Philadelphia Minority Business Development CenterTM

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Philadelphia Minority Business Development CenterTM - Summer Newsletter

$how Me the Money!
Addressing the Lack of Capital Access in the “Domestic Emerging Market”
In the fall of 1998, the MBDA, US Department of Commerce, created the Capital Access Task Force to discuss the problems faced by minority entrepreneurs in obtaining capital to start and grow their businesses, and to individually propose possible solutions to this problem. As a result, a report was issued entitled, “Mainstreaming Minority Business: Financing Domestic Emerging Markets: by Michael Harringtom and Glenn Yago.

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


The issue of capital -- why others have it and why you (at least statistically speaking) don't -- was the subject of the most recent Black Enterprise© Board of Economists meeting held in New York in an article entitled, “Capital Ventures: Gaining access to existing sources of financing remains a priority for black-owned firms” by Eric L. Smith.

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.

Get listed with the MBDA Phoenix Database


The Phoenix Database, is a listing of minority-owned enterprises doing business in the United states maintained by the Minority Business Development Agency (MBDA) of the US Department of Commerce. The Phoenix database. MBDA uses the Phoenix database in conjunction with the “Opportunity Database” to inform and refer listed minority companies of contract and other business opportunities via email and fax. This is a FREE service provided by the Department of Commerce’s MBDA and is available to all qualifying PMBDC clients. Call today to arrange for a free consultation with the PMBDC team and ask find out about the Phoenix database!

SUCCESSION PLANNING: Transferring the Family Business to the Next Generation


Statistics show that only 35% of family businesses survive the first generation. By the time the third generation comes of age, only about 20% of those closely held businesses are still functioning. One of the primary reasons for these rather bleak statistics is lack of succession planning.

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:

Given the poor odds of a family business surviving beyond the first generation, establishing a means of transitioning the business would seem warranted. Whether the owner’s goal is to transfer shares to a family member, fund his/her retirement, or simply sell the business and move on to start a new venture, succession planning should be an integral part of all closely held businesses.

Export Training Program Available to Assist Minorities


The Commercial Service of the U.S. Department of Commerce announces the Global Diversity Initiative to assist minority and women-owned businesses enter global markets. The initiative consists of export training programs in eighteen cities across the country, and an opportunity to participate in a trade event. The training participants will have the opportunity to meet with trade consultants who will present information that will aid firms in pricing and financing their products for export, legal issues, using the Internet to expand globally, and export documentation and licensing among other products. The Global Diversity Initiative is a unique training program, which is designed to prepare firms to sell their products and services internationally. The U.S. Export Assistance Center in Philadelphia, in conjunction with the Delaware River port Authority’s Southeastern Pennsylvania Expert consortium and the International Visitor’s Center welcome you to expand your business by learning more about the exciting export opportunities that await you! For more information, please contact Janice Barlow, international trade Specialist, at (215) 597-6101, ext. 16 or janice.barlow@mail.doc.gov.

Free Business Workshops Sponsored by the PMBDC


As a part of our commitment to provide access to local business professionals in our network, the MBDC hosts workshops geared specifically towards the minority entrepreneur. On June 21, 2000, the PMBDC hosted a Business Strategy Seminar co-sponsored by PennDOT DBE Support Services and the U.S. Small Business Support Service Centers. Based upon feedback from a survey provided to the more than 30 attendees, including minority business-owners and contractors, the seminar was very effective. Panelists provided information about the importance of business planning, and the legal and tax implications of the various entity choices available to the entrepreneur in the selection, formation and operation of their prospective businesses. In addition, representatives from the SBA and the Reinvestment Fund discussed bond financing and their respective lending programs. Look in our “Upcoming Events” section on the back page for the date of the next PMBDC Workshop!

Doing business in PA?


One-stop service for those looking to start a business in the commonwealth is available at: www.paopen4business.state.pa.us We checked it out. After completing the free registration on the website, you can find all the necessary forms to register and incorporate your business plus apply for a license to actively engage in business in the Commonwealth of Pennsylvania.

THE MINORITY ENTREPRENEUR SPOTLIGHT:


G & C Environmental Services, founded by Gail M. Conner in 1988, is an environmental engineering firm specializing in industrial hygiene and health & safety consulting. Located in the suburbs of Philadelphia, PA, with a staff of ten, the firm has exceeded $2.5 million in annual sales over the past three years. Consideration is being given to expansion into several new services including construction management, groundwater monitoring, drilling, laboratory services and hazardous waste analysis & disposal.

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.

G& C Environmental Services, Inc.
2 Street Road
Newtown Square, PA 19072

We wish Gail continued growth and success as she continues to shatter the myths about minority entrepreneurs!