Is starting a small business a viable way of getting out of poverty? Completely viable, but not likely.

(This is not a post asking for money, rather trying to make a point, please read the whole thing!!)

Is starting a small business a viable way of getting out of poverty?

Ok, so the short answer, I believe, is yes.

Everyone has at some point heard a story of a struggling family or individual who decides to take a chance and start a business, and while they may not become "rich", they do manage to bring themselves up into a more comfortable bracket. How do they do that?

Well, I've been researching it. This is a really very simplified, superficial list, but basically -

1) You have to have a skill/talent/idea that you think would make a viable, profitable business.
2) You have to have an idea of a location that would help boost your business, instead of hinder it by limited access or exposure.
3) You have to have AT LEAST a basic understanding of financial concepts, such as cost, profit, budgets, overhead, etc. and the intelligence to learn more as your business grows.
4)You have to have at least a basic list of supplies you would need to start and sustain your business, as well as a list of suppliers of those items.
5)You need to be aware of and apply for any permits or licenses required in your county/state to operate a small business. These all cost money of course, anywhere from $40 to several hundred depending.
6) You have to have money to make money. You have to have some kind of capital, either from friends and family, savings, or a loan, in order to start your business and sustain it until it at least breaks even.

It is my belief that all of these things can be done by any reasonably intelligent person regardless of financial situation, EXCEPT of course, the last one.

The real question is, how does someone who can barely pay the rent and feed their families at the same time, come up with the money to start a business, to make the money to improve their situation?

Many business owners get their capital from friends and family investors, or business loans, again from friends or family, but mostly likely a bank.

THIS is where the poverty cycle traps people. People who are trying so hard to improve their lives the same way others have.

The friends and family members of people stuck in poverty have usually been borrowed from before, and therefore unwilling to invest, or stuck in similar financial situations and unable to. For example, the most likely person I could ask for monetary help for a small business would be my mom - but she's a retiree living on $600/mo with no savings, and credit similar to mine.

Banks are really no help to people in poverty. They see you as a giant risk, unlikely to pay off. You have bad credit, and not enough of your own income to pay them back if you go under. You can't get even a small loan without a co-signer (family & friends can't help you, where are you supposed to find one?). If you do somehow manage to find someone, you will likely be slapped with insane interest rates, which are more likely to make your business fail early when you can't afford the payments.

So, what now? Here you are, desperate, but not yet broken. You work as hard as you can for so little, despite always hearing "if you just worked harder..." Honestly, you physically cannot work any harder, but you've got this idea to work smarter. If you could just get started, there is a pretty good likelihood that if you devoted all your hard work to this idea instead of padding your employer's pockets, that you could literally and measurably improve your life and the life of your family, and yes, even the life of others. All you need is just enough money to start.

Again the question, how does someone who can barely pay the rent and feed their families at the same time, come up with the money to start a business, to make the money to improve their situation? The answer is, they don't. Not without a lot of luck, or winning the lottery.

I've heard so many people sneer at the poor for spending money on lottery tickets. And I'm not even talking about the super big life-of-luxury jackpot, we all know that the chances are so small as to be nil, I'm talking about scratch-offs and daily prizes. We play for a chance at a much smaller prize. My "grand dream" is just to be able to support my family well with all our hard work.

$5000 would give me the chance I need to make my business happen and make it so that I can support my family. Me, and so many others. Just that much. A bigger sum would help it happen faster, but a smaller sum would probably just go to bills and groceries.

When your fairly secure in your finances, it is so easy to look them and say, "You need to be spending that money someplace else." Factually true I suppose, but when your poor you see it this way - $10 will buy my whole family one extra meal this week, or $10 buys us the chance to never be hungry again - which would you chose?

You could send your kids to college and help them break the poverty cycle of your family for good. You could go to the food bank as a donor instead of as a case. You wouldn't ever again find yourself eating around rotten spots on food just to make sure none goes to waste and you get a little bit more to eat.  All you need is a (relatively) small lump sum to get your supplies, and location, and permits.And that, sadly, is completely out of reach for the poor.

Did you hear that sound? It was the sound of so many dreams being crushed.



So, for now, I will occasionally spend $5 hoping to win a small prize. And I will wait until next tax season in the hopes that we can use our return to really improve our lives instead of on things we need short term. Or the tax return after that. Or the next. And IF I ever get that lump sum to start my business, and my business does as well as I think it will, and I can grow my business and my profits, and finally be at the point of "thriving"....I'm going to offer small business loans to poor people, no credit score required! Five to ten thousand dollars is not too much to risk to help people help themselves.