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Minority-Owned Businesses Face Critical Challenges
Fastest Growing Business Sector of the U.S. Economy Must Remain a National Priority
WASHINGTON—Today’s current economic crisis presents a heightened challenge to the more than 4.1 million minority-owned businesses, the fastest growing business sector of the U.S. economy. According to Minority Business Development Agency (MBDA) reports, many minority entrepreneurs rely on short-term debt to finance their business – for example, revolving credit lines or business and personal credit cards. In the current economic environment, not only is it more difficult to receive loans and services from financial institutions, but the price of borrowing is too high.
The Federal Reserve recently reported that 65 percent of domestic banks have tightened lending standards since July 2008. More than 70 percent said they were charging more interest for loans. This impacts cash flow and stunts the expansion of minority businesses, resulting in decreased growth and capacity and therefore, fewer jobs generated.
“As the markets begin to unlock, I urge our nation’s lending institutions to extend credit to minority businesses,” said MBDA National Director Ronald N. Langston. “As the fastest growing segment of the business sector, the U.S. economy cannot afford for these businesses to stagnate, or worse, fail. Making sure that minority firms of size, scope and capacity have access to capital to grow their businesses and generate new jobs should remain a national priority,” added Langston.
MBDA continues to advocate for and promote minority-owned businesses as a solid investment opportunity with lending institutions including traditional banks and private equity firms. MBDA, through its network of centers nationwide matches and sources minority-owned businesses with the appropriate lending institutions. For example, in fiscal year 2007, MBDA facilitated $575 million in financial transactions for minority-owned businesses. The Agency is also actively collaborating with the Department of Treasury, New America Alliance, National Association of Securities Professionals and others to ensure qualified minority firms are full participants in the implementation of the Emergency Economic Stabilization Act (EESA).
According to MBDA’s The State of Minority Business Enterprises , minority-owned firms generated more than $661 billion in annual sales and employed approximately 4.7 million people. From 1997 to 2002, the number of minority firms grew at a rate of 35 percent. By comparison, the number of non-minority firms grew at a rate of 6 percent. During the same time period, the growth in annual gross receipts was also much greater for minority-owned businesses, at a rate of 13 percent, compared to non-minority forms which only grew 4 percent.
“The U.S. is an entrepreneurial economy. Innovation is the lifeblood of entrepreneurship and competitiveness,” Langston says. “With the appropriate policies in place, minority-owned businesses have -and will continue to- provide new jobs, new products and increase expansion into new domestic and global markets.”
About the Minority Business Development Agency (MBDA)
MBDA (www.mbda.gov), an agency within the U.S. Department of Commerce, serves minority entrepreneurs across America who are building and growing enterprises. In doing so, minority-owned firms are better equipped to create jobs, impact local economies and compete successfully in domestic and global marketplaces. With a nationwide network of more than 40 business centers and strategic partners, MBDA assists minority entrepreneurs and business owners with consulting services, contract and financing opportunities, bonding and certification services, building business-to-business alliances and executive training.