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The Color of Money

Day two, article two

Selling lettuce, he built $3 million firm,
but can't get business loan

By Bill Dedman, The Atlanta Journal-Constitution

Published May 2, 1988, Page A5

Copyright 1988, The Atlanta Journal-Constitution

Irvin Betts had only $14 and an eighth-grade education, but he knew lettuce.

In 1981, he put $4 worth of gas in his 1972 Gremlin, bought a case of shredded lettuce for $10, drove to a restaurant and made a $2 profit.

Then he bought another case of lettuce and headed out again.

Seven years later, Irvin Betts is still delivering lettuce -- 900 cases a week, as well as pomegranates and 277 other items. With seven trucks and 22 employees, Betts Produce in Forest Park sells $3 million in produce a year.

Betts, who is black, built his business without a loan. Not that he didn't apply a couple of times, but he made do without.

That's often the only way a black person in Atlanta can build a business, according to local business experts.

Fred Stone, Georgia district director of the Small Business Administration (SBA): "Traditionally, blacks and other minorities have had a problem receiving financing from banks. I'll have to admit it's still a problem."

Sherman Golden, assistant director of the Fulton County Department of Planning and Economic Development, said, "Redlining is worse on the commercial side than in housing."

Charles Blackmon, a former bank officer who is director of the Atlanta Minority Business Development Center: "It's quite obvious that you have one set of lending rules for white males and another set of rules for somebody else. We're not talking about an occasional case."

Raleigh Murphy, president of Renaissance Capital Corp., a minority small-business investment corporation: "The bank is making these loans to white establishments. You don't want to think it's out-and-out racism, but you wonder."

Marvin Arrington, president of the Atlanta City Council, said he asked banks six months ago to pool $5 million for loans to businesses along Auburn Avenue, which in the early 1900s was the country's most vigorous black business area. "I got not one favorable response. Not one favorable response."

A federal law, the Community Reinvestment Act, says banks and savings and loan associations have "an affirmative obligation" to help meet the community's credit needs, including business loans, particularly those guaranteed by government agencies such as the Small Business Administration.

Many banks, however, make few or no SBA loans, according to a study conducted for The Atlanta Journal-Constitution. The newspaper used the federal Freedom of Information Act to obtain a computer printout of every SBA loan in Georgia from 1982 to mid-1987. The information was analyzed by the Southern Finance Project, an independent, non-profit research organization in Charlotte, N.C.

Those that do make SBA loans made few of them to minority- and women-owned businesses. Georgia has more than 100,000 minority-and women-owned businesses, according to the SBA. No institution loaned more than 20 percent of its SBA dollars in Fulton, DeKalb, Cobb and Gwinnett counties to these borrowers. First Atlanta, which brought up the rear among the active SBA lenders, loaned 8 percent to these borrowers.

If each Atlanta area lender had loaned 20 percent of SBA dollars to minority and women borrowers, those borrowers would have received an additional $21.4 million in credit over the five years.

The most active SBA lenders over the five years were Southern Federal Savings and Loan, with 264 loans in the four-county Atlanta metro area; Fulton Federal Savings and Loan, 175; Trust Company Bank, 148; Bank South, 139; Citizens and Southern Bank (C&S), 104; and NCNB National Bank, 119.

The Southern Finance Project also looked at the location of SBA loans in relation to the location of deposits. The big three banks -- C&S, First Atlanta and Trust Company -- have a much smaller share of the SBA loans in black and low-income ZIP codes than their share of deposits in those areas. That's true even if the downtown ZIP code and bank headquarters are excluded.

But on an overall SBA rating, the Southern Finance Project judged Trust Company to be the leader. This rating combines overall SBA activity with the distribution of those loans to minority and women borrowers and the targeted ZIP codes.

"The only reason we're maintaining what we've had is because of institutions like Trust Company," said the business development center's Blackmon, who is black. "I still think we need some resensitizing to the needs of minority businesses."

Murphy's small-business investment corporation could help. It has raised $1 million from the city's business community. All the big banks contributed, but Murphy, who is black, says some of them think that that donation disposes of their obligation to help minority businesses.

"We can't carry the whole weight. They should be referring only the marginal deals, the ones that take a little more risk."

Part of the problem could be lack of business education, said Stone, who is white.

"You deal in perception, and the black entrepreneur often goes into the bank not understanding all the banker's terms or language, although his or her application may be just as worthy."

Banks also often don't want to make a small loan.

"Many of the banks have taken the position that they won't look at a request unless it's $100,000," said Blackmon, who was a banker in Atlanta for 10 years. "That means the person has to have $25,000 to $50,000 in collateral. A lot of black people don't start with that kind of money."

Irvin Betts didn't. He said he applied at Trust Company for a loan about 1985, then at Anchor Savings Bank last year. He said both told him he didn't have enough capital. He hopes to apply again for a loan soon so his business can grow. He sells to restaurants on credit terms, but, if he can't borrow money himself, his business can't increase as fast as possible.

"I could have maybe $10 million or $15 million in business if I had the working capital. If I had the money to work with I could buy most of my produce direct, cut out the middleman, increase my profit 15 percent."

Through the years Betts has seen other produce companies, white-owned ones, get loans and move ahead of him.

"I just keep trying. I don't let it get me down. Blacks always have a problem . Some just get lucky."


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