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According to the policy brief, “minority communities represent the most potent potential market in the American economy...Minority businesses are growing even faster than the population in terms of both numbers of new firms and revenues.” Despite this potential, this emerging and largely untapped domestic market has been a “historically underserved business market and is being constrained by inadequate capital access”.

The Milken Institute has researched, identified and quantified the “emerging domestic market” in the article. In addition, they have analyzed traditional bank lending practices and have proposed alternative financing techniques that would improve capital access to minority enterprises.

Through a public-private partnership encompassing government programs and private capital markets, existing programs would be consolidated to leverage the supply of private capital and, hence, carve new channels of equity and debt to “emerging” minority businesses. Collateralized Loan Obligations (CLOs) would be developed from a pool of minority business loans to establish Special-Purpose Vehicles (SPVs), ideally through an existing government agency, to implement a secondary market for CLOs to fill the financing gaps. The SPVs would administer pools of small business loans purchased from lending institutions.

Credit enhancement would be promoted through a Credit Reserve Fund (CRF) that would insure the loan pools against default and prepayment risks. The loans would then be repackaged for resale to private investors. Check out www.milkeninstitute.com for more about the organization’s work or to view a copy of the article on-line.

Locally, on the political front, Councilman W. Wilson Goode, Jr., in his first resolution, called for an annual review of small business lending practices in the City of Philadelphia. Prompted by evidence of inequities in his Greater Philadelphia Capital Access report, the annual review will give the Mayor and City Council a clear picture of lending to small businesses.

In keeping with the mission of the MBDA, the PMBDC intends to remain abreast of the financing obstacles encountered by the minority entrepreneur and facilitate strategic alliances that will provide access to public/private debt and equity financing while coordinating and leveraging public and private resources.

Black Enterprise© Highlights the work of the MBDA

Serving on the Board of Economists was Anita Cooke-Wells, the director of the Office of Capital Access at the U.S. Commerce Department's Minority Business Development Agency (MBDA). Through its minority business development centers, the MBDA assists start-ups and existing businesses in obtaining financing for their firms. Cooke-Wells is directly responsible for developing and administering programs to increase access to debt and equity capital for minority businesses.

Mrs. Cooke-Wells also stressed in another part of the article the need to have a professional business plan, in hand, when seeking out potential investors or lenders. Call Marjorie Anderson, PMBDC Director at (215) 569-3500 ext. 117 for an appointment to schedule your FREE consultation so that the staff of the PMBDC can put together your professional business plan and provide you with the technical assistance that will make a difference.

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SUCCESSION PLANNING: Transferring the Family Business to the Next Generation

Succession planning is more than simply a strategy for leaving a business, it is instead, an on-going process that provides for the survival of the business long after the original owner has retired from active participation.

Proper planning may require input from various professionals such as lawyers, financial planners, appraisers, insurance agents, accountants, and bankers. Issues that should be addressed during the planning process include:

• Do we groom a successor or go outside the family/corporation?
• What are the tax implications of the transfer of ownership?
• Will the owner stay involved?
• Is there a need for a covenant not to compete?
• What will the impact be on current key employees?
• Are there adequate incentives for current employees to remain active?
• Are there intra family feuds that must be managed?
• What liquidity issues are there?
• Is a bona fide buy-sell agreement in place?
• Will the owners and the business needs be better served by employing a redemption agreement, cross purchase agreement or a hybrid agreement?
• What are the estate and gift tax implications?

Export Training Program Available to Assist Minorities

Free Business Workshops Sponsored by the PMBDC

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THE MINORITY ENTREPRENEUR SPOTLIGHT:

In 1998, the Philadelphia PMBDC assisted the firm with a five year forecast that projected revenues at $5 million by 2002 and a cash flow analysis showing the use of a $500,000 capital loan for equipment expansion and payroll. The dynamic owner, Gail M. Conner, has graced the cover of the August, 1998 edition of Black Enterprise© magazine in an edition entitled, “Business Dynamos: Women Business Achievers” and was recently named “Business Woman of the Year” by the Great Valley Regional Chamber in April, 2000.

Gail’s Business Strategy: “Don’t mimic the competition; provide solutions that help clients to be self-sufficient.”

Before a building can be remodeled or major construction performed, Conner and her employees go in and assess for dangerous chemicals such as lead and asbestos, estimate the contamination and then recommend companies to do the cleanup. Her firm will often go in to a job site where larger environmental firms have proved ineffective, correct the problem and then teach the client how to implement the new solution.