Report: Minority businesses need greater access to capital

Minority-owned businesses are thriving despite limited access to venture capital, loans and the federal marketplace, according to a report released this week by the ranking Democrat on the House Small Business Committee.

The Minority Business Summit Report, released by Rep. Nydia M. Velazquez (D-N.Y.), focused on anecdotal evidence gathered by speaking with more than 70 minority entrepreneurs who attended the Minority Business Summit in September.

There are currently 4.1 million minority-owned businesses in the United States. They generate nearly $700 billion in annual revenues and employ more than 7 million workers, the report states.

However, the average 7(a) ES to a minority-owned small business declined from $290,000 in 2000 to just more than $168,000 in 2005, according to data from the Small Business Administration quoted in the report.

The average loan to an African-American owned business in 2005 was just $80,000, while the average for a Hispanic firm was $123,000. 7(a) loans are the basic SBA loan, and are at least partially guaranteed to the lender by the SBA.

The Summit Report further states that minority-owned small businesses are shut out of the venture capital market and have a hard time securing funds from so-called angel investors, or wealthy investors who serve as informal venture capital sources.

The report also states that the SBA's 8(a) program, which was created in the 1960s to provide business development to minority-owned businesses, is now antiquated to the point that the report charges that the 8(a) program aided in reducing the contract opportunities to minority-owned firms in 2005 by more than $2 billion.

To reform the 8(a) program, Rep. John Barrow (D-Ga.) introduced the Minority Owned Venture Empowerment Act, with an eye to further opening the federal market to small, minority-owned firms.

Velazquez also introduced legislation to help minority-owned business gain access to capital. The Angels Nurture Growing Entrepreneurs into Long Term Successes Act encourages investment in minority entrepreneurs. The legislation creates an angel investment program within SBA that would give priority to minority business owners.

"By working to ensure angel investors make investment in minority entrepreneurs a priority, we are increasing the amount of capital that is going into the hands of our nation's minority business owners," Velazquez said in a statement.

The Minority Business Summit report will be made available online next week.