The Unbankables
If you lend small amounts of money to the working poor—people with no assets, no credit, no savings—can their American dreams come true?
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After several months of center meetings, Hernandez was approved for a $1,500 loan. She bought seventy comforter sets and sold them through word of mouth. “My customers would tell me, ‘Go to my mother’s house—she’ll buy a couple.’ I tell people, ‘If you need something else—boots, underwear—I have that too.’” She took out another loan, bought more comforters, sold them. Last year, she took out her third loan, for $4,000, and by the end of the year she had cleared $10,000. Her husband was able to quit one of his jobs. At one of the center meetings she discussed how, with gas prices so high, she would probably be better off selling in one place. After her next loan, she’s going to the Small Business Association and then a bank—“Leave the PLAN Fund, become independent. My credit is much better now.” I asked if she was looking for a location for a store. “All the time. I’m dreaming. It’s soon.”
Rivera is from Mexico City. She went to her first PLAN Fund class in 2000 and one year later started a janitorial company, J.B.S. Cleaning Services, with her husband. The initial loan enabled her to buy a used car, and the second one five vacuum cleaners; with the third loan she bought some steam-cleaning equipment and a better car, which she uses to pick up some of the ten people she and her husband employ. The company cleans businesses and homes all over Dallas. The PLAN Fund helped her get her business plan together, but mostly she credits the support system. “My group is five people. The others in the group would say, ‘You can do better—come on! Don’t quit!’ That’s important, because sometimes we feel we can’t do it. If I have a problem with my business, I can call Anthony Pace. He gives me numbers. I didn’t know anything about sales tax permits. They have someone at the PLAN Fund who talks specifically about the sales tax.”
Last year J.B.S. grossed $60,000; this year Rivera expects to make close to $100,000. “I love this country,” she told me. “This is the country of the opportunities.”
Hernandez and Rivera have succeeded because they did the hardest thing of all: They stuck with the program. “Basically,” Small told me, “business is about trying. If you keep trying, you’ll succeed. Staying with it—that’s what the support of the group is all about.” I told him about the look I’d seen in Hernandez’s eyes when she talked about her plans for Galería Internacional. He nodded. “That’s the tiger’s eye—it’s palpable. I can look at someone and tell if they’ve got it. But I find fewer people in the low-to-moderate income range have that look in their eye. Folks have so many issues to deal with, they don’t even think about starting a business.”
Almost everyone who had come to the first class showed up at the last, on June 27, even though it was raining so hard people were getting washed off the streets of Dallas. The students took a written test, and Pace and Foster discussed the answers afterward. “Provide four examples of marketing tactics that can positively impact a sales forecast,” read Pace. “Business cards,” said a young man. “Word of mouth,” said a woman. Foster talked about a restaurant that had dressed someone up in a costume and put him by the side of the road: “What can you do that’s outrageous to make you stand out?” Harold Washington answered, “How about calling yourself a king?” and everyone laughed.
Pace asked how many were expecting to apply for loans. Four raised their hands, including Washington. Pace said the PLAN Fund would work with anyone who was having trouble repaying a loan. “Since I’ve been director, we haven’t used a collection agency,” he assured the students. Foster called out names, and Pace gave certificates saying they were now PLAN Fund members. When she got to Washington, he said, “Roll out the red carpet!”
After class, he told me that the best lesson he’d learned over the previous two months was cash flow. “I didn’t know nothing about cash flow. But to run my business, I need three things: an operational fund, a tax account, and a payroll account. I need to put seventy percent in the first, twenty percent in the second, and ten percent in payroll, which is for me. I never thought about that, setting aside money to pay myself. My group leader told me that.” His peer group had helped him write his executive summary. He was also fixing one of the women’s computers, while the former math teacher was doing his taxes.
By June, Washington had talked with a man at the DISD who gave him the number of a woman in the purchasing department; he left a message with her. “She didn’t call back,” said Washington, “but I talked with him. I made a contact.” He had also talked with a man at the Minority-and-Women-Owned Business Enterprises at DFW. “He said I can work with the airport and directly with their subcontractors. He said he’d e-mail me all the info to talk to the purchasing person at the airport.” Though neither action had led to any business, Washington seemed confident. “I’m making personal contacts. I have somebody I talked to. I’m building myself up in the computer community.” He was still looking to get the Dell deal, and he was still planning on applying for the loan. “I want to buy equipment. I need it to keep a positive cash flow.”
But when I caught up with him a month later, he wasn’t so sanguine. “Right now, I can’t afford to get the loan,” he said. “I don’t want to chew off too much. The loan process is a long process. My group has to look at everything. They have to say if I’m ready.” Business was slow; he’d sold two computers that month, with another sale pending, but it was summer. “I’m waiting to see if everything will pick up next month when school starts. Hopefully my phone will ring more. If I can get the sales, I can get the loan to buy the equipment. I don’t want to get the loan and not be able to buy equipment with it. Our group leader told us we shouldn’t buy anything we’ll have in inventory for forty-five days or more. That money should be in the operations budget.” For the first time, Washington seemed depressed. His FEMA rental assistance was about to end, plus he had not met his goal of running his business full-time by August. He’d made it to the first center meeting but not the second, in early August, at which he would have had to announce whether he was applying for a loan. It was the first PLAN Fund meeting Washington had missed.
Two weeks after that, he was amiable King Harold again. His latest plan, he told me, was to open an eBay account and sell computers online as a way of getting to that $25,000 mark. “If the eBay thing takes off, I should have the Dell deal by December.” He said he saw Dell towers for sale on eBay for $500. “I’ll do the tower and a flat-screen monitor for $499.” So he was open to the loan again. “When people e-mail me and say, ‘I need a computer,’ I need to have it ready to go. With $1,500, I can buy four computers.” He held out hope for the DISD deal, though he still hadn’t heard from the woman in the purchasing department.
What had changed since early August, I asked. It was the group, he said. After he missed the second center meeting, members had started calling. “Everyone in my group called me—‘Heard you been having a hard time. What’s going on?’ They came to my rescue. They told me, ‘It’s gonna be okay. Business is gonna pick up.’” Then he got an extension on his FEMA aid to November. He planned to keep coming to the center meetings for the support. “I’m optimistic right now,” he said.
I asked Pace what he thought about Washington’s chances. “It’s hard to tell. It’s tough to succeed in business, especially with a couple of strikes against you. If you have more income and more savings, you can afford more risk. I always say to borrowers: Keep your day job, do it on the side, get experience and confidence, then go full-time. Sam, Veronica, Julieta are all people who have been with us for years. Harold has only been with us since May. At the low-income level, the margins for failure are so small—it takes less to knock someone down or out.”
The skeptical economists are probably right when they say that, for the most part, the poor in America would be better off getting an education or working for someone else. For the most part. Economics is a logical science and doesn’t—can’t—take account of the tiger’s eye, to say nothing of those who are just entrepreneur crazy. The poor will be with us always, but so will those who can’t sleep at night for thinking about their computers, their comforters, their American dreams.
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