A Striking Match

October 14, 2005
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GRAND RAPIDS — Sherwin Mennega needed masonry tools. Archie Hutchison needed a tattoo chair and needles. His wife Angela needed beads. Carol Shaw needed a TrenchMaster ditch cutter. Reb Roberts needed a laptop computer.

All of them got what they needed by saving up $1,000. Grand Rapids Opportunities for Women did the rest.

Each of these entrepreneurs participated in GROW's individual development account program. IDAs are special savings programs that encourage low-income individuals to invest in personal enrichment opportunities such as home ownership, education or entrepreneurship. The organization that sponsors the program then matches the participants' savings with donated funds. GROW offers various IDA funding options, with matching gifts as high as three times the amount saved by the participant. That means that a low-income entrepreneur could save $1,000 and wind up with $4,000 to invest in his business.

To participate in the program, a person must successfully complete GROW's Economic Literacy (EL) program, have at least a part-time job and meet income guidelines. Participants' income must be below Michigan's median income, as determined by the state and federal government. That's currently $68,602 for a family of four, or $40,650 for an individual, according to U.S. Census Bureau data. There are other restrictions, as well. The higher-ratio matching programs are only available to individuals with incomes well below the median. Some of the funders only contribute to participants who live in certain geographical areas.

There are no gender restrictions for the program. Contrary to what the organization's name might suggest, GROW's IDA program is not open only to women. Anyone who meets the program's criteria may participate, regardless of age or gender.

Finding people who qualify is not a problem, according to IDA program manager Clair Postma. Getting all of their paperwork is.

"What we need to do is establish their income 12 months prior to starting the program," said Postma. "This is the problem. This is where the challenge is: getting all the documentation."

Once the participant has completed the financial literacy class and provided the necessary paperwork, Postma "walks them down to the bank" and opens an account. GROW's IDA program works with four local banks: Fifth-Third, Mercantile, Huntington and Macatawa. The matching funds come from the Grand Rapids-based Frey Foundation, city and state programs, and individual and corporate donors.

Participants contribute between $20 and $100 each month to their accounts. At the beginning of the program, Postma helps them set a savings goal using the budgets they have created in their financial literacy classes. Sometimes this goal is the purchase price of equipment or training. Most frequently, though, participants want to save the $1,000 maximum that the program allows. Even so, Postma said, it's important for the participants to plan how they will use their funds. Having a goal helps them stick to their saving schedule.

"If you don't know what you're going to get with that $1,000, it's not going to get you through the tough times," said Postma. "But if you know that you really need a computer or a trailer or something for your business, then that's an incentive for you to go and put in that $50 a month or whatever it is."

Occasionally, would-be participants have the desire to save but simply don't have enough income, and Postma has to turn them away.

"Sometimes when you look at the budget, you say, 'There's no way that you can afford to save $25.' I've had to tell people that they have to pay their bills first. Now, $25 doesn't seem like a lot to us, but I look at some of these people and I don't know how they survive. And I would love to do it for them, but not at the expense of feeding their kids."

Once participants are in the program, they attend quarterly meetings to continue their financial education. A recent meeting, for example, helped participants understand how to file their business taxes. They are also required to attend six "Up-Close" seminars. These workshops focus on specific topics such as creating a business Web site, commercial banking or management techniques. Depending on the rate at which the participant saves, the entire program can be as short as six months, though it can be extended up to two years for those who are slower at building up their funds.

Once the IDA participants have reached their goal and are ready to "close out," they are not simply handed a check. Instead, GROW dispenses the funds directly to the vendors who will be supplying their businesses. So, in the case of Roberts, a painter and owner of Sanctuary Folk Arts gallery, GROW cut one check to pay for his new Macintosh PowerBook computer, and another to Office Depot for miscellaneous business supplies.

Roberts said that the computer has been a great addition to his business. Although he describes himself as "not quite entirely literate" on the laptop, he has been learning quickly. He chose that particular model because he knew that his friends in the art and graphic design community who also use Apple computers would be able to help with any problems he might encounter. He said that he has used the computer to a limited extent to create digital art, but most of the work has been more mundane: keeping in touch with friends via e-mail or creating postcards to advertise gallery shows. Roberts' wife Carmel also has been through GROW's IDA program and recently returned for a training program that will allow her to start a new consulting business as a "life coach."

And the Hutchisons are just about to open their combined tattoo and bead shop in Grand Haven. The couple that had to scrape together enough money to drive into Grand Rapids for their GROW IDA quarterly meetings will soon be turning their art into a livelihood.

Shaw's Sunrise Landscape Designs has been very successful, especially since she used her IDA funds to purchase the TrenchMaster and a powered post-hole digger. She now employs a full-time foreman and up to three seasonal helpers.

"One good thing about the GROW program in general is that it has taught me to think big, to feel more comfortable with the idea of allowing my business to grow," said Shaw. "If you don't think big, you'll never let your business grow big."

Shaw is thinking big right now. She's shopping around for her first dump truck.

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