Blacks Seek to Nurture an Entrepreneurial Class
Ontoine Henderson, 24, owes his living to a dirty driveway.
A native of South Los Angeles, Henderson dabbled as a lingerie salesman and an auto mechanic, but had ambitions to go into business for himself. He came up with the idea to open a cleaning service when his parents complained about the oil stains left on their driveway after he fixed a car.
But running his own shop remained just a vague dream--until Henderson enrolled in an eight-week training program, run by the Urban League, designed to teach African-American youths how to start and run a business. The program provided Henderson with $2,500 in start-up money. With another $2,500 in loans from friends, he bought a truck, a steam-cleaning machine and created a one-man company called High Pressure Hydro Clean.
Four years later, Henderson has paid off the loans and earns a living hosing down restaurants, garages and storefronts. Business has been up and down. But, he says, “it’s more lucrative to work for yourself than to work for someone else.”
In the wake of the Los Angeles riots, politicians, church leaders and business people are stepping up calls for programs to nurture such dreams as Henderson’s--dreams they believe can blossom into a long-sought but elusive black entrepreneurial class that will help rescue South Los Angeles.
In black neighborhoods, there is a rush to generate new enterprise--particularly among black-owned banks, black clergy and African-American trade groups. And there are signs of renewed interest in such programs by non-minority companies and the White House.
Some groups are creating loan pools or other financing devices to help entrepreneurs start businesses. Others are mounting training programs to teach them how. Still others are providing selling space, set-asides or other incentives.
While such programs are part of a wider effort to rebuild and revitalize riot-torn areas, stimulating African-American enterprise holds special meaning for many blacks, for whom the ideal of economic self-determination has deep historical roots.
Local ownership of businesses was the cry in 1965 after riots first ravaged Watts and South Los Angeles.
And it is the clarion call again.
“You can empower your communities by empowering yourselves--by coming together and putting funds together, and not looking for handouts or for someone to come in and solve the problems of your community for you,” said Ellis Gordon Jr., senior vice president and chief credit officer of black-owned Founders National Bank in Los Angeles.
The need for enterprise programs is clear. Historically, census figures show that African-Americans have a lower rate of business start-ups than Asian-Americans or Latinos, a fact that troubles many blacks.
Yet during the 1980s, even many successful programs--such as the Los Angeles Urban League’s youth training program that gave Henderson and about 44 other young blacks a start in business--have disappeared.
Funded by a two-year, $449,000 state grant, the Urban League program ran out of money in 1989. Attempts to find private funding failed; foundations were more interested in financing literacy programs, Urban League officials said.
Explanations for the shortage in black enterprise vary. Politicians and community leaders traditionally have focused their urban policies on the provision of social programs, education, housing and job training, or on attracting outside companies into black neighborhoods. Too little effort has been devoted to starting up locally owned businesses, particularly in California, some observers say.
But black business people say their biggest obstacle to success is a lack of access to capital. Many argue that banks have discriminated against blacks in granting loans to start businesses. In many inner-city neighborhoods, few banks or other financial institutions even exist.
A 1991 study by UC Riverside economists Gary A. Dymski and John M. Veitch found that residents in lower-income and minority areas get fewer and smaller housing loans than people in white neighborhoods, even when the income of the applicants is equal. The pattern probably holds for commercial lending, the economists added.
Funding aside, many blacks say they have been shut out of the typical career paths for entrepreneurs: college, business school and a job in a large corporation before starting one’s own business. As a result, even when money is available, black entrepreneurs may find themselves ill-prepared for the competitive business world.
“It’s not as simple as you first think,” said Willie D. Davis, the star Green Bay Packer defensive end who is president of a business empire that once included a beer and wine distributorship and is now made up of radio stations in Los Angeles, Denver and Milwaukee.
“There was a period, as a minority, if you had the will and some limited access to capital, you could jump out there and work hard and get there,” said Davis, who is black. “The problem today is that the marketplace is much more competitive, sophisticated, and it’s more difficult to be successful.”
The result has been the perpetuation of black neighborhoods with few entrepreneurial traditions, unlike Korean-American or Jamaican communities, said Alfred Edmond Jr., a senior editor at Black Enterprise magazine in New York. “It’s not just money. We need to create an entrepreneurial class,” he said.
“It is probably at this point trite to say it all begins with education,” said Jon P. Goodman, director of USC’s Entrepreneur Program, who reviewed economic development programs when she was a congressional aide. “It’s not just an issue of Head Start or after-school programs or remediation. It also means job training, job retraining and business assistance. . . . Businesses do not fail because of lack of capital; that’s a symptom. . . . It’s lack of knowledge that creates failures.”
The riots may have opened a window of opportunity to redress some inequities. And this time around, there is less of a focus on government aid and more on tapping the resources--financial and otherwise--of the communities themselves.
“The current federal and state programs have not had the kind of impact that we need to have if we’re going to stimulate minority business development and business development in general in South-Central Los Angeles,” said John Mack, executive director of the Los Angeles office of the Urban League. “To this point, we’ve had piecemeal efforts that have dabbled with the symptoms without really getting to the core of the problem.”
Some examples of post-riot efforts:
* The three black-owned Los Angeles financial institutions--Family Savings Bank, Broadway Federal Savings & Loan and Founders National Bank--have joined forces to form a revolving credit pool, analogous to the kyes that exist in Korean-American neighborhoods.
With corporate and bank donations of at least $1 million, the institutions hope to create a fund to grant loans to fledgling entrepreneurs based less on collateral and more on non-traditional criteria such as character or drive. To get around banking regulations that restrict who qualifies for loans, the fund would operate independently and be administered by a board of community-based directors.
In an additional effort to build the capital base in the black community, African-American banks and churches have mounted a campaign to get black residents to pull their savings and checking accounts out of mainstream banks and put them in black-owned ones.
* The African-American Chamber of Commerce of Los Angeles may establish an investment fund financed by business owners and interested investors. Money would be lent to or invested in black enterprises. Some of the resulting interest payments and investment earnings would be returned to the fund for new lending, and some would be paid to the fund’s investors.
* The African American Entertainment Coalition--representing 21 associations in the film, television and music industries--is planning to raise $500,000 by asking each of its 2,500 members to donate $200 to its own investment fund. “We’re trying to promote the notion of self-determination,” said Nina Shaw, a coalition board member.
* Proposals for job-creation strategies are being sought by the Mentor Network, a coalition of about 140 local black- and Latino-owned businesses. The group, which encourages and supports entrepreneurship, has been holding public forums to become a “clearinghouse” of ideas.
* This month, Bethel AME Church on South Western Avenue will launch a program providing business instruction in such areas as marketing, inventory control and cash management. The courses will be taught by veteran business owners and faculty from local college-level business schools. About 25 aspiring entrepreneurs will take part in the 90-day program, to be financed with a $75,000 grant from the city of Los Angeles.
The federal government also is stepping up its efforts
The U. S. Department of Energy has said it will accelerate its program of depositing funds in minority-owned banks nationwide, making $250 million available.
And last week, the Small Business Administration announced that it will provide $15 million this year to nonprofit agencies in 35 cities for distribution to entrepreneurs in the form of “micro loans.”
Such efforts will help put inner-city areas on the same footing as more affluent communities, where small business has fueled growth and created jobs as the economy has shifted away from smokestack industry.
“If you look at the number of jobs lost from large corporations and how many have fled urban America for suburban America, you see that smaller businesses are taking up the slack,” said Edmond of Black Enterprise magazine. “Simply put, there has to be a financial commitment to encourage and support businesses located in urban areas and to make a difference in providing jobs, job training and education opportunities as related to the job market.”
The difficulty of getting black and Latino youths interested in business ownership troubles Jaron Hamlett, president of the Mentor Network. Hamlett said public schools may have to play a role if things are to change.
“We need a curriculum that helps young people develop more interest in entrepreneurship, because kids generally don’t think its realistic to aspire to business ownership,” Hamlett said.
Traditionally, help for minority business people has come from the public sector. One of the largest minority business development programs is run by the U. S. Department of Commerce, whose Minority Business Development Agency operates hundreds of development centers that provide low-cost advice to small business owners. The SBA also provides start-up loans for minority entrepreneurs.
A 1989 report on the centers by the General Accounting Office generally found that the program performed as expected, with only 17% of people who received counseling reporting that they were dissatisfied.
Federal and state governments have also instituted set-aside programs guaranteeing that a portion of public works or utility contracts will go to minority- and women-owned businesses. Although there have been problems with fraud and misrepresentation by some businesses, many minority firms owe their start to such set-asides. But such programs have recently come under attack in the courts, and their future may be in doubt.
Recently, private programs have taken up where public efforts leave off. One example is an effort by thJ. Newberry retail chain, which has said it will offer fledgling business people space in some stores to market their wares, in exchange for a percentage of sales.
That will help Shirley Williams, an African-American resident of East Rancho Dominguez, near Compton.
Williams, 41, had a good job as a clerk at a seafood packing company. But like thousands of budding entrepreneurs before her, she wanted to be her own boss.
“I want to be able to support myself . . . doing something I like,” Williams said. She wanted to make and sell African-inspired hats and clothing.
Now, Williams is hoping to turn her dream into a full-time, going concern. Williams just won a spot in the Compton Newberry store and is talking about space in two others.
“It seems like a lot of things are opening up, and there may be a chance for some blacks to start up their own business,” she said. “I’m not looking for anything big, just my own corner.”
Times staff writer George White contributed to this story.
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