One Stop Capital Flop 

You'd think the loss of six million dollars would teach Oakland to stop making ill-advised business loans. You'd think.

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Desperate for assistance, the city enlisted the help of the federal Small Business Administration, which brought in its One Stop Capital Shop. Under the combined program, federal and city employees worked side by side, mucking through city loan applications. The new office inherited the bunk loans of the past and took on managing future loans.

The One Stop Capital Shop was meant to be a speedy, streamlined process, as the name implies. Analysts sort through handfuls of applicants each week, approving loans of less than $10,000 on the spot, while anything over $100,000 requires a review by the city auditor. The program now hews to federal guidelines, setting up workshops for new business owners, and following the rule that all business plans must include a marketing strategy -- something that was lacking in Brooks-Hamilton's ill-fated plan.

But the makeover hasn't made up for the city's lack of business savvy. The local One Stop program itself has been fraught with problems, including high employee turnover: Analysts come and go, two executive directors have passed through its doors, and Claggett, whose agency oversees the program, is CEDA's third director since One Stop began.

In addition, several loans approved by the current watch have raised red flags in the auditor's office. Consider Just Desserts, a San Francisco bakery that wanted $1.4 million to move to Oakland and purchase real estate. "That was a loan based on a lot of assumptions," Smith says. His office reported that the company was weaker than it appeared on paper -- certainly weaker than One Stop analysts projected -- and posed a likely default risk. The council approved the loan anyway, and the bakery ultimately defaulted.

And there are more. Blackboard Entertainment -- a company that made educational videos for children -- borrowed $250,000 from the city, which, in a highly unusual arrangement, even took a five percent stake just in case the company went public. In May, it went bankrupt. Allan's Ham and Bacon defaulted on a $147,000 loan. All About Hair, a salon, cost the city $77,000. Brew's Vision Unlimited, whose owner had a prior embezzlement conviction and a history of bad debts, finagled $95,000 to open what was supposed to be an upscale downtown sports bar and billiards joint. The owner never made his payments.

A smattering of other leftovers still blights One Stop's portfolio: There was $55,000 to T.P. School Supplies, $47,500 to print-design shop Android Designs, and $25,000 to the salon Black-N-Style. Steel City Gym got $25,000, R&D Barbecue received $10,000, and entrepreneur Kenneth Mitchell accepted $160,000. All of it gone.

Claggett blames the embattled program's woes on its failure to devise a strict screening process for loan approval, something he claims is in place today. He emphasizes that potential borrowers now need to have a clear marketing proposal. "Many of the loans that were approved back then, we wouldn't approve now," he says.

While he insists the program's problems are a thing of the past, Claggett has ordered the program's employees not to speak to the press, and he refused to let the Express interview current One Stop Capital Shop director Gregory Garrett.

Roland Smith, for his part, is still concerned about some of the loans being pushed today.

Case in point: Vida's Fish Market. Last year, the One Stop analysts put together a $400,000 loan package to Vida Bottom, the elderly owner of a small fried-fish stand on East 18th Street. Bottom does a straggler business, serving only takeout orders and employing one or two family members. Now she wants to expand to a sit-down restaurant with forty seats. One Stop projections have her sales increasing 59 percent in 2002 and 27 percent in 2003 -- a pipe dream, according to Smith.

The auditor's own review notes that Vida's has been growing only about eight percent per year, on average. Even with her expansion plan, Smith says, the One Stop view is far too optimistic. According to his calculations, Bottom would have to serve one customer every twenty minutes, in every one of her proposed forty seats, all day long in order to match One Stop's optimism -- and that doesn't include her cost of taking on new employees.

A divided council heeded some of Smith's suggestions and asked Bottom to provide a portion of the money up front and make other adjustments in her loans. City leaders nonetheless approved the money in March. Assured that a check was on the way, Bottom began working on the restaurant's facade on her own dime.

She's still waiting for her check, and says she was recently told it could take a few months longer. The delay has soured her experience. "Some days I wish I never heard of them," she says. The sides are now in litigation, hoping to expedite the process.

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