An Introduction to the Microenterprise Practice
Microenterprise Practice Group Leader
Swider Medeiros Haver LLP
A microenterprise is a category of small business. A common definition of microenterprise (as applied to US based companies) is a company with five or fewer employees that requires total capitalization of less than $35,000. The term microenterprise is traditionally associated with international development and the “microcredit” or “microfinance” movement. This refers to the extension of loans in very small amounts and without requiring collateral to the poor or unemployed to enable them to engage in income-generating activities. In the United States the recent economic issues have lead to renewed recognition that first, even the smallest entities are important to the economy. Second, many people who have not traditionally been “entrepreneurs” are turning to self-employment as a means employment or secondary security. And third, they need assistance. (See e.g. Recession Ups US Demand for Third-World Type Loans The Associated Press February 17, 2009.) Additionally, one of the reasons microlending practices have been more limited in this country is the recognition that in the US, business need more help complying with government regulations.
The number of businesses that fit the category of Microenterprise are a substantial portion of the US economy. According to the association for Enterprise Equality microenterprises account for 87% of all businesses and 18% of private employment; One out of six U.S. private sector employees works for a microenterprise. There are approximately 24 million businesses considered microenterprises. (Source: The Association for Enterprise Equality Microenterprise Statistics available online at http://www.microenterpriseworks.org/index.asp?sid=17.)
Understanding the needs of this market can lead to significant opportunity. One example is the success of etsy.com. Etsy is an online marketplace for buying & selling handmade products; its mission is “to enable people to make a living making things, and to reconnect makers with buyers.” This ethos is a significant part of the “new economy.” Etsy.com claims over 100,000 sellers worldwide.
We believe more entrepreneurs will self-designate as microenterprises in coming years because the tightening of the credit market and traditional lending avenues will lead them to alternative development sources such as SBA Microloans. (See, e.g. When Banks Say No, Microlenders Say Yes The New York Times March 12, 2009) These are loans targeted to entrepreneurs who would otherwise find access to capital difficult. Once they begin to access these resources, they will recognize the “label” and seek targeted services. According to the The Microenterprise Journal there is “a dearth of services geared toward companies with very few employees” which is “largely due to the perceived lack of profitability in dealing with very small businesses.”
Every entrepreneur who puts the time, effort and resources into starting and operating a small business is also making an investment in their local community, as well as the local and national economy. Through the Microenterprise Practice, we are constantly trying to find new ways to support these efforts through training and targeted legal services that meet the needs of the individuals and companies. If you have questions, you can contact us at info@smhllaw.com please put “microenterprise” in the subject field.