Turning lives around in Navajo country

Grace and Lawrence Montes once were "party animals." With only a ninth grade education and a severe alcohol problem, they weren’t the typical entrepreneur with an MBA or a college degree.

"We’d work for about a week, party for several days, then get fired from the job we had," said Lawrence, a Navajo. "Then we’d work again … then party for another two weeks. Or work here and drink there. We were party animals. That was the type of lifestyle we had."

But several years ago - starting with nothing - they opened up Native American Cleaning Service in Tohajaille, N.M., a satellite Navajo community, which serviced businesses in nearby Albuquerque, 26 miles away. Next, they opened and ran a small grocery store next to a school for a year. "The store was doing real good," said Lawrence. "A lot of kids and community members were coming to our store." They were doing so good, they said, that the school board voted to fence off their store from the school. "Someone on the board got jealous," said Grace.

So when they heard about a vacated store in Highland Meadows, a nearby community, just off of Interstate 40, they leased the store with $10,000 they’d saved up. "We never tried to get a loan anywhere because our credit was bad," said Grace. "We needed to make improvements, and offer more items, and maybe put up a sign but we didn’t have the money after we opened the store."

Then last spring they heard about a program developed by the Navajo Nation that guarantees tribal members a loan up to $100,000 if they took classes in starting and running a business. "They signed up and drove five hours to class, twice a week," said John Largo, a tribal business development specialist, who helped the Montes achieve their goal at one of the tribe’s eight offices.  

"This program was put together because many tribal members defaulted on loans when their businesses failed because of lack of planning or having a business plan to cope with expected problems," said Leo Watchman Jr., director of the Navajo small business development office. "By working with the business owners in the beginning and giving them the knowledge they need to help them create a business plan, more of the businesses will succeed," said Watchman. "Besides the classes, they also had to write an actual business plan."

The program, which had 100 applicants, is modeled after a similar program developed by the White Mountain Apaches.

On Nov. 7 one year after opening their convenience store, the Montes became the first, of the 47 who signed up for the program last spring, to get approved for a $70,000 loan.

The loan program
The Navajo small business loan program started in August 1987 after the tribe put up $30 million of its own money; making them one of the few tribes in the country to do so, officials said.

"They set aside $25 million for industrial, commercial, and tourism projects," said Bertha Aguirre, an economic development official. "And the remaining $5 million was only to be used for small business development at the chapter (community) level."

Putting up their own money was the only way tribal officials believed they could incite small business development on the Navajo Nation where 56.1 percent live below the poverty level and 68 percent of Navajo monies are spent off the reservation. "Eighty percent of the jobs in America are held by small business," said Navajo Burger King magnate Richard Mike. "Here on Navajo, it doesn’t exist." The reason: banks don’t want to risk their money on Indian land due to the unique "reservation" land status, the lack of infrastructure, such as: telephone lines, roads, telecommunications, and electricity.  

Rough beginnings
Like the Montes, the tribe’s small business loan program has had its own rough beginnings.

In the late ‘80s, the program was beset with stories of rampant abuse and even fraud. Tales continue to be told of tribal members, who despite their high credit risk or inability to repay a loan, received loans in the tens or hundreds of thousands of dollars. There were stories that loans were put on the fast track and approved due to one’s political connections. To this day, many of the loans remain unpaid, officials said. "But we’re in line with the national average of loan repayments," said Phillip Scott, chief financial officer for the tribe’s Division of Economic Development.  

In the early years there was "a surge in loan activity that eventually tapered off," said Scott. For many years, only about five serious candidates were seeking loans every month. And on a yearly basis, they were approving about 10 loans a year for an area larger than 10 of 50 states.  

Then in December 1996, officials started another program: a micro enterprise loan. It was a cottage industry type of loan that ranged from $2,500 to $7,500. "For our micro-enterprise loan program we’ve approved 102 loans, of which 42 are outstanding since the program started," Scott said. There’s now talk about raising this amount to $10,000.

But what really put a damper on the tribe’s effort occurred in 1995 when the BIA ended its small business grant program. "There was a drop in applicants," said Watchman. "For several years, no one was really coming through the doors." The grant matched 25 percent of the total cost of a project, according to BIA in-house polices, said Aguirre. A person could get a maximum of $100,000, and it served as a major funding source and incentive for small businesses that desperately needed capital.

Nevertheless, tribal officials now have 57 outstanding loans in the range of $10,000 to $150,000, and 15 loans over $150,000.

"A lot of people we’ve made loans to have been in business for many years," said Scott. "They employ people."