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Taking It
to the Bank
The traditionally uneasy relationship between minorities and banks may be on the mend
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Business New Haven
11/3/1997
By: Linda Mele
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Many experts agree the economic future of Connecticut lies in the creation and growth of small businesses. Members of the state's minority communities will need to hop on the entrepreneurial bandwagon if they hope to prosper in the 21st century.
And, more than any other time in history, the financial welcome mat seems to be out for them. While the opportunities may be increasing, however, there is still room for improvement, according to those in the industry.
“Minorities are seeing there aren't going to be a lot of jobs available in large companies,” says A. Walter Esdaile, development administrator for the city of New Haven and a former bank executive.
“And while many are becoming aware of the potential of owning their own business, the entrepreneurial experience hasn't been a part of their environment over the last several generations and they've become more comfortable getting jobs in secure environments that provide weekly paychecks and benefits,” Esdaile says.
“Many don't know how to take risks, to sacrifice and put everything on the line,” he adds.
Area lenders, alone and in partnership with public and private agencies, are trying to change that by creating programs to increase the minority community's access to resources, education and capital.
Through its First Community Bank entity, BankBoston is a model program designed to increase lending in urban markets.
“Many cultures have a distrust of banks and bankers and don't take their services for granted the way Americans do,” says Jorge Machado, vice president and “team leader” of small-business lending for First Community.
Machado and NAACP President Roger Vann say this lack of trust in and/or indifference to banks prevents minorities from developing relationships with bankers and establishing the kind of credit lenders look for when reviewing loan applications.
It also accounts for the proliferation of check-cashing services in urban communities, they say.
“Many use such services because it's easy - even though they have to pay a fee to get their check cashed,” Vann says.
He adds that by using such services instead of banks, people don't open savings accounts and earn interest and they don't know about or have ready access to the resources and capital that others who use banks on a regular basis do.
Machado says BankBoston tries to staff its branches with people from the community in which they are located so residents and business owners will feel comfortable doing business with them.
“Doing business in an urban market is different than doing business in a suburban market,” Machado says. “And banks that want to succeed in that market need to realize and understand the differences.”
Beverly Hoppie, assistant vice president/manager of People's Bank's Women's Business Center, agrees.
“Our customer base has become very diverse and for our programs to work, we need to be sensitive to the needs of the different ethnic groups who populate the communities we serve,” Hoppie says.
“People's has made tremendous inroads in hiring and having managers representative of various ethnic groups, which provides a comfort level to our customers,” adds Hoppie.
Traditionally, banks have not been particularly comfortable lending money to small businesses either for start-up or expansion even outside the minority community, Esdaile says.
Small businesses are high-risk ventures and bankers have not, historically, been known for their willingness to risk capital on them. However, Esdaile says that is slowly changing.
It's changing because some lenders are going an extra step to make these types of loans more attractive and less risky by creating programs or partnering with others to create programs that help educate and provide assistance to individuals interested in starting or growing businesses.
One such project is the Regional Business Resource Center in New Haven, which opened its doors October 1. Though it does not specifically target minorities, it does target urban areas with large minority populations.
The center is a partnership between the Regional Workforce Development Board, the New Haven Enterprise Community, SNET, BankBoston, the Community Economic Development Fund, the Service Corps of Retired Executives (SCORE) and the U.S. Small Business Administration (SBA).
Its programs include planning, training, loan and grant procurement, technical assistance, marketing and licensing. It's billed as a “one-stop-shopping” resource for those interested in starting or growing a business.
Director Richard Schwenzer says that although some entrepreneurs can go through conventional channels to secure financing, most need access to lending programs that feature a more liberal review process.
“If a lender knows someone has taken the time to access all this information and educate themselves,” Schwenzer says, “they certainly would look more favorably on a loan application.”
The Entrepreneurial Center is a similar program that has three locations (Bridgeport, Norwich and Hartford) and is partnered in like fashion with People's Bank.
The SBA also has minority's and women's lending and grant programs targeted to those specific groups.
Over the past three years, residential lending to minorities has also risen, according to Waldo Williams, People's vice president of residential lending.
“It's not been in leaps and bounds,” allows Williams, “but it is encouraging and part of the upward movement has to be attributed to the fact that the barriers to home ownership for everyone have decreased.”
Williams adds that some people, whether for personal or business dealings, want to work with lenders with whom they feel they have “a natural affinity.”
“In many cases that means someone of their own cultural or ethnic group,” Williams says.
All agree that a lot more needs to be done both in outreach to and education of the minority community as well as an increased presence of minority lending officers.
“The industry has gone through a lot of changes in the last decade,” says Esdaile. “But while there is an overall improvement, minorities still don't have a huge presence in banking.”
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