A look back at lender's impact

Ackneil M. Muldrow II, president of Development Credit Fund, reflects on its 21-year run offering financial assistance to area small businesses

July 26, 2004|By Todd Beamon | Todd Beamon,Baltimoresun.com Staff

First of two parts

Development Credit Fund Inc. closed last month after 21 years of providing loans and other assistance to small businesses in the Baltimore region.

Established by the Greater Baltimore Committee in 1983, the DCF was financed with $7.5 million from six area banks. The Maryland General Assembly created a loan guarantee fund for the same amount through the Maryland Small Business Development Financing Authority. The DCF was the state's first joint public-private financing entity.

Ackneil M. Muldrow II was named the fund's president and chief executive. He still was running the fund out of its Charles Village offices when it closed on June 30.

Throughout its history, the DCF has provided nearly $40 million in loans, generally spanning five to 10 years for working capital, equipment and machinery. It also managed nearly $5 million in federal funds through various community development programs.

The DCF also struck a unique partnership with Nike Inc. to aid minority entrepreneurs in opening retail stores in Baltimore communities. More than 500 businesses had received financing from DCF, and at least 4,000 people had sought assistance.

Muldrow, a graduate of North Carolina A&T State University, worked at Commercial Credit Corp. in Baltimore and the former Maryland National Bank before joining the DCF.

In an interview, Muldrow discussed the fund, its founding and its impact on the Baltimore region. Baltimoresun.com will feature more excerpts next week.

The Development Credit Fund closed after 21 years because of competition?

Yes. There is a lot of competition from the banks. They're offering the same product that we offer, but they have other services. They can offer these services, ofttimes, more cost-effectively because they're making money in other areas around that customer.

Meaning?

If you're already banking at an institution, they can give you a break on your loan rate because they're making it up with other services. They are looking at the total services, and they're pricing on that.

But you've operated for 21 years. May as well do 25?

Yes, we may as well, but we cannot offer the services that the financial institutions can offer. We can't compete in that market. We're not competitive.

What has this competition done for the DCF's customer base?

We ended up with the highly leveraged business. This is what we started out to do, but we didn't want to get too high with this leverage. Our market began to narrow, because the kind of customers that came to us 20 years ago were basically very strong minority businesses. They basically had no outlet for where they could get loans. Things have changed over the last 21 years.

Did the DCF see this trend coming?

We saw it some 10 years ago, as more institutions came out and said, "Gee, this small-business market is growing, so let's get in there" - and, particularly with African-American and Latino markets. Everybody had a product for a group. We just had a product for everybody.

So what made the DCF different?

We prided ourselves in that we offered a stronger service than most. We got out and worked with the client directly, more often than the bigger institutions with hundreds of clients. We did a little more hand-holding with our clients, to get them through good times and bad times.

That was one of the signature suits of the Development Credit Fund. We called it "Aftercare."

How important was "Aftercare"?

It was very important. Technical assistance directly to a borrower is still needed from lenders. You still need that business engineer to work with the borrower, and we did it as best we could, but we couldn't go too far because of liability issues. But you still need that business-customer engineer.

Why?

Because many are first-time business owners; they're not sophisticated. They may know the product, but not the overall business.

A lawyer said to me the other day: "I'm damn good in law, but I'm not a good businessman." But a law firm is a business. So even that individual needs hand-holding, to tell him that these are the things you need to do, as far as good business practices are concerned.

But you have a more sophisticated minority business person today?

True. But still, they can be well-educated, but not necessarily educated to business. They have ideas, opportunities to go into business: Cousin Bertha may have loaned them some money, so they have some equity to start a business.

But it's still a learning experience, even in today's market.

The Development Credit Fund grew out of the Greater Baltimore Committee. How did it come about?

There were people who looked at the marketplace, people who were visionaries in their own right: John C. Sawhill, who was the president of New York University, worked at Commercial Credit Corp. In the 60s, he talked to Commercial Credit about doing something for small businesses, but nobody could define what a small business was, so they did nothing.

There were those who were talking about this back in the 60s, but there was not an audience.

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