The second of two parts

For new entrepreneurs, surviving past the first year is a measure of success. That goes doubly for those who start businesses out of dire necessity.

Take Deborah Ritt. The 43-year-old, single mother with eight children started Avalon Herbs on her farm in Bellevue, Iowa, in 1995. "I was on public assistance and needed the money," she says. Ritt's business really took root after she received a grant from the Trickle Up program. The New York-based international organization gives entrepreneurs with few resources small cash infusions, which often have disproportionately large impacts on the ventures and the lives of recipients.

For Ritt, the grant -- which came a year after she launched Avalon Herbs -- was "a godsend. It got me on my feet and saved me a year of hard work, time, and money," she says. With the first check, she bought bottles and labels. "By packaging my product, I could market it. I could grow and expand the business without worrying about having to sell perishable products quickly," Ritt says. With the second check, she bought a scale, an herb extractor, and tincture-press filters. Ritt sells through her own mail-order catalog and a store in the town mini-mall, which stocks 10 shelves with her organically grown herbs.

At least 80% of Trickle Up startups continue in business for at least a year, according to the program's surveys. But success has many measurements.

LONGEVITY. Ritt says her revenue is still "below poverty level," but her business has grown by a third every year. "[The money] raised our level of living: The kids' needs are taken care of, and it helped them psychologically. They feel there's something going for them," she says. The only public assistance Ritt now gets is food stamps. "I plan on doing this for the rest of my life. I want to pass [the business] on to my children," she says.

Fulfilling that long-term goal will likely be tougher than the heroic achievement of starting on a shoestring. "The startup is only one piece of the equation. What is much harder is watching small enterprises grow. There's a gap between where they are and becoming more mainstream," explains Peggy Clark, director of the Aspen Institute's economic opportunities program, which studies micro-enterprises.

"The Trickle Up business plan is O.K. for the amount of money they're giving," says Maria Semidei-Otero, president of the Women's Venture Fund. "You want to make the requirements attainable. The grant helps them build inventory and develop marketing materials. But it's limited. If [recipients] are not channeled to where they can get further information, they will flounder."

"The grant is the first step in getting them on their feet," says Daniel Delehanty, deputy director of Trickle Up. "We want people to develop a track record so that they can go on to get a loan from a community development center or a small loan from a bank." Some of Trickle Up's community partners -- which it calls coordinating agencies -- offer microloan plans. A few, such as Maine Coastal Enterprises, serve as intermediaries for the Small Business Administration Microloan program, which lends from $100 to $25,000.

The problem is, typical micro-entrepreneurs rarely have the skills to run more complex, growing companies, and they need training to help them deploy larger amounts of money. "A lot of people know carpentry or are seamstresses but know zip about business," says Bonnie Cronin, director of development and public affairs at Working Capital, a nonprofit entity in the micro-enterprise niche. Some organizations lend as much as $25,000 to help entrepreneurs get to the next phase, which they couple with training, mentoring, and other support programs.

STRENGTHENING LINKS. "We have worked hard to bridge the gap to provide credit," says Terri Ludwig, president of Accion New York, another nonprofit in the field. Accion has recently started working with Trickle Up. It has yet to make a loan to a grant recipient, but "we hope to be the next step beyond the grant. We're trying to strengthen the link to a commercial bank," she says.

Of course, the way recipients use their early funds makes a big difference in whether they can make the leap to prospering companies from informal home-based ventures. For example, Pamela Weaver Baker, 30, used her Trickle Up grant to buy $300,000 worth of liability insurance for Playland, her in-home day-care center in Loomis, Calif. The coverage allows her to accept children from state-funded programs into her center. "Without the grant, I would have just had private enrollment, which is harder to get," she says. Baker now has 10 full- and part-time children. "I am working on increasing enrollment to 12 throughout the day, and then I'll hire a teacher to work with me. I'm almost at that point now," she says. In three years, Baker plans to move the business out of her home. For that, she'll need a loan.

Yet some professionals who work with micro-enterprises say not everyone has to be pushed into a bigger business. A lot of Accion clients start with loans ranging from $1,000 to $8,000, says Robin Ratcliffe, vice-president for communications at Accion International. And their businesses stay at the microloan level. "It doesn't mean they're a failure," she says. "They're still accomplishing their goal. They have grown, and their income has increased." For some, that may be enough.

By Karin Halperin in New York

To: FINANCE