural and urban, are saving
through IDAs. In 2004, about 75 percent of the IDA programs, nationally,
permitted savings to be used for small business start-up.
An evaluation of the outcomes of IDA programs in 14 community-based
sites, both rural and urban, included in a national demonstration project
found that low-income individuals could save and that financial education
was an important factor in higher savings outcomes (Grinstein-Weiss and
Curley 2003); however, another study of IDAs in rural North Carolina iden-
tified important constraints on asset building in rural communities—isola-
tion, and historical and cultural obstacles that, in turn, make it difficult to