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State Microenterprise Support

Overview

Small business ownership has consistently been a path to America’s middle class – particularly for minorities, immigrants and the economically disadvantaged. Very small businesses, or microenterprises, represent more than 80% of all businesses in the United States, and are a key job creation strategy in communities with weak job prospects. However, of the estimated 20 million Americans who operate microenterprises, at least 10 million of these microentrepreneurs face disadvantages in establishing and operating their own businesses, including women, minorities, low-income individuals and people with disabilities. States should recognize that microenterprises are an important part of the state’s economy and provide funding to programs that help these individuals succeed as entrepreneurs.

Policy Ratings

To see state-by-state policy data, click here.

Elements of a Strong Policy¹

CFED considers a state’s microenterprise policy strong if it meets the following criteria:

1. Does the state fund microenterprise development or codify its support for microenterprise in law? States can allocate funding to support microenterprise development program operations, entrepreneurship training or provide loan capital. In the absence of funding, codifying support for microenterprise signals that the activity is a priority for the state and lays the groundwork for future funding. States should directly fund microenterprise development or explicitly codify the state’s support for disadvantaged entrepreneurs, programs to support disadvantaged entrepreneurs and microenterprise programs.
2. Does the state use federal block grant funding to support microenterprise development, entrepreneurship training or self-employment? Microenterprise development and services for entrepreneurs are allowable uses in the federal guidelines for the CDBG, WIA and TANF programs, but few states take full advantage of these provisions. States should:
   
   • Include microenterprise as an eligible use in the state’s CDBG consolidated plan and use non-entitlement CDBG funds to support microenterprise development or financing;
   • Use WIA funds to support microenterprise development and entrepreneurship training or provide capital to entrepreneurs; or
   • Use TANF funds to support microenterprise development or, as a first step, recognize self-employment and entrepreneurship training as allowable work or participation activity.
3. Has the state implemented a Self-Employment Assistance program? Under federal law, a state can create Self-Employment Assistance (SEA) Program that allows eligible individuals to receive unemployment insurance (called a self-employed allowance) while they participate in business training and are establishing a new business. States can allocate as little as 1%-2% of unemployment funds to establish a SEA Program. States should enact and fund such programs.
4. Does the state provide funding to its State Microenterprise Association? SMAs – a term for various statewide associations, coalitions or networks with varying organizational structures, membership and activities – provide a statewide infrastructure for disseminating best practices, conducting public education and advocacy about microenterprise development at the local and state levels, and supporting the development of effective microenterprise services. States should fund SMAs to streamline, more efficiently utilize and leverage state microenterprise funding.

Footnotes

1. CFED acknowledges the expert assistance of Elaine Edgcomb and Joyce Klein of the Aspen Institute and Deb Markley of the RUPRI Center for Rural Entrepreneurship.