DeKalb blames company for excessive overhead, loan losses

Among the loans handled by DEBCO was $35,000 given to Interim DeKalb CEO Lee May in 2005, the year before he was elected to the county commission.

Credit: BEN GRAY / AJC

Credit: BEN GRAY / AJC

Among the loans handled by DEBCO was $35,000 given to Interim DeKalb CEO Lee May in 2005, the year before he was elected to the county commission.


About DeKalb’s small business loans

A nonprofit company called DEBCO has administered federal small business loan programs in DeKalb County since 2000, but that relationship is coming to an end. DeKalb officials say DEBCO was inefficient and failed to collect nearly $1 million in loans, though DEBCO’s director says the company was financially responsible as it created more than 300 jobs.

Loans issued: 76

Loan principal and interest: $2.6 million

Loans written off: 24

Value of loans written off: $941,330

Source: DeKalb County

Note: DEBCO Executive Director Charles Blackmon said his figures are different from the county’s, and the value of the written-off loans is $762,000.

DeKalb County is ending its long relationship with a small business loan company that officials say spent nearly as much money on overhead costs as it did on lending, and couldn’t collect many of the loans that it did provide.

The company rejects the county's characterization, saying DeKalb skewed the facts about its spending of federal tax money.

About $941,000 in small business loans have gone uncollected by DeKalb Enterprise Business Corporation (DEBCO) over the last 15 years, said the county administrator who monitors the program. In addition, he said DEBCO’s operating expenses prevented it from helping more businesses than it did.

“Their business model and their inefficiency has been alarming,” said Allen Mitchell, the county’s interim director for the Community Development Department, during a committee meeting last month.

Among the loans handled by the company was $35,000 given to Interim DeKalb CEO Lee May in 2005, the year before he was elected to the county commission. May used the money toward opening an eight-screen Cinefe theater, but he later went into bankruptcy. He paid $8,500 of the loan before defaulting.

DEBCO Executive Director Charles Blackmon said the company created more than 300 jobs through the loans, and the write-offs and operating expenses were part of the cost of doing business.

“We have worked diligently to recover loans,” Blackmon said. “They [DeKalb officials] made every effort to put us in a bad light to cover whatever they want to be said. … I’ve got less problems now that I don’t have to deal with DeKalb County.”

DeKalb has contracted with DEBCO since 2000 to administer the county’s revolving loan program, which is federally funded through the U.S. Department of Housing and Urban Development’s Community Development Block Grant Program.

Nearly half of DEBCO’s $4.9 million in funding — including $773,000 for training programs — was spent on operational expenses including salaries, benefits and rent, according to the county’s figures. Of the remaining $2.6 million available for loans, the county’s figures show about one-third was written off.

DeKalb said DEBCO didn’t recover $941,000 in loans; Blackmon said the correct number is $762,000.

The loan given to May came from DEBCO’s microloan program for entrepreneurs, which it operates through the U.S. Small Business Administration to provide up to $35,000 to borrowers. DeKalb County partners with DEBCO for the Revolving Loan Fund, which provides up to $50,000.

“He took advantage of this program when he had a small business in 2005, and like so many others in the Great Recession, fell on insurmountable financial difficulties which forced him to file for bankruptcy,” said Burke Brennan, a spokesman for May. “The CEO is a huge proponent of small business and job creation. He believes in this program and believes it needs to be managed effectively and efficiently.”

DeKalb’s contract with DEBCO expires at the end of the year and won’t be renewed. The county is evaluating whether to hire another contractor or administer lending programs directly through the county government and affiliated agencies like the Decide DeKalb Development Authority.

“We want to be more efficient and less costly in delivering the loans,” Mitchell said in an interview. “At a lower cost, we can offer more loans.”

Business owners said the loans they received through DEBCO were essential to their success.

David Holt, who owns daVIDO’s $3.75 Pizza, said the loans helped his original south DeKalb location stay in business, keeping 25 people employed. He’s received about $100,000 through two loans, which he is continuing to repay.

“DEBCO has been a lifesaver for us. When we needed funds or financing, they’ve come through for us,” Holt said. “I hope this program doesn’t go away because we’ve been in business now for 22 years, and there have been times when we’ve run short on cash flow and needed to get equipment purchased.”

DeVon Hudson, a State Farm insurance agent, said a $40,000 DEBCO loan allowed him to pay training and licensing costs, resulting in him hiring two employees. Hudson has paid off most of the loan and is still making payments.

“It was at a critical point because if I hadn’t had that cash infusion, I may not have been able to hire those employees at that time,” he said.

After DeKalb restructures its small business loan programs, they should be run more effectively and have stronger county supervision, said Commissioner Kathie Gannon.

“It just wasn’t working. Things were falling through the cracks — mostly money,” Gannon said. “Without the kind of oversight they should have been having, it’s easy for people to get referred for loans and less easy to collect that money back.”

Though DEBCO will no longer work with DeKalb County, the company plans to move to another Atlanta-area location and continue offering U.S. Small Business Administration microloans, which don't require local government oversight.