Helping the Poor to Be Boss

PUBLIC POLICY

Until 18 months ago, Leo Carter's job was to sweep, mop and polish the floors at Miami Beach's St. Francis Hospital. Today, as proprietor of The Best Floor Waxing Service, he is an entrepreneur with six employees. Mexican-born Joe Garcia, on relief in Manhattan eight months ago, now takes in about $240 a week as the operator of a midtown newsstand. David Flowers, who had to give up his job as a house painter after he injured his back in an auto crash, has become the owner of a thriving eight-pump, seven-employee service station on Chicago's South Side.

Easy Terms. For all three men, the Federal Government supplied the funds that enabled them to start their own businesses. With finances too meager for them to qualify for ordinary bank loans, they borrowed their capital on easier terms (51% interest, up to 15 years to repay) than many a blue-chip corporation could arrange amid today's tight-money pinch. The loans came from the Small Business Administration under Title IV of the 1964 antipoverty law, which aims at helping the poor in depressed neighborhoods to become self-employed and to put struggling little firms on a sounder footing. To that end, SBA has just raised the maximum loan from $15,000 to $25,000--the level where it was until 13 months ago.

Relying mostly on character instead of credit to judge who should get its largesse, the SBA in 22 months has lent $25,281,230 to 2,475 borrowers in 44 communities. Though defaults have come to 3.4% of that total as compared with a mere 0.2% in commercial bank lending, the agency calls itself "pleasantly surprised" that the record is not worse. Even so, some critics complain that the SBA has taken some mighty peculiar risks. A service station folded because the owner wasn't around enough to keep track of the operation. A small manufacturer of plastics and draperies failed because he priced his products below cost. Even though he had undergone one bankruptcy before, Chicago Taxi Driver Lawrence Young persuaded the SBA to lend him $19,500 to launch a Chicken Delight carry-out shop. It subsequently foundered to the extent that the agency lost $14,000 even after auctioning the fixtures for $5,000. Young, now working as a janitor, blames his misfortune partly on his failure to attend the SBA's free courses on how to run a business.

A Problem of Confidence. Nearly a fifth of the SBA's loans so far have been made in the New York City area, helping hundreds of formerly long-term unemployed relief recipients to become owners of beauty parlors, record shops, Laundromats, and even small factories. The big problem, says Sidney Shiff, executive director of the New York Small Business Development Center, which screens and funnels loan applications to the SBA, is to "give people the self-confidence to go into business for themselves. You can't start big, with grand programs. But when neighbors see that somebody's made it with a new store, they'll try harder." SBA Administrator Bernard Boutin vows to try harder too. As a start, he has ordered his staff to "go out into the ghettos" and find more people who seem to have the potential to run a business.

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