A call to arms for Black business

Black Enterprise, Nov, 1996 by Carolyn M. Brown, Tonia L. Shakespeare

FACILITATING CAPITAL ACCESS

Alleviating the barriers to raising and accessing capital remains at the top of the agenda for minority- and women-owned businesses. NexGen's Howlette recalls his own experiences starting out four years ago. Trying to obtain a $20,000 line of credit, he was rejected by five majority-owned banks, even though he was given a guaranteed 80% loan commitment from the state of Maryland.

Industrial Bank in Washington, D.C. (No. 4 on the BE FINANCIAL 2s list), gave NexGen the money it needed. Since then, the bank has increased the company's line of credit to $250,000, has granted a second SBA-guaranteed term loan for $125,000 and is now considering an additional raise on their line of credit.

Ironically, those big banks that once turned Howlette away are now courting his business. But "we're staying put and keeping our money in Industrial," he exclaims. "They stuck with us in the beginning, so we are going to stand by them until the end."

Showing its resilience, the SBA doubled its loan volume from 1993 to 1995. Last year, $7.8 billion in 7(a) guaranteed loans went to 55,590 small business owners, a 52% increase over 1994. Of those, 13,400 loans worth $1.4 billion went to women-owned enterprises, up 86%; and 10,370 loans worth $1.6 billion went to minority-owned enterprises, up 53%. (The SBA's 7(a) program guarantees bank loans of up to $750,000 to creditworthy small firms.) Much of this volume came through the agency's LowDoc (low documentation) and prequalification loan programs.

Still, impediments to small business lending continue, says Mary Ann Mitchell, president of the National Black Business Council. And more black entrepreneurs must sacrifice to pay their bills, by, for example, capping into personal lines of credit to meet payroll expenses and overhead costs. To remove these barriers as well as the attitudinal ones set up by banking's old-boy network, black business owners must team up with private equity investors. They must also tap nontraditional sources that understand that small companies can become big businesses, such as AT&T's Credit Corp. and IBM's ICC Corp.

Howlette stresses that minority- and women-owned businesses need to take greater advantage of technology to help them level the playing field. "The government is already processing information online. [See "Doing Business the Paperless Way," this issue]. And eventually, everyone will be buying, selling and marketing over the Net." NexGen is the creator of CommerceNotes, which enables entrepreneurs who use IBM's Lotus Notes software tO obtain EDI capabilities at a fraction of the cost.

As they forge ahead into the 21st century, black businesses must find flexible, creative and efficient ways to expand their products and services. Not only must they learn ways to outpace the big boys, but to keep step with their global partners. Now, as the presidential battle comes to an end, it remains to be seen which policies will become casualties of war. Still, the reality is that small business owners are responsible for ensuring that their businesses and their communities thrive.