Keeping The Faith

This story appears in the October 1998 issue of Entrepreneur. Subscribe »

Faith-based economic development is not a new trend. Churches have worked in U.S. communities since colonial days. "What is new in modern-day America is the focus on minority institutions using their strengths and assets to develop inner-city neighborhoods," explains Rev. Dr. Fred Lucas, president and CEO of New York City's Faith Center for Community Development Inc., which provides technical assistance to faith-based community development groups.

Entrepreneurship has become a major tool that faith-based community developers wield to revitalize urban areas. Lucas says the move into entrepreneurial ventures was a natural evolution of the churches' mission to help the poor. "It's not enough to have housing programs; people need jobs and access to quality goods and services," says Lucas. Religious organizations also needed money to maintain their core activities in the face of a shrinking government and corporate belt-tightening. "It became an issue of how to generate operating money and help community businesses develop," he says.

Two organizations, in New Jersey and California, exemplify this trend. New Community Corp. in Newark was started in 1967 by William J. Linder, a Catholic priest, after civil unrest decimated the community. The 1,600-employee nonprofit organization has no affiliation with the Catholic church, but Monsignor Linder sits on the board of directors, and clergy from 15 religious orders work in capacities ranging from CFO to school director.

One of New Community's first endeavors was establishing a supermarket in a shopping center it had built. It took a while to find a partner who would be willing to move into the community and share equity, but the organization persevered. In 1990, Carteret, New Jersey-based grocery store chain Pathmark came on board. Today, the grocery store's annual sales are $35 million, and two-thirds of the proceeds are plowed back into the community. New Community now also owns franchises of Dunkin' Donuts, Pizza Hut, Nathan's Hot Dogs, Taco Bell, Mail Boxes Etc. and Magic Fountain Ice Cream.

FAME Assistance Corp., a nonprofit organization founded by the First African Methodist Episcopal Church, also sprang from the ashes of civil riots--this time in Los Angeles. The program began in 1993 with a $1 million contribution from The Walt Disney Co. to provide microloan funding and entrepreneurial training.

That initial investment has mushroomed. "We have a business resource center containing the FAME Renaissance Venture Fund, which invests in fledgling businesses," says FAME executive director Mark Whitlock. In addition, FAME runs a job placement agency and will open a 48,000-square-foot incubator in 2000 to nurture small minority companies.

Entrepreneurship is certainly not new to FAME, which has been part of the Los Angeles community since 1872. In fact, Biddy Mason, one of the church's founders, once owned large parts of downtown Los Angeles and was known throughout the community for helping those who were less fortunate. Through efforts like these, faith-based organizations are using entrepreneurship to help people help themselves.

Round Two

Congress and the administration are back in the ring over SBA funding.

Just when small-business owners thought the federal budget process was becoming less of a street brawl and more of an honest debate, along come the proposed SBA Fiscal Year 1999 expenditures.

In August, the Senate and the House of Representatives passed appropriations bills significantly below 1998 SBA allocations and 1999 requests. The SBA requested $724 million for 1999, but the Senate approved an appropriation of $613.6 million and the House, $705.89 million. Congress gave the SBA $716.1 million for 1998.

According to House and Senate appropriations reports, the bone of contention is funding for the Disaster Loan Program, which the SBA administers. "It is unconscionable that the SBA has submitted a request for a 10 percent increase in the salaries and expenses for the Disaster Loan Program while . . . requesting a substantial interest rate increase on loans for those who have been devastated by disasters," the Senate report says.

SBA sources say the agency's intention was to save taxpayer dollars. Currently, there is a gap between the interest rate the SBA charges and the amount the agency pays to borrow the money. In the 1999 budget, the SBA proposed closing that gap by raising the interest rates charged on disaster loans.

"Our overriding concern is that the SBA continue to be an effective agency for small business," says Todd McCracken, president of advocacy group National Small Business United.

Another congressional directive worrying McCracken is proposed personnel cuts. In its report, the House called for a significant staff reduction and decreed these cuts come primarily from SBA headquarters and overhead functions.

"There have been tremendous cuts in the SBA that have been taken disproportionately from the Washington office," says McCracken. "I think additional cuts could ultimately affect the quality of programming."

McCracken expects cooler heads will eventually prevail. In the meantime, small business is destined to emerge from the battle beaten and bruised.

Fast Track

By Laura Tiffany

Name and age: Michael Cookson, 42

Company name and description: Wham-O Inc. manufactures toys.

Based: San Francisco

Founded: November 1997

1998 sales projections: $35 million

Toy story: After co-founding Aviva Inc. (manufacturers of the My First line of children's sports equipment) in 1989, Cookson sold the line to Mattel Inc. in 1992. Mattel then expanded its sports division by acquiring the Wham-O name. With the help of investors, Cookson purchased Mattel's entire sports line for a reported $20 million last year, acquiring the rights to the Wham-O line, Morey Boogie Boards and Aviva, among other brands.

Name game: Cookson plans to reintroduce branded classics like the Hula Hoop, Frisbee and Silly String to the toy market with more focus and hoopla.

Play time: "Our goal is to bring these products back to life," says Cookson. "There's a whole new generation of kids we want to `Wham-O-ize.' " With well-known brand names to work with, Cookson expects the Wham-O division to double its growth next year.

Fresh air: "One thing that particularly interests me is getting kids away from TV and computer screens," says Cookson, "and encouraging them to be active and play outdoors."

Contact Sources

Faith Center for Community Development Inc., 120 Wall St., 26th Fl., New York, NY 10005, (212) 973-3694

FAME Assistance Corp., markw@famechurch.org, http://www.famechurch.org

New Community Corp., 233 W. Market St., Newark, NJ 07103, (973) 623-2800

National Small Business United, 1156 15th St. N.W., #1100, Washington, DC, 20005-1711, (202) 293-8830

Wham-O Inc., is@wham-o.com