October 22, 1999
New York — Harriet R. Michel, president of the National Minority Supplier Development Council has announced a major new initiative that will enable minority-owned companies to access institutional venture capital, and help them to be more competitive in the world's new economic environment.
"Minority-owned businesses are positioned to contribute both to job growth and to the overall economic health of minority communities and the country as a whole," said Ms. Michel. "Lack of access to capital prevents minority-owned businesses from achieving their full potential."
A recent Federal Reserve System survey of more than 4,600 small businesses supports this fact.
The National Minority Supplier Development Council (NMSDC) expects to approve a new plan, "The NMSDC Growth Initiative," to address this lack of access to capital, at its October Board meeting.
"Thousands of minority businesses and our member corporations depend on our programs to promote minority business development across the country. These remain unchanged," says Ms. Michel. "Without question, this new option may benefit only the few companies that may be able to attract venture capital from professional institutional investors. However, we think it is important that minority businesses have the opportunity to utilize the financial tools that many other firms take for granted."
Providing a direct link between corporate America and minority-owned businesses is the primary objective of the National Minority Supplier Development Council, one of the country's leading business membership organizations. It was chartered in 1972 to provide increased procurement and business opportunities for minority businesses of all sizes.
The new initiative, requested by NMSDC corporate members and minority business owners, provides MBEs with the potential for substantial growth and the opportunity to access equity capital while retaining management and control, and the advocacy of NMSDC and its member corporations. The initiative is considered an important tool for MBEs to participate on an equal footing in the expanding national and global economies.
The Growth Initiative is part of a comprehensive NMSDC plan devoted to MBE growth, which also includes e-commerce, international supplier development, customized executive training and expanding outsour-cing and second tier opportunities with corporations.
"Over the past few weeks, there have been many references in the Wall Street Journal and other media to some organizations and individuals vigorously opposed to what they think is our position on this issue. In fact, none of them had seen the plan, which was finalized last week at a meeting of our Executive Committee," says Ms. Michel.
The purpose of the new plan is to provide a solution for one of the most demanding challenges facing a fast-growth minority firm— the need for external financing. This prompted a NMSDC Task Force to analyze different ways to expand the definition of certified minority ownership that allows a firm to retain its minority status and the majority of the voting stock.
"The keys to the success and growth of any business are outstanding products and services, a strong management team and capital, particularly equity capital. For the majority of MBEs, irrespective of size, they will not be able to survive unless they grow," says James H. Lowry, president of James H. Lowry & Associates, a nationally-recognized consulting firm that specializes in small business development.
"This is something we have been looking forward to for a very long time," says Charles Lee, Jr. chairman of NMSDC's National Minority Business Input Committee, which represents over 15,000 MBEs in the NMSDC national network.
"Debt financing restricts cash flow and requires a company to service its fixed debt obligation. Equity capital, on the other hand, an option for MBEs who are competitive enough to attract it from institutional investors allow the MBE to handle national and global contracts and broaden the scope of their products and services, while implementing a long-term profitability strategy. Debt financing has proven to be quite burdensome to companies that want to grow rapidly," Lowry says.
Joe Arriola is chairman of Miami-based Avanti/Case-Hoyt, specializing in commercial printing services with 1,060 employees and $158 million in anticipated 1999 revenues. Mr. Arriola believes that this growth option is fundamental to permit minority companies to grow and compete." Avanti/Case-Hoyt is #18 on the Hispanic Business list of largest Hispanic businesses.
Bill Parker, is president of Washington Cable Supply, an inventory control, materials management and logistics company providing telecommunications and utility products. He recently signed two one-year contracts totaling more than $100 million with AT&T. The company, located in Lanham-Maryland employs more than 100 people, and expects to add five additional locations in the next two years.
Mr. Parker agreed with Joe Arriola, saying, "It is essential that capital be made available for MBES to grow, otherwise we are going to get locked out."
William A. Kirk, president and general counsel of National Association of Investment Companies (NAIC), said that his organization is "pleased to work with the National Minority Supplier Development Council on the Council's "Growth Initiative'."
NAIC is a trade association of venture capital and investment firms substantially focused on the etnic minority marketplace. Through their investments, NAIC members seek to grow successful and profitable minority-owned or controlled companies of scale and size than can compete in the marketplace. In addition, several NAIC member firms also manage SBA-licensed Small Business Investment Companies (SBICs).
"Certain SBIC program policies are very similar to the NSMDC Growth Initiative and we look forward to contributing our experiences in this regard," said Mr. Kirk.
The NMSDC Network includes a national office in New York and 38 Regional Councils across the country. There are 3,500 corporate members throughout the network, including America's top publicly-owned, privately-owned and foreign-owned companies as well as universities, hospitals and other buying institutions. The Regional Councils certify and match more than 15,000 minority-owned businesses with member corporations that wan to purchase goods and services.
For more information about the National Minority Supplier Development Council, call 212-944-2430.
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