SAN GABRIEL VALLEY / COVER STORY : Enterprising Endeavors : Pasadena Neighborhood Center Offers Free Training, Small Loans to Help Self-Starters Realize Dreams

In the winter of 1991, Pam Mims saw her career and her confidence crash and burn. After five years at a downtown law firm, the 42- year-old legal secretary and single mother was laid off, yet another casualty of corporate downsizing.

“It really devastated me,” she said. “My self-esteem was below zero. . . . I didn’t think I was capable of doing too much of anything.”

As a desperate, unemployed mother of a preschooler, Mims hardly seemed destined for entrepreneurial success.

Yet, four years later, with the help of the Pasadena Neighborhood Enterprise Center, Mims operates a one-woman office consulting company, offering medical and legal transcription, bookkeeping and desktop publishing services.

The center, she said, has “really opened up a lot of doors for me as far as working as an entrepreneur, as opposed to working in a law firm.”

For five years, the Pasadena Neighborhood Enterprise Center has provided free business training and small loans to prospective entrepreneurs. Based on a model that started in Bangladesh and has spread worldwide, the program nurtures ultra-small, mainly home-based businesses, known as micro-enterprises.

Its core structure is the peer group--a combination social network and banking unit. Clusters of four to seven participants meet twice a month to share advice and encouragement. They act as loan officers and guarantors, deciding among themselves who gets to borrow money, and then co-signing each other’s loans.

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Since the inception of the Pasadena center, the program has spawned 215 companies, most of them in the San Gabriel Valley, said Director Nettie Collins. (The agency lacks statistics on how many are still in operation.) The center-backed enterprises have ranged from computer and office services to day-care centers, catering companies--even a small record label, an art dealership and a harpist who plays silvery melodies for weddings and brunches.

The center also sponsors a monthly event called the African Marketplace, where members and other vendors can sell their wares. Although many of the goods are African imports--clothes, jewelry and craft items--they don’t have to be. Nor do the vendors have to be black, or even members of the center. The event, held in northwest Pasadena, provides a marketplace for any interested small merchants.

Unlike ambitious, grand-scale economic development projects, such as Rebuild L.A., which aim to draw corporate investment to Los Angeles neighborhoods, the center works with low- and moderate-income people to build their businesses up.

“Small businesses are the lifeblood of this country,” said Curt Lewis, a financial consultant for Dreyfus Fund and a member of the center’s advisory board. “We think that in the future, as more corporations are downsizing and cutting back, this concept has even more appeal. It gives people the opportunity to have more control over their lives and their future.”

It certainly was a godsend for Mims.

For years, the frenetic world of legal work was her life, and overtime and weekend hours were the norm. After she had her daughter seven years ago, though, it took the skill of an acrobat to juggle doctor visits and preschool parties with her jampacked workday.

“You feel so afraid to take time off, for fear of being fired,” she said.

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When her position was axed during a round of staff cutbacks, she panicked.

“As a single parent, I didn’t know what I was going to do.” At the time, she was not receiving support from the child’s father.

Then came depression and the struggle to make ends meet. Despite an occasional free-lance job, she once was nearly evicted from her $775-a-month apartment. She also spent a brief and, for her, humiliating stint on welfare.

A friend told her about the enterprise center, which is free and open to anyone with an interest in starting a business.

Gradually, with the help of the center, she overcame her plight and eventually opened her own company. The center taught her networking skills, restored her confidence, and loaned her $500 to buy a fax machine.

“As far as the (peer) group itself, we would share ideas, and just having someone who’s trying to do the same thing as you are, in terms of opening a business, really boosted your morale,” she said.

Moreover, she was able to bring her child to center meetings. And while her work hours are often demanding (she sometimes rises at 3 a.m. to complete a project), now she can always squeeze in time for her daughter.

Her current income comes in fits and spurts, varying from month to month. Although she said it averages less than half the $3,300 a month she grossed as a legal secretary, she hopes to establish a regular client base that will generate stable revenue.

Not all the enterprises pan out, said Saundra L. Knox, executive director of Pasadena Neighborhood Housing Services, a nonprofit housing development agency that serves as the center’s parent organization.

Knox recalled a landscaping business started by a group of ex-gang members. Although they started with the best intentions, and even displayed excellent gardening skills, she said, they weren’t able to shake old habits learned on the street.

When business disputes arose among them, Knox said, they would sometimes resort to fistfights to settle matters. They delayed registering a truck they had bought, confiding later that they couldn’t read the registration forms. And they once showed up, en masse, at a client’s office, demanding payment.

But for others, such as Alejandro and Maria Palacio, the center has provided a handhold out of public assistance.

Alejandro Palacio, 34, lost his job as a computer trouble-shooter two years ago when a family crisis forced him to stay home with one of the couple’s six children. That triggered a downward spiral of increasing poverty and despair.

“Next thing you know, your bootstrap’s broken, so how are you going to pull yourself up?” he said.

When the Palacios heard about the center, they jumped at the chance to open their own computer service.

After falling out of the mainstream job market, Palacio said, “You get a better sense of entrepreneurship--because you have to.”

About 90% of the center’s participants are women, and 85% are African American, said Knox. But although the center caters primarily to low- and moderate-income women and minorities, race, gender and financial need are not criteria for membership.

Member Richard Pollack, who is white and middle class, is a 55-year-old retired computer systems manager who runs a vending machine business with his son. He notes that even though he’s a “minority” at the center, he has always felt entirely welcome.

“They’re the nicest people over there,” Pollack said. “Everybody has made me feel very comfortable being the only white in the group. And color and race has never been an issue.”

For some, the program provides an outlet for cultural and artistic expression, as much as a source of extra income.

Sandra Romero, executive director of the San Gabriel Valley Fair Housing Council, is using training she received from the center to promote and market a CD of her late husband’s music.

“Ever since I met him his dream was always to be immortal, to record his music with great musicians behind him,” she said.

Rozell Woods, 44, used his training at the center to get his home-based import business off the ground, selling Senegalese imports. Business did so well that last year he opened an African clothing store on Lake Avenue, called Fatuma II.

Along with garments and gift items, he offers African heritage and history. Whether you choose a doll or a crown, Woods will explain the origins of the item, the folklore behind it, and its spiritual significance.

Other center-backed businesses, such as day-care facilities, catering or dressmaking services, turn the notion of “women’s work” on its head, taking what have traditionally been unpaid household tasks and transforming them into sometimes lucrative ventures.

The original micro-enterprise loan program was the brainchild of Muhammed Yunus, an economics professor from Bangladesh. In 1976, he proposed an unheard-of development scheme for his country--offering tiny loans, many under $100, to the poorest Bangladeshi women.

The program was wildly successful, enabling destitute families to survive by purchasing milk cows and starting small crafts businesses. It now has more than a million members, and has inspired similar programs throughout the developing world, the United States and Canada.

Orange County and the city of Los Angeles have micro-enterprise centers, and one has just begun in Pomona. The center in Pasadena is one of four micro-enterprise programs sponsored by the national Neighborhood Reinvestment Corp., which also opened centers on a South Dakota Indian reservation, in Philadelphia and in Jackson, Miss.

In 1989, Neighborhood Reinvestment asked Knox if she would like to sponsor one of the pilot programs through Pasadena Neighborhood Housing Services. Neighborhood Reinvestment provided one grant to hire an organizer for six months to start up the program, plus $20,000 to collateralize the loans and $30,000 in seed money to help run operations for three years. Since then, the center, with a two-member staff and a budget of $77,000 per year, has run on private foundation grants, Knox said.

The center requires participants to attend twice-monthly meetings and take an 18-hour crash course in financial management, marketing and presentation. Participants draw up a business plan detailing what goods or services they will produce and what their niche market will be.

Loans are distributed through the peer groups, which function much like lending circles in Asian and Latino communities. However, unlike lending circles, in which members contribute to a rotating loan fund, the peer groups receive money through Community Bank in Glendale.

The center has a $40,000 credit line with the bank, secured by a $20,000 certificate of deposit. Loans start at $500, and can go up to a maximum of $10,000, Knox said, with an interest rate of about 10.5%.

To date, Knox said, the center has approved and funded 56 loans for a total of $62,000--a lump sum which, in itself, would be considered a micro-loan by commercial banking standards.

And while the agency is ultimately responsible for repayment, members of the peer groups review each other’s business plans and make the final lending decision. All the peer group members co-sign every loan, and once the first two members begin making payments, two more members become eligible to borrow.

Not everyone can take out a loan--that’s up to the peer group to decide. And not everyone wants one. Most center members say the loans are really secondary. It’s the training and support they’re after.

The center’s default rate is about 5%, Knox said--admittedly high by banking standards, and also higher than similar micro-enterprise programs, such as the Coalition for Women’s Economic Development in Los Angeles, which has a default rate of 2%.

But experts say that, given the generous lending standards, 5% isn’t bad.

“A lot of their underwriting is based on character,” said Kenneth White, a center board member and vice president of Bank of America. “And you’re taking a big chance when you base your lending on character rather than credit record.”

There are some fundamental limitations to micro-enterprise programs, said Alan Carsrud, academic coordinator of UCLA’s Price Center for Entrepreneurial Studies. Most of the businesses that come out of these programs don’t generate new jobs, he said. They just replace a workplace job with self-employment.

“Most of these micro-businesses do not reach the critical size of 10 or more employees that can generate growth,” he said. “You’re not going to find a replacement for McDonnell Douglas doing this.”

Still, he said, micro-businesses provide a buffer against unemployment, build business skills and savvy and boost community pride. And healthy businesses--even the smallest ones--can have an economic ripple effect, said financial consultant Lewis.

“When people are successful, they pay taxes, they take out loans, they buy cars,” he said. “They’re future homeowners, they’re future borrowers, and it helps the community we live in.”

Indeed, four center graduates have recently purchased homes, said Patricia Duff Tucker, 31, the former director of the agency--and one of those new homeowners.

The program offers benefits that can’t be counted in dollars, members said. For instance, peer group members often swap services and forge business alliances.

At a meeting for new participants, Alejandro Palacio offered computer assistance to other members who needed help with business flyers. A woman with plans for a day-care center hooked up with another member who runs a transportation service for children. And Sandra Fields, who started out selling cheesecakes and switched to desktop publishing, traded one of her creamy pies for some computer instruction.

The bonds of cooperation may even return, full circle, to the program’s birthplace. Center Director Collins said a woman who assembles gift baskets for new mothers is considering contracting with weavers in Bangladesh for the pram-shaped baskets she needs.

In the end, the program’s returns may be measured over generations.

“If it wasn’t for (Neighborhood Enterprise Center), I wouldn’t be where I am now,” Mims said. Best of all, she added: “It’s given me the opportunity to be a good role model for my daughter.”