Give Us Some Credit

By Hélèna Katz

According to Statistics Canada, small businesses account for about 75 per cent of all job creation in this country. Yet one of the biggest challenges of setting up a business is getting a loan. Canada’s major banks have been roundly criticized in recent years for raking in big profits while not supporting small businesses, one of the few growth sectors of the economy. And with unemployment rates among people with disabilities far outstripping the national average, more and more people with disabilities are going it on their own.

That’s what Serge Leblanc did after he got laid off from his 18-year job with Quebec’s Cerebral Palsy Association. In business for himself for the past two years, he offers presentations to companies and unions about integrating people with disabilities into the workplace. "Integration is an excuse to talk to people about their stereotypes about people with disabilities," he says. "I use humour in my presentations and get people thinking."

Some of the people he’s been sensitizing are employed with Human Resources Development Canada, Loto-Quebec, and RDS, the sports
television network. Leblanc admits that "going into business meant heading into unknown territory." That’s where participating in Quebec’s only loan circle set up specially for people with disabilities was helpful.

Loan circles are a third-world concept that was developed in Bangladesh by the Grameen Bank in 1976 and is now being implemented in a first-world economy. Each circle has four to seven members who want to start their own businesses. Members decide among themselves who will be the first to receive a loan, and the entire group is responsible for ensuring that the loan is repaid.

Nicole Houde and Groupe Conseil St-Denis set up the circle of five people with disabilities, which operated from February, 1996, to August, 1997. Each participant had completed a Human Resources Development Canada program for independent workers before joining the loan circle. The group met every three weeks to discuss issues like good verbal communication and how to prepare a loan request, as well as to find out how each person was progressing towards their goal of starting up a small business, their plans, what worked out, what didn’t and why.

Group members could also apply for a first loan of $1,000. Once that was paid back, they could request another $2,000 for up to a year. Of the five people with disabilities in the circle, only one took out a loan, which was used to purchase equipment for his business.

"The loans are always to achieve another step in establishing or expanding a business," Houde explains. "If someone wants to borrow to do something that would harm the environment, for example, or create a toy that’s harmful to children, it wouldn’t be approved."

By last August, two members of the circle had put their business plans on the back burner after getting regular jobs, two others
went ahead with their business plans and a fifth person was referred elsewhere to develop his idea further.

The peer support participants receive from being in a circle gives members a boost, Houde says. "Being in a loan circle shows people with disabilities that there are others like them who want to find their place in the economy," she explains. "Just because they’re disabled doesn’t mean they’re less able to do it. It just means they have fewer tools, and that’s where a loan circle can help people develop their potential and help them to network."

The networking and sharing of information are the things Leblanc found most useful. "The minute you’re born, you’re networking," he says. "The pediatrician, the psychologist. Then you go to school, play out in the street. Networking happens everywhere, but sometimes people don’t realize it."

Leblanc didn’t need a loan to push his business a step further, but Eric Pruneau did. When he needed funding for his business repairing car starters and alternators, he took a different route. He approached the Montreal Community Loan Association to borrow $5,000. Set up nearly eight years ago, the association lends up to $20,000 at low interest rates, although the average loan is about $8,000.

And, unlike banks, the association favours immigrants, women, refugees, single mothers, welfare recipients, people with disabilities and unemployed youth. "This will give them an opportunity to open another door," manager Milder Villegas says.

For starters, Villegas says, the loan association evaluates projects based on their overall merit, cash flow and financial planning for the next two years. "I think banks don’t take much time to analyze whether projects will work," Villegas says. "They’re more interested in whether a person has collateral. Our target population doesn’t have collateral."

The association is also mindful of not loading borrowers down with too much debt. When someone knocked on the door asking for a
$27,000 loan, their request was analyzed over a period of several months. They ended up receiving $2,500. "We thought it was an
interesting project," Villegas says. "But it wasn’t in their interest to have that amount of money."

Projects must also have a social impact, like creating jobs or providing a service to the community. In nearly eight years, the association has made loans to more than 40 fledgling businesses, including a music school, a baking cooperative, a marionette maker and Resto Plateau, a community cafeteria. Almost all have survived.

Pruneau, who is Deaf, had been unemployed when he set up his business two years ago. He received $5,000 from the Montreal Community Loan Association in April, 1996, and has almost finished paying it back. Now he’s taking out a second loan, for $10,000, to move his company into a bigger space in east-end Montreal. This will give him enough room to work on two cars and increase the array of services he’ll be able to offer clients. Pruneau started out repairing starters and alternators, but now he’ll be able to fix everything except motors and transmissions. He also hopes to triple business from $2,000 a month to $6,000.

Pruneau’s mother handles the telephones and keeps the paperwork straight. His father, who already has a full-time job as a mechanic, helps Eric out with difficult repairs. "Eric didn’t have work and we knew it was hard for a Deaf person to find work," his mother explains in between fielding phone calls from clients. "We didn’t want him to sit around doing nothing, so we figured we’d start a business."

Worried that he’d get discouraged, Mrs. Pruneau initially learned about starters and alternators alongside her son. "I dropped it quicker because I didn’t want to be doing that and getting my hands dirty all the time," she laughs.

The Montreal Community Loan Association tries to ensure the success of projects by calling or meeting with borrowers at least once a month to keep tabs on their progress and find out what kind of help they might need. This could include advice on how to develop a business plan or computerize inventory. The association also has a small pool of resource people who are willing to donate their time to teach people a skill.

Funding for loan circles often comes from governments, credit unions and, occasionally, banks, but Human Resources Development
Canada put up the money for loans to the circle for people with disabilities.

On the other hand, the Montreal Community Loan Association relies on a variety of sources. It has raised more than $400,000 through
loans from individuals, foundations, religious institutions and some businesses. Supporters include Aldo Shoes, the United Church and the Laidlaw Foundation.

However, the greatest number of donations comes from individuals, who lend anywhere from $200 to $20,000. "People in the community
feel a responsibility to the community. They want to change things, and see this as a way to do something good," Villegas says.

Alternative sources of financial support like loan circles and community loan associations will continue to play a valuable role for emerging businesses like Leblanc’s and Pruneau’s.

Montreal’s fund has been so successful that the concept is spreading across Canada. Community loan funds have sprouted in Ottawa, Sudbury, Baie-Comeau, Sydney and Winnipeg, among others. Most loan funds are being set up in urban areas, although the concept can also work in rural communities as a way to create jobs there and stem the flow of people heading into the city in search of work.

As today’s labour market changes and the pool of jobs continues to shrink, more and more people with disabilities will be starting up their own businesses. With the reluctance of the big banks to support their efforts, loan circles and community loan funds will be stepping in to fill the void and bring the work force of the future into tomorrow.

(Helena Katz is a freelance writer living in Montreal, Quebec.)


FUNDING RESOURCES FOR SMALL BUSINESSES:

- Human Resources Development Canada offers Self-Employment Assistance to employment insurance recipients who want to start their own
business. For more information, contact the HRDC centre in your community.

- Community Loan Associations can be found in the following communities:

Sydney, Nova Scotia (902) 639-9680

Montreal, Quebec (514) 844-9882

Quebec City, Quebec (418) 525-5526

Baie-Comeau, Quebec (418) 589-6171

Ottawa-Carleton, Ontario (613) 694-9383

Cobourg, Ontario (905) 372-4002

Kitchener, Ontario (519) 742-1782

Women in Rural Economic Development (Stratford, Ontario) (519) 273-5017

Orillia, Ontario (705) 825-4903

Toronto, Ontario (416) 323-9248

Winnipeg, Manitoba (204) 944-8838

New Westminster, British Columbia (604) 517-6147