Banking on Risky Businesses

The Philadelphia Inquirer – By Peter Binzen

Costa Rica native Luis Mora is a banker for the “non-bankable” in North Philadelphia’s American Street Empowerment Zone. He said he made “very risky” loans to small businesses that lacked the creditworthiness to qualify for conventional borrowing from commercial banks. As executive director of the nonprofit American Street Financial Services Center, Mora began making loans when the federally funded program began in 1997. And he initially displayed the caution that one would expect from a banker who had spent nearly 10 years with Philadelphia National Bank and its successor, CoreStates. Bankerly conservatism had been bred into his bones.

“For the first six years, we only had three defaults,” Mora said of his center’s performance. He sounded almost apologetic. We were being told we were a bit too conservative,” he acknowledged.

“That’s true, that was the initial criticism,” said Cindy Skinner, president of the board of the lending institution. “We were very conservative.”

But the center is more daring now. Seven of its borrowers are currently in default for a total of about $770,000. Mora said the defaults represent less than 5 percent of the $16.5 million in loans to more than 60 borrowers. He said that about 570 jobs have been created through his center’s lending in a neighborhood with a history of disinvestment. The American Street Corridor encompasses the area from Frankford Avenue to Sixth Street between Girard and Lehigh Avenues. More than 70 percent of the center’s loans would never be made by commercial banks, he said, and close to half are for less than $100,000. The borrowers are a “diversified crowd” including restaurateurs, interior designers, woodworkers, theater operators, retailers, wholesalers and those running light industries.

“You name it,” said Mora. “We have all kinds of businesses.” Many of the loans go to business start-ups, and without Mora’s money, they wouldn’t start up.
Skinner, who has been involved with the center since its founding, views Mora as “the glue that has held everything together on American Street.” She believes he has “balanced very effectively what the community needs and what the center needs.”
Said Joe Mancini, whose hardware and industrial-supply business on American Street has flourished thanks to loans and a $100,000 line of credit from the center: “Luis was fantastic. If it hadn’t been for him, we wouldn’t be here.”

The initiative that Mora, 50, heads stems from federal legislation signed by President Bill Clinton in 1993 that established “empowerment zones” in impoverished urban and rural areas. This program represented a 10-year federal commitment to revitalize designated communities. With its $79 million allocation, Philadelphia set up empowerment zones in north-central and West Philadelphia as well as in the American Street corridor. As its share of the allocation, the American Street Financial Services Center received close to $7.5 million for loans, $1 million for property acquisition, and $7.6 million to create a neighborhood funding stream.

Mora, the center’s first and only executive director, holds a bachelor’s degree in architecture from the Federal University of Rio de Janeiro, Brazil, and a master’s degree in urban and regional planning from the University of New Orleans. Jobless, he came here to visit a friend in 1981 and never left. “I fell in love with the beautiful architecture, the historical meaning of the place, and the friendly people,” he said. “It was like a hidden treasure, a big city with small-town conveniences.”

Most important for Mora, he discovered that Philadelphia offered “incredible opportunities for somebody just beginning.” That was especially true for a Latino newcomer fluent in English, Spanish and Portuguese. He volunteered his services at City Hall and soon found himself hired by the Spanish merchants association working to improve the “Golden Block” on North Fifth Street. Two years later, he sought financing for the merchants from PNB.

“They not only gave us financing, but they offered me a job,” Mora said. He took it and helped create what became the CoreStates Community Development Corp. He was its president when he left in 1996 to head the American Street Financial Services Center. It was incorporated as a nonprofit in 1997 and made its first loan later that year.

Mora’s offices at 2530 N. Second St. are above Ignacio Morales’ Laundromat. The center’s loan underwrote his purchase of the facility for $261,000. The Laundromat now employs seven workers and grosses about $150,000 a year. “Without Luis, I could not do this,” said Morales, 41, a native of Puerto Rico. “When you’re a beginner, it’s difficult. Go to a bank – forget it.” As Mora’s landlord, Morales collects $1,250 a month in rent for 2,200 square feet on his building’s second floor.

Duane Bumb, the city’s deputy director of commerce who serves on the center’s board, describes Mora’s operation as “extremely well-run and increasingly frugal.”
Mora’s frugality is reflected in his three-person workforce: Gary Gordon, Paula Navas and Mora himself. They have no secretarial help. The center’s operating budget of about $400,000 a year covers outlays to lawyers, accountants and others that Mora retains to assist his customers.

“We work very closely with them to create business plans, marketing plans, financial plans,” he said. “Technical assistance is the most important part of what we do.”
Throughout the area, one finds Mora fans. “Luis was wonderful, we had a completely positive experience,” said Jane Stojak. With her sister and brother-in-law, she borrowed $200,000 to open the Triangle Theater in a former factory at 1220 N. Lawrence St. two years ago. Noting that it was “complicated” to operate a playhouse in a “depressed neighborhood,” Stojak said that “we’ve been breaking even.”

Antoinette Patrick and her husband, Charles, borrowed $50,000 from the American Street center for their five-year-old asbestos-abatement service at 2045 N. Lawrence St. “They work with you,” she said of Mora and the center. “Banks wouldn’t loan us money, but they did.”

Along with attempts by Mora’s center to strengthen businesses in the district, there has been a campaign to reduce crime, and to a certain extent, both efforts have worked. But success in the one drive has led to unintended consequences for the other. Because drug dealers have been driven off the streets, said Eva Gladstein, director of the Philadelphia Empowerment Zone, “there’s less disposable income in the district.” And the sad fact is, she said, that “some businesses have suffered” from the absence of drug dealers.

Such is the paradox of life in the American Street corridor.