Small boosts can pay off for struggling small businesses. ACCION International, a group that specialized in giving tiny loans to small businesses in Latin America for decades, in 1991 began a series of lending programs in the United States. It now loans money in six U.S. cities.
ACCION has been operating long enough in three cities–New York, Albuquerque, and San Diego–to do a longitudinal study on the effects of its loans on 203 small entrepreneurs. ACCION makes loans, generally from $200 to $5,000, only to people who have already kept their business afloat for six months. But ACCION's definition of business is loose, covering entrepreneurs ranging from a woman who makes hats at home and sells them at weekly swap meets to someone who drives around in a van repairing bicycles. Forty percent of the U.S. businesses ACCION loans to operate from homes. After receiving at least two loans from ACCION, the study found, the 203 businesses created $1 million in new assets, increased monthly business revenue by $300,000, and added nearly $90,000 to monthly household income. Each business, on average, increased its assets by $5,332, gained $441 in monthly take-home pay, and provided the equivalent of 1.5 full-time jobs each.
Since the study didn't compare the clients to businesses in similar circumstances without loans, ACCION can't pinpoint how much benefit came from its loans or other factors like local economic conditions, regulatory environment, access to education, or merely the personal energy of the business owners.