What's Behind These Surprisingly Big Grants to Boost Small Businesses?

President Obama has talked a lot in the past year or two about "middle-out" economics—the idea that prosperity is driven not by a few job creators at the top, but by building a thriving middle class. Historically, a robust small business sector has been one key to such broad prosperity, and philanthropic efforts in this area have lately gained steam. Still, there's not a huge number of funders focusing here in a big way, and many that do are from the business world and see a win-win in boosting mobility while expanding their customer bases.

One funder in this space, as we've reported before, is Sam’s Club and the Sam’s Club Giving Program. Now it's stepping things up, announcing the Small Business Economic Mobility initiative, a five-year investment in small business growth through increased access to capital and financial skills education. The move was unveiled during National Small Business Week.

There's serious money here. This initiative provides $13.6 million dollars to eight national nonprofits that provide access to capital and education in marginalized groups, including women, minorities, and veterans. The goal is to help small businesses reach the next level and contribute to economic development. As part of this new initiative, Sam’s Club Giving Program will also give the Opportunity Finance Network (OFN) a $3.6 million grant to raise awareness about predatory lending and educate small business borrowers.

It's no secret that small businesses face a struggle with access to capital, and predatory lenders have moved aggressively to capitalize on that struggle. According to Karen Mills in The State of Small Business Lending, until about two decades ago, banks provided about 50 percent of loans. But in 2012, only 30 percent of loans were made by banks. The predatory lending market has dominated the lending sector, and minority-owned businesses often bear the brunt of these expensive financial products due to frequent rejection by banks.

With its Small Business Economic Mobility initiative, Sam's Club Giving Program aims to curb that problem, and help businesses in marginalized communities gain access to capital—and improve their financial skills, too.

There's a lot to like about this program and the way Sam's Club is responding to the struggles of small business owners at a moment when issues of inequality and stagnating mobility are very much in the spotlight.

We'd like to think that the more Sam's Club and Walmart develop their business models, the more they'll see the virtues of middle-out economics. In a recently published essay, Walmart CEO Doug McMillon and Senior VP Kathleen McLaughlin argue that the Waltons are trying to stay ahead of the curve in terms of taking a shared value approach to business. "In the long term, a company’s business interests and the interests of society converge," say the authors. In February, Walmart announced that workers at Walmart and Sam's Club stores would receive pay hikes to put them well above the minimum wage.

And as we've reported lately, the Walmart Foundation is engaged in ambitious efforts to boost the work and financial skills of low-income workers, particularly women.

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After two decades of pounding by employment advocates for its archetypal low-road employer tactics, is the evil Walmart empire finally changing its ways and signing on to a more inclusive vision of economic development? It seems possible. Remember, this is a company that did a major about-face on sustainability issues nearly a decade ago. If it can go green, can it also become a high-road employer? I guess we'll see. Its philanthropic arms are certainly tuned into these issues in a big way.

Here are the recipients of the grants under the Small Business Economic Mobility initiative:

Accion U.S. Network: $1.8 million

Accion will use this money to support the continued development and improvement of an online lending and financial education platform.

Association for Enterprise Opportunity (AEO): $2.5 million

AEO will expand cross-sector collaborations to bring innovative solutions to community and nonprofit lenders that will increase the flow of capital to underserved small business owners.

The Aspen Institute - Fund for Innovation, Effectiveness, Learning and Dissemination (FIELD): $450,000

FIELD received funds to develop shared platforms in the microenterprise industry, and will also advance the development of the FIELD microTrackerdata platform.

Community Reinvestment Fund (CRF): $500,000

CRF will use its funds to support the development of an online lending platform for the Small Business Administration Government (SBA) guaranteed loan process.

National Association of Latino Community Asset Builders (NALCAB): $2 million

NALCAB will use this $2 million to provide local Latino-serving nonprofit development agencies with subgrants, training and technical assistance to directly serve Latino-owned micro-businesses and entrepreneurs in 19 states and the District of Columbia.

The Opportunity Fund: $750,000

Funding will be used for affordable loans for California-based small businesses. Loans are paid back through an "automated small, fixed-percentage payment from the business owner’s sales," relieving debt traps perpetuated by high-cost, short-term lenders.

VEDC (Valley Economic Development Center): $2 million

VEDC will create a "loan loss reserve" that will unlock $20 million in funds for micro and small business loans. The Center will also establish the National Microfinance Fund in "at least 10 U.S. markets."