Acquiring business capital

GETTING the necessary capital to start a business is one of the biggest problems potential entrepreneurs have to face, especially minorities and women. African-Americans are among the group that's more likely to start a new business this year, but growth capital requires a new agenda in today's marketplace, according to the latest report by the Boston Consulting Group. "The good news is that minority entrepreneurs can indeed close the gap with their competitors in the broader business community if they operate innovatively, radically change the way they think about business, their customers, and their competition--and move aggressively," the study found.

Today, more Black women are becoming entrepreneurs, and they and other minorities own 14 percent of all U.S. businesses, according to the U.S. Census Bureau. Even so, women and minorities still have a more difficult time acquiring capital and contracts on the federal, state and local levels, says Nydia Velazquez, ranking Democratic member on the House Small Business Committee. During a recent congressional Minority Business Summit in Washington, D.C., it was determined that on average, women and minorities are receiving smaller loans from banks, are more likely to be denied lending opportunities and are receiving less venture capital.

Without that capital, many women and minority business owners experience limited growth potential, and find themselves borrowing from financial institutions or depending on family and friends to finance their business dreams. "There is a serious business ownership divide in this country when minorities make up nearly one-third of the population, but own only 15 percent of businesses," says Rep. John Barrow (D-Ga.).

To level the business playing field, minority-owned firms like Chicago-based Mohimi Ventures provide fee-based conferences for established leaders and diversity suppliers of major corporations to interact firsthand with women and minority entrepreneurs. Networking, building relationships with potential lenders and investors, gaining insight on financing and, in some cases, making deals in an open forum are among the keys to unlocking capital, says Fatemeh Hall, Mohimi Ventures' president and CEO.

Mohimi is one of several resources available today to assist women and minority entrepreneurs to become more successful and overcome barriers. For example, the Small Business Administration's SBA8 (a) Program assists socially and economically disadvantaged small business owners with obtaining capital, technical assistance and other training.

Raising capital--whether it's from "angel" investors, venture firms, banks or other sources--is difficult for men and women, but some financial experts acknowledge that the hurdles are higher for women- and minority-owned businesses. There's a perception that women and minority small business owners lack the required experience, management skills and sufficient personal finances to qualify for growth capital.

Acquiring venture capital is even tougher and riskier. Studies show that only 4.2 percent of $19 billion in venture capital was allocated to women-owned businesses in 2003. The disproportionate low share compared to male business owners may result from the fact that many women- and minority-owned businesses have fewer than $250,000 in assets and aren't taken seriously by some venture capitalists, experts say.

Both minority and majority communities will enjoy stronger economies and communities, experts say, if they build upon each other's assets and develop strategic partnerships to seize future opportunities to grow.

COPYRIGHT 2006 Johnson Publishing Co.
COPYRIGHT 2008 Gale, Cengage Learning