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HEMPSTEAD, N.Y. -- When it comes to financial help for his West Indian grocery store, Andrew Morris is a step ahead of most small-scale entrepreneurs.

Instead of jumping through bureaucratic hoops for traditional lenders and then paying them interest, he taps into a homegrown cash-flow system to expand his inventory. The system is called "susu" or "partner," and it's an informal rotating-credit arrangement with roots in Caribbean culture. A group gets together to pool its savings, and members can draw funds from the pool as they require them.

In a typical susu, 20 or so close family members and friends make a weekly contribution -- known as a "hand" -- of a certain fixed amount to the fund. If each member is contributing $100 a week over 20 weeks, each member is entitled to have a turn, known as a "draw," getting $2,000 during the 20-week period. The money changes hands across kitchen tables and living rooms, with housewives negotiating hands and grandmothers acting as bankers. Those who get their share early receive, in effect, a cash advance against future deposits. Those who draw their funds at the end use the system as a sort of savings program that has the benefit of helping friends and family members.

While the Caribbean community in the U.S. has long used susu funds for household purchases, more people now use them the way Mr. Morris has: combined with bank loans or other funding to expand a business and move into more mainstream markets.

"It's no longer just a Christmas club," Mr. Morris says. In fact for him, susu funds have become such an integral part of his business that he has lost track of the amount he has tapped for his grocery store. "It's a way of life," he says.

Other cultures have also flourished in the U.S. through informal or underground lending systems. Asian Americans, for instance, have long relied on each other as a source of business funds.

Such networks help ethnic businesses grow. Karl Rodney, publisher of Carib News, a Caribbean-American newspaper distributed nationally, estimates the number of Caribbean businesses has increased about 15% during the past five years. Of the Caribbean businesses, he believes about 10% have expanded beyond small mom-and-pop operations.

Even the biggest banks are recognizing the wealth assembled in the underground susu system. Chase Manhattan began recognizing susu deposits as a measure of creditworthines in the early 1990s. About six years ago, Fleet Boston followed suit.

The growth of the Caribbean business community is being noted by mainstream U.S. businesses. The Caribbean American Chamber of Commerce includes 15 of the nation's biggest companies as members. All are eager to tap into the market of about 866,000 Americans of Caribbean descent. When the chamber was organized in 1985, it had just two banks, and now it has nine, says Roy Hastick, president of the nonprofit chamber group based in Brooklyn, N.Y. "We cannot do business as we used to," he adds. "We have to change with the times in terms of doing things much bigger."

Mr. Morris's store, Sam's Caribbean Marketplace, is a prime example. The former bike messenger opened it in 1993 to cater to a burgeoning Caribbean community here, about 20 miles from New York City. Today, with revenue topping $1 million -- up sevenfold from 1994 -- the store caters to some 10,000 customers a month of all ethnic groups. Customers drive as long as an hour to sample several dozen types of hot sauce, canned products, curry brands, reggae music and even cookbooks.

A lean, soft-spoken man who was born in Jamaica, Mr. Morris attributes his success to the susu. In 1992, armed with a master's degree in business administration from Columbia University and a business plan, he secured a $50,000 loan from European American Bank. But the loan wasn't big enough to allow him to open the store. Rent for the 1,600-square-foot space was $1,800 a month, and he needed cash for inventory, marketing, payroll and licenses. It was for these needs that Mr. Morris dipped into the susu, tapping $15,000 in funds he had amassed in a pool managed by his mother. In 1993, Sam's opened its doors.

Since then, Mr. Morris has continued to take part in susu hands to fund capital expenditures that have allowed him to keep pace with his growing sales. In 1994, he used a regular household oven to bake Jamaican meat patties. But as demand increased, the oven, which baked 48 patties an hour, wouldn't do. In 1996, Mr. Morris invested in an industrial-style oven that cranked out 108 patties every half hour. By the end of the year, Mr. Morris had sold 70,000 patties, thanks to the susu.

Now with business running relatively smoothly and his bank loan paid off, the start-up funding pressures are off. But Mr. Morris still finds reasons to dip into susu funds. Every year around Easter, Jamaicans enjoy eating cheese sandwiched between slices of a sweet bread. For the three weeks leading up to Easter, Mr. Morris sells about $4,000 worth of the treat. So he dips into susu funds to cover about 60% of his purchases of cheese and buns.

Last year, Mr. Morris paid his $3,000 sales-tax tab with susu funds. "It's a cash-flow boon," he says.

Mr. Morris also relied on the susu when he expanded his product line, boosting the cost of his inventory to nearly $100,000 from $10,000. The strategy helps him cater to specific tastes, such as those of customer Cecile Wong. Ms. Wong, who is of Jamaican-Chinese descent, eagerly picked up a bottle of Jamaican Chinese soy sauce one recent afternoon. "I find this [store] has the most variety that is Jamaican and Chinese," she says approvingly. Meanwhile, some half-dozen non-Caribbean customers a day stroll in looking for particular jerk sauces for barbecues.

Just back from a trip to Jamaica, Mr. Morris has more big plans: importing and distributing coffee, gospel music and other products across the U.S. He is also developing a Web site to sell his products online to far-flung members of the Caribbean community. Of course the susu will come in handy, he says.

From StartupJournal.com
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