Owner Damyn Johnson was cutting Chris Merizalde’s hair one cold morning a few weeks ago at the Grooming House, Johnson’s barbershop in Frogtown Square near University Avenue and Dale Street.
Johnson, 39, over the last decade, has expanded from four to eight chairs at his shop.
It’s part of a commercial intersection once best known for a strip club, a porn theater and vacant store fronts. The University-Dale intersection has rebounded with housing, small businesses and more over the last 30 years.
Johnson, a St. Paul native, credits some of his success at Grooming House to training and initial financing from Neighborhood Development Center (NDC).
“NDC gave me an opportunity,” said Johnson, who earned his barber credentials in 1999. He learned to cut hair working at his grandma’s former St. Paul shop and was interested in building his own business.
“Damyn is a beautiful example of why we do this work and how it positively impacts the community,” said CEO Mihailo “Mike” Temali, the 30-year leader of NDC and its predecessor. “He’s a community leader and role model. His shop gives off a vibe of classiness that’s powerful. He paid off our loans long ago. He’s climbing the economic ladder. He’s been a mentor to other entrepreneurs.”
Johnson also embodies a vision for the area that retired banker Bill Sands started pursuing in the 1980s.
Sands was concerned about the decline around his Western Bank, located near University and Dale.
He hired Temali, a native of St. Paul’s East Side, to start one of the Twin Cities’ first nonprofit small business training, development and finance centers. Sands made the first of two $100,000 investments in NDC. The plan: help working-poor neighbors — disproportionately women, people of color and immigrants who lacked the collateral, track record and credit history — to qualify for a bank loan, build the business acumen to take cooking, tailoring, haircutting and other skills into abandoned storefronts.
The University corridor was pockmarked with vacant storefronts thanks to closed and moved-to-suburbs car dealers, shops and restaurants.
“Banks used to do a lot of ‘character’ lending to small businesses, years and years ago,” recalled Sands, still an NDC board member. “The regulators, after every recession, got tougher and our minimum loan size kept going up. The federal and then the state government passed laws that let banks start [nonprofit] community development corporations.
“Temali had vision. And NDC has far exceeded anyone’s expectations.”
Today, NDC is a nonprofit community development financial institution with a $6 million loan portfolio. It has made 907 loans worth $23 million over the years. It has a five-year average annual default rate of 3 percent for clients not yet “bankable.” The median loan is about $25,000.
NDC has trained 5,600 prospective entrepreneurs in business plans, accounting, marketing and other disciplines. Only 20 percent open a business following the 11-week class offered throughout the Twin Cities in five languages.
NDC focuses on the lowest-income neighborhoods of Minneapolis-St. Paul, including University Avenue-Frogtown and the east side of St. Paul, the East Lake Street and West Broadway corridors in Minneapolis.
It develops, manages and owns several redeveloped business centers and incubators: Midtown Global Market and Mercado Central on E. Lake Street and Frogtown Square and Frogtown Entrepreneur Center.
“We have worked with 650 businesses that are open today, over 2,200 jobs, paying well over $6 million in state sales taxes annually,” Temali said. “We create 45 new businesses annually, 180 new jobs, and we’re helping 40 businesses expand each year.”
More than 75 percent of the business owners are minorities and hail from households that earn less than half the Twin Cities-area median income.
“We try to build neighborhoods from within through the people who live in those neighborhoods,” said Temali, 64. “We have a high-touch, high-risk approach. It’s worked. The biggest categories are food and construction.”
An NDC-trained woman opened NDC-backed Cajun Twist, a restaurant in Theodore Wirth Park in north Minneapolis last week.
The successful businesses include names such as Sonora Grill, S.O.S. Building Services, the Clearance Rack, Salty Tart bakery, Cook St. Paul, several small construction outfits and roofers, and Taqueria Los Ocampo, a family restaurant that has expanded to seven locations and 140 employees.
Wilder Research has concluded from a several-year-old study of 457 NDC-launched businesses that every $1 invested in NDC results in a $28 economic impact from jobs, payroll and taxes.
Last year, Wilder attempted to assess the “ripple effects” of NDC’s work in the low-income-but-game Frogtown neighborhood through the insights of business owners, community groups and neighborhood residents. Wilder found that NDC’s work enhanced communities through locally owned businesses, and by spawning other development, engaging and supporting minority entrepreneurs and creating a model for neighborhood investment.
Wilder found that Frogtown residents appreciated neighborhood restaurants and shops owned by minorities. The median wage paid by those businesses was $12.50 an hour.
NDC was viewed as a neighborhood advocate and promoter of minority business that also was effective with business, government and philanthropic stakeholders.
Temali, who is paid about $160,000 a year, oversees a staff of 34 people, and revenue in 2017 of $5.4 million from rent, services, and contributions from individuals, foundations, companies and government.
Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at firstname.lastname@example.org.