Entrepreneurial aid to welfare recipients plagued by setbacks Defaults hamper BOSS program

January 10, 1993|By Kim Clark | Kim Clark,Staff Writer

A photo caption was omitted on the cover of today's Business section. The photo is of Bridget Rucker, a graduate of Business Owners Start-up Services who has been unable to get aid from the program.

* The Sun regerts the errors

Bridget Rucker spent the first half of 1992 planning her escape from welfare: She'd use the training and loan offered by a state-funded program to open a hair salon.

"I was so happy. I finally got a break," she recalls.

But five months after completing the training, her business plan hasn't even been considered by the loan board, and she has lost options on several stores because of the delay.

FOR THE RECORD - CORRECTION

Now she cries in her bed at night because her dream of self-sufficiency, once tantalizingly real, seems as distant as ever.

"It is such a letdown. I really thought this was the answer," says the 30-year-old mother of two.

Halfway through a five-year test, Business Owners Start-up Services, a program designed to turn Maryland's welfare recipients and unemployed into entrepreneurs, is plagued with such discontent and setbacks.

Six of the seven BOSS grads who have received loans from the special fund are in default, draining more than half of the initial $100,000 seed money donated by the Abell Foundation.

Although about 30 of the graduates have started businesses without such loans, Ms. Rucker and most of the about 200 other graduates have been told they weren't ready to apply for loans, or have seen loan applications denied or delayed.

Despite those failures, BOSS managers, who say they have learned some hard lessons, plan to train even more would-be entrepreneurs after modifying the program.

The loan fund has raised more than $1 million in private and state money for the next five years. And BOSS plans to double the size of its classes, which teach such subjects as accounting, marketing and management.

Still, the added funding isn't like ly to help graduates such as Ms. Rucker.

Stricter rules governing the loans may doom Ms. Rucker's plan to open a salon. And while she and her fellow BOSS grads love the idea of entrepreneurship, they say BOSS shouldn't raise more people's hopes until it can take care of those already struggling to make a business work.

The problems at BOSS are sure to have wide repercussions, coming at a time of change in Washington and growing debate over the effectiveness of entrepreneurship programs.

The number of such training programs has grown from a handful to 250 during the past decade, even though skeptics say the best way to spend scarce government and foundation dollars for the poor is on job training.

"Almost half of the people on welfare have no high school degrees, and many are illiterate," says Sar Levitan, head of George Washington University's Center for Social Policy. "Their best hope for self-sufficiency is in training and education, if Bill Clinton asks."

The federal government's job training program, for example, reports 60 percent of its trainees have jobs within three months ++ of graduation.

But that hasn't stopped BOSS supporters.

The state Department of Economic and Employment Development, which funds the training program with a five-year, $160,000-a-year contract, will kick in another $75,000 to the loan fund this year, says DEED spokeswoman Mary Lou Baker.

BOSS plans to move to a larger office so it can boost the size of its classes from 30 to 60 this spring. And five area banks have pledged an additional $1 million over the next five years for the loan fund.

Why are all these government officials and private donors pouring money into a program with a questionable record?

They say they have little choice. Slim hopes are better than none, and job opportunities in the city are so meager that entrepreneurship programs offer the only chance of economic growth, says Michael Gaines, president of the Council for Equal Business Opportunity, which runs BOSS and administers the loans. Federal statistics show that the city lost nearly 30,000 jobs in 1991 alone, making hiring prospects dismal, he notes.

"Companies are not moving into the city and creating jobs," he says. "The people who live here are going to have to create jobs. . . . We've got to start somewhere."

Lessons from failure

Besides, program administrators say they've learned from their mistakes.

They're changing the training and loan application rules to make everyone more realistic and to improve the entrepreneurs' chances. That new realism may be sparking some of the students' discontent.

Sonia Stockton, who runs the BOSS training program, said BOSS took over the classes from the Small Business Development Center last April and has been trying to forge a successful program since then. All the failed loans belonged to entrepreneurs who graduated before BOSS took over.

Some businesses failed because the loans were too large -- an average of $9,000 at 10 percent interest -- and demanded too fast a payback, usually about two years. That meant the new businesses had to make payments of more than $400 a month.

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