Non-Profits Become Key Lenders in New Orleans

Small businesses in New Orleans have faced an uphill battle since Hurricane Katrina. Entrepreneurs are having trouble getting loans from traditional sources. Non-profit community lenders are filling in the gaps.

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This is WEEKEND EDITION from NPR News. I'm Liane Hansen.

More than two and a half years after Hurricane Katrina flooded 80 percent of New Orleans the picture is somewhat brighter. The city's population has risen to two-thirds of its pre-storm numbers. But many of the thousands of small businesses hurt by the storm are still struggling to start up again because financing from the government and traditional banks is scarce.

Non-profit community lenders are stepping in to help out. More from NPR's John Ydstie.

(Soundbite of clanking)

JOHN YDSTIE: Oil dances in a hot wok in a kitchen of Bam Myien(ph), a Vietnamese restaurant located in a New Orleans East strip mall.

Ms. MAI WIN(ph) (Owner, Bam Myien): (unintelligible) rice noodle with mixed vegetables.

YDSTIE: Owner Mai Win's restaurant is up and running now and it's got a new banquet space next to the dining room complete with a grand staircase for wedding receptions. Bam Myien Restaurant has emerged from the ten feet of floodwater that enveloped this area. But without the help of local banks or the small business administration, says Win:

Ms. WIN: I applied for SBA. They turned out because they said I have no income.

YDSTIE: How could she have an income, asked Win, if she couldn't first get a loan to restart her business? It was a Catch-22.

Ms. WIN: I asked government, you know, SBA to help but they turn us down.

YDSTIE: Mai Win, a cheery and irrepressible woman, finally got the loan she needed to recover and expand from a non-profit lender called Seedco Financial Services.

Ms. ROBIN BARNES (Senior Vice President, Seedco Financial): The spring rolls are the best and then maybe some of the soup.

YDSTIE: Among the mostly Asian crowd in Bam Myien's dining room, Robin Barnes's blonde hair stands out. Barnes, a friendly and earnest professional, heads up Seedco Financial New Orleans office. Like other non-profit community lenders, Seedco makes loans to businesses and organizations considered too risky by traditional lenders. It generally uses money provided by foundations and bank fulfilling their requirement under the Community Reinvestment Act.

In spring 2006, Robin Barnes relocated to New Orleans from New York, where Seedco Financial is based, and where it helped local Manhattan businesses recover after 9/11. As she looked for ways to jump-start small firms in New Orleans, her focus quickly turned to neighborhood eateries.

Ms. BARNES: Restaurants were exactly the right bet at the time because there were very few places open and because there were not a lot of grocery stores. It's even difficult for people to find options in terms of buying food and cooking food. So restaurants were needed.

(Soundbite of sizzling)

UNIDENTIFIED MAN: Got it.

YDSTIE: Back in the heart of New Orleans in a different kitchen another food vendor is struggling to survive.

UNIDENTIFIED MAN: Two of them combo, shrimp, fish and oyster.

Ms. LORETTA HARRISON (Restaurant Owner): Okay. When you finish with that we're going to fix three different plates, okay? Okay?

YDSTIE: Loretta Harrison made candy before Katrina. She sold Loretta's authentic pralines to tourists in the French Quarter. But things changed after the storm.

Ms. HARRISON: People kept coming in and they said, do you serve lunch? I say, I have pastries and coffee. They said, no food? Do you serve lunch? Do you serve breakfast? I said, no, but I will.

YDSTIE: Harrison, who wears a trademark red shirt and big smile, was one of the few who got a loan from the SBA in the early days from the recovery, but it wasn't enough. Then one day Robin Barnes dropped by. Rather than lending from behind a desk, Seedco Financial's loan officers comb the streets and get intimately acquainted with potential clients.

Ms. BARNES: I think that somebody had referred us to Loretta. One of our local project partners had said you should go visit her.

Ms. HARRISON: Two people came in. Robin and a guy came in that day and I said, oh no, no more loans, no more loans, I said. But then when, you know, their loan was better than the SBA because it's interest free.

YDSTIE: Seedco Financial could make low- or no-interest loans because much of its money came from the state of Louisiana. The state decided to funnel nearly $140 million in federal recovery funds through Seedco Financial and half a dozen other community lenders.

After her first visit to Loretta's Robin Barnes quickly discovered Harrison's willingness to adapt, serving hot lunches on Fridays, for instance, and marketing her authentic pralines on the Internet. That made lending to Harrison seemed like a risk worth taking.

Still, Harrison says the future is uncertain.

Ms. HARRISON: I'm all loaned out. We're up to our eyebrows in loans from SBA, and then we took the loan from Seedco. And in days when it's slow like this it's frightening.

(Soundbite of exhaust)

Ms. SANDY WYNN (Owner, Lady Hannah Shrimp Boat): This my vessel right here.

YDSTIE: Lady Hannah. Who's Hannah?

Ms. WYNN: Hannah's is my oldest daughter and my only daughter.

(Soundbite of exhaust)

YDSTIE: The shrimper's dock in Venice, Louisiana. Sandy Wynn and her husband keep their 60-foot steel-hulled shrimp boat here. This dock is about as far south as you can go in Louisiana without driving into the Gulf of Mexico. Katrina and then Rita obliterated boats, docks and seafood processing plants on this low-lying land. The total damage to the fishing industry: $400 million.

Most banks saw fishing at too risky a bet after the hurricanes. Sandy Wynn had already tried, and failed, to get an SBA loan to repair the Lady Hannah when she learned about Seedco and saw a second chance.

Ms. WYNN: When I met Robin was at this little community meeting, and I heard her say something about Seedco Financial helping about 1,400 businesses around the 9/11 area. And it just hit me, like, these are the people that should know most about what we're going through emotionally.

YDSTIE: Robin Barnes had never even considered that Seedco might work with the fishing industry. But Sandy Wynn brought Barnes down to the shrimper's dock and introduced her around. Now, the non-profit is a major lender to Louisiana fishermen.

Ms. BARNES: The first thing we had to do is really learn what the (unintelligible) represented in Louisiana. Coming out here and seeing it for ourselves really made us understand. But we also learned then what the opportunity was. If we could get boats back in the water they could immediately start generating some revenue.

YDSTIE: Sandy Wynn got a $60,000 loan from Seedco Financial to fix her boat.

Ms. WYNN: Which was just about enough to get us back into water. Not to pre-storm, you know, condition but enough to get us going.

(Soundbite of machine running)

YDSTIE: Across the Mississippi from Venice near Point Alahash(ph), Byron Enclade's(ph) crew repairs an oyster boat. The broad open craft rides low in the water. It's one of Enclade's three boats, none of which has harvested a single oyster since Hurricane Katrina.

Mr. BYRON ENCLADE (Owner, Oyster Boats): If they'd got us the money earlier I could've been out here right now. These two boats could've been bedding oysters on my bedding ground.

YDSTIE: African-American businesses, like Enclade's, suffered disproportionately from a lack of credit after Katrina. And Enclade was deeply frustrated by the slow trickle of aid from the state. It's meant little or no work over the past two years for him and his employees, who are mostly family and are here today working on the boat.

Mr. ENCLADE: I got my first cousin and I've got my baby brother. And while he's married into the family and stuff, this boat here will employ three people, three to four people.

YDSTIE: Enclade got $200,000 in loans and grants from Seedco Financial. When he's back up and running he'll have jobs for ten people or more. Preserving those local jobs is part of the mission of community lenders, says Robin Barnes.

Ms. BARNES: We saw how many members of Byron's family were working in this business and how it had sustained them. That's a huge consideration. These businesses are very important to this community.

Mr. ENCLADE: Hold on. I got to leave out.

YDSTIE: Byron Enclade hopes to get boat back in the water to catch the end of the oyster season and make some money to start repaying his loans.

Low- or no-interest loans from community lenders have given small businesses hurt by Katrina a chance, but those loans are double-edged swords. They need to be repaid, and that still requires customers and profits - neither of which is certain these days in southern Louisiana.

John Ydstie, NPR News.

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