The Nonprofit That Gives Broke Entrepreneurs a Chance

To revitalize inner-city neighborhoods, Minnesota’s Neighborhood Development Center backs aspiring business owners who already live there.

An instructor from the Neighborhood Development Center holds an orientation class for prospective small-business owners at the Anoka County Library just outside St. Paul, MN  
National Journal
Sophie Quinton
Add to Briefcase
See more stories about...
Sophie Quinton
May 15, 2014, 9:02 a.m.

When Hai­y­en Vang and her hus­band, Neeson, de­cided to open a cloth­ing store, they were bey­ond broke. At age 22, they were GED-hold­ers with one Wal-Mart job between them, a tod­dler at home, and a baby on the way. They had bad cred­it, and were barely mak­ing pay­ments on an as­bes­tos-rid­den house on the north side of Min­neapol­is.

There was no way they would have qual­i­fied for a small-busi­ness loan from a ma­jor bank. But they found a part­ner in the Neigh­bor­hood De­vel­op­ment Cen­ter, a non­profit that has been tak­ing risks on low-wealth en­tre­pren­eurs in the Twin Cit­ies since 1993. Through en­tre­pren­eur­ship train­ing, small-busi­ness loans, and real-es­tate pro­jects, NDC helps loc­als cre­ate jobs for them­selves and oth­ers — and re­vital­ize their own neigh­bor­hoods.

“NDC just saw a po­ten­tial,” Hai­y­en Vang says. “Even though we had bad cred­it, we were young, they still gave us a chance.” Ten years after en­rolling in an NDC en­tre­pren­eur­ship course, she and her hus­band own a chain of six dis­count cloth­ing stores, em­ploy about 26 people, and are plan­ning to fran­chise na­tion­ally. The Clear­ance Rack is one of about 500 NDC-as­sisted busi­nesses cur­rently op­er­at­ing in the Twin Cit­ies area.

The Vangs are both chil­dren of South­east Asi­an refugees. Al­though Hai­y­en was born in Vi­et­nam, she pro­nounces “Min­nesota” with the soft “o” com­mon in the up­per Mid­w­est and pro­jects a very Amer­ic­an op­tim­ism. She’s the kind of per­son who, when un­em­ployed and vis­ibly preg­nant, de­cides to start work­ing on a busi­ness plan. “It had al­ways been a dream of ours, and even our par­ents” to own a busi­ness, she says.

In most com­munit­ies, es­pe­cially low-in­come neigh­bor­hoods, people of­ten run in­form­al busi­nesses to make money on the side. That might mean cut­ting hair in their liv­ing room or fix­ing neigh­bors’ cars. “There is just this huge un­tapped re­source,” says Mi­hailo Tem­ali, founder and chief ex­ec­ut­ive of­ficer of NDC.

It can be in­cred­ibly dif­fi­cult for low-wealth en­tre­pren­eurs to start a form­al busi­ness. Most im­port­antly, they need cap­it­al. But when people don’t have any as­sets, they can’t in­vest in their busi­ness idea them­selves and can’t qual­i­fy for bank loans, either. Re­search cited by the Small Busi­ness Ad­min­is­tra­tion’s Of­fice of Ad­vocacy also sug­gests that minor­ity busi­ness own­ers are more likely to be denied cred­it than whites, even after con­trolling for cred­it scores, per­son­al wealth, and busi­ness rev­en­ues.

Would-be en­tre­pren­eurs who don’t have much edu­ca­tion, don’t have any small busi­ness own­ers in their fam­ily or friend groups, or are new to the United States can also be held back be­cause they have no idea where to be­gin. Cul­tur­al and lan­guage bar­ri­ers can make it more dif­fi­cult to ask for help.

NDC ad­dresses all these chal­lenges, start­ing with edu­ca­tion. Part­ner or­gan­iz­a­tions — usu­ally groups that serve a par­tic­u­lar neigh­bor­hood or eth­nic com­munity — host classes and re­cruit stu­dents. NDC-trained in­struct­ors teach the courses, which last 20 weeks, cost low-in­come stu­dents $100, and are cur­rently offered in five lan­guages.

So far, NDC has trained more than 4,400 people. Al­most all stu­dents earn much less than the area’s me­di­an in­come, and most have either a high school or as­so­ci­ate’s de­gree. Eighty-four per­cent of alumni are non­white.

Wendy Hines, the trained ac­count­ant who taught Hai­y­en’s class, walks stu­dents through the nuts and bolts of start­ing a busi­ness. She cov­ers all the lo­gist­ics, from pick­ing a loc­a­tion to ap­ply­ing for a fed­er­al tax-iden­ti­fic­a­tion num­ber. She also dis­penses ad­vice: Try not to quit your day job un­til your new busi­ness is prof­it­able. Only hire fam­ily and friends you’ll be able to man­age as em­ploy­ees.

About one in five stu­dents who com­plete NDC’s train­ing de­cide to take the next step. “A lot of people say they want to start a busi­ness, but they don’t un­der­stand the work that’s in­volved,” Hines says. And not all alumni who do start a busi­ness are still op­er­at­ing a dec­ade later.

But alumni who do want to pro­ceed can also ap­ply to NDC for a small busi­ness loan. NDC’s lend­ing team looks care­fully at each ap­plic­ant’s fin­ances and busi­ness plan, and also uses former in­struct­ors as char­ac­ter ref­er­ences. As Hai­y­en’s in­struct­or, Hines could tell her col­leagues that Hai­y­en had worked hard in class, that she was com­mit­ted to her idea, and that she and her hus­band had years of re­tail ex­per­i­ence between them.

An NDC loan al­lowed the Vangs to open their first store near the south Min­neapol­is neigh­bor­hood where Hai­y­en grew up. Their ini­tial plan was to of­fer a 3-for-$10 deal on cloth­ing for the whole fam­ily. Hai­y­en filled the shelves with over­stock items. Neeson worked the overnight shift at Wal-Mart so he could work in the store dur­ing the day. Of­ten, the Vang’s young chil­dren would spend the day in the store with them.

The Vangs soon real­ized that they’d set prices far too low, and that they were stock­ing too many one-off items. So they evolved. They now charge $10 or less per item, and only of­fer wo­men’s cloth­ing, shoes, and ac­cessor­ies. When they needed ad­vice, they’d call the small-busi­ness con­sult­ants at NDC.

Ten years later, The Clear­ance Rack serves cus­tom­ers all over the city — Afric­an-Amer­ic­an and His­pan­ic wo­men in one neigh­bor­hood, Ni­geri­an and Liberi­an im­mig­rants in an­oth­er, Hmong wo­men in a third. “Every single one of our store­fronts was va­cant for years be­fore we set up,” Hai­y­en says, even a loc­a­tion in­side a mall. The Vangs have been able to pur­chase a much nicer house in a much nicer neigh­bor­hood.

Lend­ing to bor­row­ers who have noth­ing but a plan to set up shop in a low-in­come neigh­bor­hood sounds like mad­ness. “You couldn’t really cre­ate a high­er-risk port­fo­lio,” Tem­ali says. But NDC’s de­fault rate is just 5 per­cent, be­cause the or­gan­iz­a­tion sur­rounds en­tre­pren­eurs with sup­port from day one.

NDC cal­cu­lates that every new busi­ness it helps launch even­tu­ally puts $100,000 back in­to the loc­al eco­nomy each year, through pay­ing rent, prop­erty taxes, and busi­ness ex­penses. As well as en­cour­aging en­tre­pren­eurs to set up shop loc­ally, NDC also in­vests in real-es­tate pro­jects that turn blighted, land­mark build­ings in­to safe spaces for small busi­nesses to op­er­ate.

“NDC as­sisted us, but then at the same time, we helped ourselves,” Hai­y­en says. She sees fran­chising the busi­ness as a way to pass on the op­por­tun­ity of busi­ness own­er­ship to oth­er en­tre­pren­eurs like her. “It’s just amaz­ing how the cycle just re­peats. And it gets big­ger and bet­ter every time,” she says.

What We're Following See More »
ALSO VICE-CHAIR OF TRUMP’S TRANSITION TEAM
Trump Taps Rep. McMorris Rodgers for Interior Secretary
2 hours ago
BREAKING
RESULTS NOT NECESSARILY TO BE PUBLIC
White House Orders Review of Election Hacking
2 hours ago
THE LATEST

President Obama has called for a "full review" of the hacking that took place during the 2016 election cycle, according to Obama counterterrorism and homeland security adviser Lisa Monaco. Intelligence officials say it is highly likely that Russia was behind the hacking. The results are not necessarily going to be made public, but will be shared with members of Congress.

Source:
AT ISSUE: BENEFITS FOR COAL MINERS
Manchin, Brown Holding Up Spending Bill
4 hours ago
THE LATEST

Sen. Joe Manchin (D-WV) and Sherrod Brown (D-OH) are threatening to block the spending bill—and prevent the Senate from leaving town—"because it would not extend benefits for retired coal miners for a year or pay for their pension plans. The current version of the bill would extend health benefits for four months. ... Senate Majority Leader Mitch McConnell (R-KY) on Thursday afternoon moved to end debate on the continuing resolution to fund the government through April 28. But unless Senate Democrats relent, that vote cannot be held until Saturday at 1 a.m. at the earliest, one hour after the current funding measure expires."

Source:
PARLIAMENT VOTED 234-56
South Korean President Impeached
5 hours ago
THE LATEST

The South Korean parliament voted on Friday morning to impeach President Park Geun-hye over charges of corruption, claiming she allowed undue influence to a close confidante of hers. Ms. Park is now suspended as president for 180 days. South Korea's Constitutional Court will hear the case and decide whether to uphold or overturn the impeachment.

Source:
CLOSED FOR INAUGURAL ACTIVITIES
NPS: Women’s March Can’t Use Lincoln Memorial
5 hours ago
THE DETAILS

Participants in the women's march on Washington the day after inauguration won't have access to the Lincoln Memorial. The National Park Service has "filed documents securing large swaths of the national mall and Pennsylvania Avenue, the Washington Monument and the Lincoln Memorial for the inauguration festivities. None of these spots will be open for protesters."

Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login