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Dwaine talks about the benefits of smaller loans from the South Dallas Trust Fund

(This is an excerpt from a Dallas Observer article written by Robert Wilonsky)

Nov 17, 2005

Back then, both private businesses and nonprofits were eligible for grants they didn't have to pay back. And it seemed to work, too, especially for small business owners to whom $10,000 was a fortune--like, say, Henry Smith, who owned Eagle Trophies on Martin Luther King Jr. Boulevard till he retired last year. According to former fund Chairman Caraway, Smith took his $10,000 and bought an engraving machine, which meant that no longer would he have to do everything by hand.

"He said to me, 'Thank you, son, now I can bid on contracts,'" Caraway recalls. "And he would be up in his shop late at night--he was on top of Grant's Barber Shop--and you could hear the computerized machine buzzing. It cost him $7,000, but look how that money was used. It changed his entire business and his entire life." (Smith, who closed his shop last year, couldn't be reached for this story.)

Albert Black Jr. got such a grant from the trust fund in 1991, when he moved his On-Target Janitorial Services from Rowlett to Logan Street off Martin Luther King Jr. Boulevard. Black, who had grown up in Frazier Courts housing projects and whose father worked as a doorman downtown, used the money to hire new employees and renovate the building, which, he says now, "wasn't much, but back then, every day, man, we were waiting for something good to take place." Black would eventually get his master's degree at the SMU Cox School of Business, change the business from janitorial services to a business supply and service company and open offices in Houston and San Antonio.

"The impact [of the $10,000 grant] is still something we consider very, very important to us," says Black, who in 2000 became the first African-American to chair the Greater Dallas Chamber of Commerce board of directors. "It created a momentum we're still building on. The trust fund was a catalyst for turning three employees into the largest African-American employer in the region--we have 169 full-time employees--and we think that's the kind of impact that allows us to say we've delivered. You're supposed to employ people with that money, add to the tax base. And I realize our story is not what the reputation of the fund is, and we may be a unique story, but it's not a story that can't be replicated over and over again. We expected to do real well because of the support we received from the trust fund, and we believed we were going to be held accountable if we did not deliver."

Five years after Black got his grant, business was so good that he renovated another warehouse, this time a 160,000-square-foot building on South Madison Avenue--in Oak Cliff, where it's well out of the area served by the South Dallas/Fair Park Trust Fund.

There is an obvious question: How is it one man can create a multimillion-dollar business out of $10,000 and another can find himself bankrupt, or at least on the desk of the city attorney, with $50,000 in his pocket?

To answer it, perhaps you must go back to 1993, when the city council was forced to overhaul the trust fund when it was revealed that its all-volunteer board approved 49 grants that it couldn't afford to pay out, lest the thing go broke. There was another problem, too: It had become too easy for businesses to get the grants and harder for nonprofits. The fund, wrote Lori Stahl in the News, had shifted "away from its grassroots focus," which the council fixed by making businesses ineligible for grants they didn't have to pay back. Now they would be allowed to borrow as much as $20,000 from the fund. Meanwhile, Fair Park-area residents could get grants for home improvements, and nonprofits could get anywhere from $10,000 to $50,000 over a three-year period.

Not that Caraway believed it needed to be fixed. "When I was on the board it was moving forward," he says. "Since that time it's taken a dive." Nevertheless, for a while it appeared the trust fund could be trusted.

But the business loans started getting bigger, ballooning to the $50,000 they are at present. And folks lined up to get them, from Leon Batie, who would open a Subway franchise on Grand Avenue, to dentist Michelle Morgan to Al Davis, whose 40-year-old Davis Apparel on Martin Luther King Jr. Boulevard began supplying uniforms to companies in the late 1980s. These would be some of the trust fund's bigger success stories, people who came forward with legit, viable plans and used their trust fund money wisely. All would eventually pay back their loans--and then some, with Davis Apparel being due some $4,489 in overpayments.

But then there were the "troublesome loans" Leo Chaney would like to ignore--those who took their seed money and planted it six feet under. They're the businesses that give the South Dallas/Fair Park Trust Fund a bad name and a bad rep, the ones that owe a combined $350,000 and, in some cases, haven't even made good faith efforts to repay a small portion of their loans.

But here's the kicker: Crayton--and Ragsdale and Caraway and even Albert Black--all insist that $50,000 is just enough money to do one thing: get you in deep, deep trouble.

See, Black says, with $10,000 in grants, which you don't have to pay back, a business owner has to be careful, thoughtful about the investment. It's just enough to do something, but not everything. You can hire a couple of employees, pay for a few small renovations, invest in an important piece of equipment, maybe help secure a larger loan with a traditional lender. Better still, there's no threat of legal action hanging over your head if you screw it up. It's the ol' win-win: You make something of the cash, great; if not, well, hey, we tried.

"One of the reasons that people wanted to stop providing grants was because we needed a way to generate money," Ragsdale says. "When you got $10,000 and $15,000 grants, you could have seed money without wondering about how you were going to pay it back. It's small seed money, but it helped."

But $50,000 loans, well, they come with more than strings attached--3 percent interest over five years. As more than one person says, it comes with just enough rope with which a business owner can hang himself.

"Albert Black probably didn't need it, but if you look at some of the $10,000 grants that were given versus the $50,000 loans, come on," Caraway says. "Which is better served? These people are still in business. Now, not all of them are. Not all of the grants were great. We probably had some shysters in there. But I would much rather help a person pull up their bootstraps with $10,000 and try to do better versus giving them just enough to hang themselves, which is what makes me different from the rest of those son-of-a-guns."

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