Banking on the man from Hope: small black-owned businesses are looking to the Clinton Administration to help open access to much-needed capital - B.E. Report on Small Business; includes related article on five industries with the greatest potential for growth: health care, communications, technology, environment and specialized services and; includes list of business service organizations

Black Enterprise, Nov, 1993

Small black-owned businesses are looking to the Clinton Administration to help open up access to much-needed capital.

It's easy to identify the top concerns of African-American entrepreneurs: "Capital, capital and capital," says Anthony Robinson, president of the Minority Business Enterprise Legal Defense and Education Fund (MBELDEF) in Washington, D.C. "Access to capital remains issues Nos. 1, 2 and 3 for the minority business community." And access denied remains the most difficult challenge facing black entrepreneurs.

Nearly a year into the administration of President Bill Clinton, the economy remains troubled and growth is slow. After two prolonged battles between the President and Congress over how best to improve the economy, African-Americans aren't sure that Clinton can carry out his campaign commitments to minority business. Even worse, those commitments seem relatively low on his list of economic priorities. "Until he gets the words minority business out of his mouth, these businesses won't necessarily feel included in his message," says Harriett Michel, president of the National Minority Supplier Development Council Inc. in New York City.

To compound these concerns, Clinton's budget problems delayed key appointments to the Small Business Administration (SBA) and the Minority Business Development Agency (MBOA). This was most unfortunate, since funding for the SBA continues to shrink and its poorly managed programs enrage frustrated entrepreneurs.

African-Americans'discomfort about the nation's real commitment to black economic development is not unfounded. Self-employment - the first step on the path to entrepreneurship - accounted for 8% of white workers in 1992, according to Bureau of Labor statistics. For Hispanics, the rate was 5.2%, while for blacks, just 3.5%. The reality is that these numbers are little changed from 10 years ago.

Nevertheless, many African-American entrepreneurs believe that with Clinton in the White House their aganda will enjoy a higher priority than it has had for more than a decade. "At least give the man a year's time to get his ideas through Congress, and then implemented," says Dolores Ratcliffe, president of the Los Angeles-based Association of Black Women Entrepreneurs and the owner of Corita Communications. Joseph Gaskins, vice chairman of the National Coalition for Black Economic Development, in Maryland agrees: "I'm very optimistic. There is hope - that's what's been missing for so long."

Several Clinton appointees in high positions - including African-Americans who are key officials of the Department of Commerce and SBA - are pledging to reform federal programs to foster minority-owned businesses. Speaking before the National Urban League in August, Commerce Department Secretary Ronald H. Brown promised to "work to bring new, future-oriented businesses into the urban core; to encourage the expansion of business formation for minority entrepreneurs and other central-city residents; to help businesses in the inner city expand into growth industries; and to export products they produce to other countries."

Adds Dayton J. Watkins, Clinton's choice as acting deputy associate administrator for Finance, Investment and Procurement, "It appears that in the past, there was no commitment on the part of the President, and his administration including SBA to improve, to concentrate, and to focus on minority-business development in America. Now that's different, because of Clinton's leadership for minority-business development."

Money Is Still Tight

Unfortunately, neither the economy nor Congress is helping Clinton open up opportunities for small businesses. In fact, Clinton lost his first battle with Congress over a mild economic-stimulus package, after the nation showed signs of a slow recovery from the recession in the beginning of 1993.

Everyone now recognizes that this recovery is among the weakest of any in the post-World War II era. And one crucial statistic remains strongly negative: business loans. Last July, the Federal Reserve Board reported that business loans were down 3.5% from a year earlier. Meanwhile, capital remains "less available, due to the overall economy," notes Harold D. Brittain, director of programs for the National Association of Investment Companies (NAIC) in Washington, D.C.

NAIC represents specialized small business investment companies, or SSBICs. These venture capital firms (formerly called MESBICs, or minority enterprise small business investment companies) enjoy federal interest-rate subsidies and lend venture capital to both new and established small minority firms. Many credit NAIC's lobbying for helping to secure one of the few benefits small businesses won from the federal budget compromise in August: a change in federal tax rules to encourage investments in new ventures.

This change halves the capital-gains taxes on investments held in certain small businesses for at least five years, and allows all capital gains to be deferred on funds that are rolled over into SSBICs. The NAIC invested just $88.5 million in minority, women-owned and other specialized small businesses last year, a 40% drop from a 1989 peak of $147.6 million. "We hope to increase the private capital in the SSBIC industry by 50% to 100% within the next five years," says Brittain. The current level of private capital is $200 million.