Minority-owned businesses are challenged to compete in a marketplace that is constantly moving the needle and demanding suppliers provide quality goods and services at tighter margins and at a faster pace of delivery.
Better, cheaper and faster are the new normal in requirements for most corporate contracts. Minority firms rely on federal support to maintain their competitiveness and to expand beyond the U.S. into global markets.
Since the election of President Donald Trump, who proposed aggressive cuts in the federal budget, there has been uncertainty in the small and minority business communities if programs that support their businesses will continue to be funded.
When the President announced his Administration’s 2018 proposed budget, the Minority Business Development Agency (MBDA) and U.S. Small Business Administration (SBA) were on the list of federal agencies slated for deep cuts. The proposal included an over $43 million reduction in funding to the SBA and the defunding of the MBDA.
The MBDA is the only federal agency that solely supports minority-owned businesses. The agency provides funding for a network of 43 Minority Business Centers located in cities with high minority populations throughout the U.S. The Centers provide minority entrepreneurs with business development support to ensure they can compete in the U.S. marketplace and beyond.
Companies that are clients of the MBDA are fast-growing, innovative and represented in every industry sector. In recent years, the MBDA has focused its attention on industries that have not traditionally been inclusive of diversity including the construction and manufacturing industries. In the last three years, the agency facilitated an average of $3.58 billion in contracts each year for minority-owned manufacturing firms.
The MBDA’s annual budget of $36 million, which is only $0.11 per American, is one of the smallest of all the federal agencies. For every federal dollar spent, the MBDA receives the highest return on investment. Minority businesses stand to lose out on hundreds of millions of dollars in contracts if the Administration’s proposal to defund the agency is implemented.
Farad Ali, president and CEO of The Institute in Durham, N.C., shared his perspective, “The MBDA is the only agency that focuses exclusively on minority businesses without any restrictions. No other governmental agency advocates solely on the behalf of these businesses, and monitors legislation that affects minority businesses and communities.”
Access to capital is a critical component in developing competitive businesses. Minority firms are more likely to be denied loans at a rate nearly three times higher than non-minority firms.
Minority firms are likely to pay higher interest rates. On average, they pay 7.8 percent while non-minority firms pay on average 6.4 percent. Minority firms are less likely to receive loans, and when approved, they receive lower loan amounts.
“The MBDA network is heavily involved in securing all types of capital for MBEs and in advocating on behalf of MBEs to ensure fair laws and practices when it comes to capital. The MBDA Network focuses on these challenges, and works to eliminate these barriers,” said Ali. “Furthermore, the MBDA programs significantly contribute to the continued economic development of the minority communities. African-American and Hispanic-owned businesses employ 6.5 million minorities and contribute $1.4 trillion in economic output. The country’s 8 million minority firms represent nearly 30 percent of all U.S. business.”
There are a number of initiatives that have launched to defend these agencies against the proposed budget cuts.
The Congressional Black Caucus (CBC) released a response to President Trump’s question to the African-American community, “What do you have to lose?”
In the 130-page document titled, “Solutions to Advance Black Families in 21st Century,” the CBC offered what it called a “guiding post” for the Trump Administration. It referenced the MBDA and SBA as vital to the minority communities and local economies.
For the first time, President Trump met with the CBC in late March 2017 to discuss his proposed budget.
Following that meeting, Rep. Cedric Richmond (D-LA), chairman of the CBC, said, “We told him how problematic that his budget was. And we answered the question for the president. His question was, ‘What do you have to lose?’ And, we gave him our policy document, and we talked to him about here’s what we have to lose. When you start talking about closing minority business development centers and community development financial institutions which help African-American entrepreneurs start, when you defund the Second Chance Act and other key programs, it’s just a budget document that really makes it harder for poor people, black and white, to rise out of poverty. It is not a document that protects people in rural areas or inner cities. And we wanted him to know that.”
California Congressman Jerry McNerney led two bipartisan letters to the House Appropriations Committee, imploring Congress to fund the MBDA in the FY2018 appropriations and recommending MBDA provide an annual policy report to Congress to address gaps in equity between minority and non-minority owned firms.
“The MBDA was established by President Richard Nixon in 1969 for the establishment, preservation and strengthening of minority business enterprise,” said Rep. McNerney.
“This is a historic and exciting time for minority-owned businesses, which are expanding in ever-increasing numbers, beyond neighborhood retail and service industries and into modern high-tech and manufacturing,” he said. “We must make every effort to empower and support the growth of minority-owned businesses; their contributions to local economies and communities cannot be overstated.”
“Companies are looking at minority communities as powerful consumers, and we, as Americans, should look to the same communities as innovators and job creators. MBDA has a significant role in the ecosystem of entrepreneurship and community development. Funding MBDA is, and will remain, a priority,” said Rep. McNerney.
One Atlanta-based staffing agency knows firsthand the benefits of the MBDA to small minority businesses. Sanquinetta Dover, president and CEO of Dover Staffing, has been a client of the MBDA since 2003. Dover Staffing is one of many minority businesses that has experienced significant growth due to its relationship with the MBDA.
“The MBDA has provided my company invaluable support over the years. With the supplier development coaching that emphasized infrastructure development, my company grew from $1 million to $8 million in revenue. The development of a strategic plan and access to capital afforded to me were critical to my business growth,” said Dover. “I am very concerned that if the Agency is defunded, there will be no government agency to advocate on the behalf of minority businesses. Other minority suppliers won’t be able to receive the coaching necessary for them to grow their businesses. This could have an adverse impact on not only minority businesses but also the minority community as job creation will be impacted.”
When asked what the minority community can do to show support to the MBDA, Dover said, “It’s time for us to become stronger advocates. I encourage everyone to speak up, write your congressmen and let them know that the MBDA is critical to the success of our businesses and to the economic growth of our communities. We need the MBDA to continue to provide invaluable business development coaching and technical support so that we can continue to thrive as a community of business owners, employers and tax payers.