City loans no guarantee for success

By LEONORA LaPETER

© St. Petersburg Times, published October 23, 2000

Fredrick Smith borrowed $50,000 from a city loan program with dreams of a successful dry cleaning business.

His dreams are going down the drain.

Smith, the owner of Taurus Cleaners on 22nd Street S, is up to his head in financial quicksand.

He can't even remember the last time he made a payment on his loan. His business phone was disconnected not long ago because he couldn't pay his bill. He had to borrow more than $4,000 recently from a friend just to keep his business from being evicted.

"I've let them know I was in trouble from Day 1," Smith said. "That $50,000 put the plant here together, that's it. I've been biting the bullet ever since."

Smith, 57, is one of just eight business owners in the Challenge area who have received a city loan of $15,000 or more since the 1996 disturbances. In some cases, businesses that received loans ended up in debt, struggling to survive or folding altogether.

Another group got loans as small as $500 from programs coordinated through the city's 2-year-old Business Development Center, one of the main efforts of Mayor David Fischer's Challenge program.

But while the city claims thousands of people have received assistance from the center, it has helped just seven businesses open or expand inside the Challenge area, and two of those have closed.

"I had high hopes for the community being drastically affected by (the center's) presence, and the progress I hoped for might have been unrealistic, but certainly it hasn't turned out the number of businesses I had hoped for," said the Rev. Manuel Sykes, pastor of Bethel Community Baptist Church, which rents space to the center on 16th Street S.

Until October 1999, the city counted on the St. Petersburg Certified Development Corp. to offer loans to those who didn't qualify for traditional bank loans. The group gave out just four city loans to businesses inside the Challenge area during a three-year period.

The city stopped funding the program, and city officials began managing the existing loan portfolio.

Paul Bailey, president of the St. Petersburg Certified Development Corp., said the loans were too restrictive. Owners had to add one employee for every $10,000 they borrowed.

Jeffrey Shorter, a former owner of Thunder Graphics & Printing on Second Avenue S, said the restrictions just about killed his business.

Shorter said Thunder Graphics went bankrupt, and he started up a new business at the same site, Shorter Graphics & Printing.

Business owners also complained they received little assistance or training once their operations were set up. That was the problem at Smith's dry cleaning business.

"It takes more than, "Here's $50,000,' " Smith said. "I'd never run a business in my life. If they're giving loans out, they can do follow-up to make sure the person is doing the right thing. It seems to me we're set up for failure."

Black business leaders say surveys show that 70 percent of the businesses in the Challenge area are struggling and many need financial aid.

But Theresa Jones, business assistance manager at the center, said small businesses have mixed success anyway, and some are not in a position to borrow.

The city has been retooling its loan offerings at the Business Development Center and now offers a number of financing options through the Tampa Bay Black Business Investment Corp. and Working Capital Florida.

Nadia and Tony Rehman's Linen Images store is one of the Business Development Center's few success stories.

Working through the center, the Rehmans got a $15,000 loan from the city-funded Tampa Bay Black Business Investment Corp. to start their linen sewing business, which seems to be turning the corner to profitability after a difficult first 16 months.

The center was extremely helpful, especially with advice about business planning, Mrs. Rehman says. Eight people now work in the building on 22nd Street S.

The city is working toward a deal to provide up to $500,000 in funds that will be matched by Republic Bank for another loan program that will help businesses in need of construction or renovation dollars, particularly along Central Avenue and 22nd Street S.

Mayor Fischer said the center is an important component of economic development in the area, even if it is still going through growing pains.

"It's got to have affected this area," he said. "The small business endeavor is going to get better."

- Times staff writer Bryan Gilmer contributed to this report.

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