A Helping Hand Withheld?

The Bush Administration is eliminating funding for the SBA's MicroLoan Program -- a move critics say will hurt urban entrepreneurs

by Drew Armstrong

Esperanza Mora-Garcia lives in North Philadelphia, only blocks away -- but worlds apart -- from the wealthy bustle of shops and restaurants in nearby Old City. An elevated train line covers one of her neighborhood's main arteries, Front Street, populated by many dilapidated or abandoned row houses. There are few businesses and few people on the streets -- indeed, the neighborhood is an example of Philadelphia's pockets of economic stagnation and poverty outside the city center.

But Mora-Garcia, a former welfare recipient and mother of six whose first name means "hope," also represents the neighborhood's hope -- and an emerging entrepreneurial trend in depressed communities. With the help of a local nonprofit group, she recently started her own cleaning service catering to Philadelphia's wealthier neighborhoods, which in just a few months has grown from a handful of clients to nearly 60. She now sets her sights on being one of the city's largest services. What does the future hold? "If I can keep going? I want to be on top," she says.

Increasingly, in the U.S. and abroad, governments and nonprofits are finding success by using small-business growth as a tool for community revitalization. Rather than throw money at economic and social problems, budding entrepreneurs are being taught business skills, ownership principles, and how to make a profit.

URBAN OPPORTUNITY.

The theory is that as these small businesses grow, so does the micro-economy, creating jobs and reducing poverty and related social problems. (Small businesses traditionally generate between 60% and 80% of net new jobs, and in 2000-01, the most recent data available, small businesses were responsible for all net new jobs in the U.S., according to the Small Business Administration.)

Supporters say such programs work because, while unemployment can be higher and per capita income lower in poorer neighborhoods, the market still demands childcare, cleaning and grocery services, and other commerce -- representing opportunity for homegrown entrepreneurs such as Mora-Garcia.

"Large retailers weren't willing to go into these areas," says John Schall, president and CEO of the Washington (D.C.)-based National Congress for Community & Economic Development, a trade organization of Community Development Corporations.

BUILDING UP.

Mora-Garcia is working with the Empowerment Group, a North Philadelphia nonprofit that teaches business skills and prepares budding entrepreneurs to approach creditors and investors. "The clients we work with don't always have a high level of education; have little or no savings, if not some debt; and they don't always have the types of resumes that allow them to get high- or fair-paying jobs," says Sylvie Gallier, EG's executive director. "For them, entrepreneurship isn't just an opportunity. Sometimes it's the most attractive choice."

Mora-Garcia is part of an advanced class of five students with some business or work experience. Since enrolling, she has gone from working solo to managing seven employees who clean dozens of houses, and has also started offering personal-assistant services to her clients. EG is now teaching her how to handle human-resources, finance, and accounting challenges, as her business expands more quickly than she expected.

Among Mora-Garcia's classmates is Yoselin Ocasio, who owns and rents out several residential properties and recently purchased a restaurant. At first convinced she could simply reopen the eatery after purchasing it, Ocasio quickly learned about the need for permits, health checks, and a solid business plan at EG. What would have happened without the classes? "I'm 100% sure -- bankruptcy," she says.

DRYING UP.

But while the approach has gained favor in community-development circles, those same supporters are now worried such fledgling entrepreneurs are losing an important source of funding to help raise their companies.