Minority Business: Loaded Dice - State of Black Businesses Still Separate and Unequal


	This page is an archive. Click here to visit this section. Loaded Dice State of Black Businesses Still Separate and Unequal Fifty years after the landmark Brown vs. Board of Education decision, black-owned businesses in the United States remain separate and unequal from the American economy, according to the first annual State of Black Business report. Entitled “Loaded Dice,” the report, by BlackCommerceMall.com, cites economists who have found that black firms are twice as likely to be denied credit due to racial discrimination. Access to capital is the most critical element to black business success, the House Small Business Committee was told in February at a hearing in Chicago. It also notes federal statistics that only 742 black companies gained defense contracts in the most recent fiscal year reported — a year when the Department of Defense had 5.8 million contract actions. Less than one percent of all defense contracts went to African American owned businesses, although blacks make up 20 percent of the uniformed services. The total number of companies certified as small disadvantaged businesses (SDBs) by the Small Business Administration, just over 9,000, is one/one-hundredth of the number of African American owned companies, 832,000, according to the latest Commerce Department statistics. The SDB designation includes other minority groups and persons with social disadvantages. The Small Business Administration’s 7(a) program served in 2000 only 2,000 African American owned businesses down from a high of 2,600 in 1995, a decline of 24 percent, (Small Business Administration) despite a growth of 60 percent in the number of black-owned businesses from 1992 to 1997(Census of Black-Owned Business). Less than .05 percent of the $90 billion in venture capital over the past five years went to black entrepreneurs, most from funds specifically targeted to minority and women owned businesses. (Professor Steve Rogers, Northwestern University) “Small businesses that were owned by African Americans were more likely to be denied credit and have unmet credit needs as the level of lender market concentration increased.” (Cavalluzzo, Wolken, Cavaluzzo, “Competition, Small Business Financing and Discrimination” 2001) Black-owned businesses received $549 million in contracts from the Department of the Army, out of $39.1 billion -- a ratio of 1.4 percent. A General Accounting Office study in 2002 shows that women-owned business enterprises receive almost half of the contracts awarded to small disadvantaged businesses. It took General Motors 14 years to grow from $1 billion in minority procurement to $2 billion in 1999. Then the National Minority Supplier Development Council allowed firms with only 30 percent minority ownership to be counted as minority-owned businesses. By 2002, the same automaker reported $6.2 billion. For black-owned businesses, the top five industries for survivability were legal services (79.1 percent survival rate); social services (66.4-percent survival rate); Real Estate (57.0-percent survival rate); Insurance Agents, Brokers, and Service (56.2-percent survival rate); Miscellaneous Retail (54.1-percent survival rate) The Commonwealth of Virginia is rated the friendliest state for black-owned businesses in a new annual study of The State of Black Business. Virginia ranked highest on seven evaluation criteria. The Commonwealth has hosted black-owned businesses since 1651, however they particularly praised its efforts to develop future oriented businesses such as technology and motion pictures in Virginia. Virginia has the only state Department of Minority Business Enterprise, which circulates a quarterly list of minority vendors to all public purchasers around the state. It’s P.A.C.E. program encourages lenders to make credit available to minority firms at fare rates. Fast growing Fairfax County sponsors an annual conference for black-owned cutting edge companies. “These mechanisms have been maintained despite the unfavorable decision in the Croson case which struck down a City of Richmond affirmative action policy,” states the report. “New Gov. Mark Warner has required that state agencies submit a quarterly report on the utilization of minority businesses.” “There is statutory authority, executive commitment from both parties, and effective accountability mechanisms,” said John William, executive editor of BlackMoney.com. “Virginia sets a standard which other states can follow.” The State of Maryland is rated the second-friendliest state for black-owned businesses. Maryland has the highest percentage of black-owned businesses in its general business population, noted the authors of “Loaded Dice”. They particularly praised its efforts to make capital available through the Maryland Small Business Financing Authority and even micro-lending programs such as Maryland Capital Enterprises. The State of Maryland’s Minority Business Enterprise law, passed in 2001, raises the goal from 14 percent of state contracts to 25 percent with a specific sub goals or split goals within the 25% MBE goal of 7% for African Americans and 10% for women. “One of the problems around the country is that disadvantaged business programs make it difficult to track the specific results for black-owned businesses,” said Templeton. “Maryland sets a standard which other states can follow.” The Commonwealth of Massachusetts is rated the third-friendliest state for black-owned businesses. Massachusetts increased its purchases from minority businesses 14.5 percent from 2000 to 2001. This was achieved by an Affirmative Marketing program run by 100 representatives throughout state agencies, mandated by Executive Order 390 by then-Gov. William Weld. “One of the problems around the country is that disadvantaged business programs make it difficult to track the specific results for black-owned businesses,” said Templeton. “Massachusetts differentiates between minority business and women-owned business efforts.” The state of Nevada is rated the fourth-friendliest state for black-owned businesses. The Nevada legislature passed in Feb. 2003 legislation requiring a preference for underrepresented businesses both in state and local government agencies and in regulated businesses by the Nevada Gaming Commission. “The legislators understood that a tourist magnet such as Nevada should make business opportunities widely available,” said John William Templeton. The law was based on two disparity studies done in Clark County, home to Las Vegas in 1994 and 2002. The state of New York is rated the fifth-friendliest state. New York has sustained a long-standing set of programs to assist black-owned firms. The Division of Minority and Women’s Business Programs was created by Article 15-A of the Executive Law of the State which requires all public agencies to meet goals for procurement from minority businesses. Black-owned businesses have made New York home since it was under Dutch rule. To to revitalize areas like Harlem and South Bronx, the businesses from those communities must have the opportunity to compete. The Tar Heel State ranked sixth most friendly to black-owned businesses in study. North Carolina has taken innovative and comprehensive strategies to enhance black-owned business. Both then-Gov. Jim Hunt and the General Assembly took two actions to maintain a commitment to minority business. Executive Order 150 in 1999 created an office of Historically Underutilized Business, an office made part of law under Senate Bill 1005 in Sept. 2001. Like Virginia, the office keeps quarterly records on the utilization of such businesses by every agency funded by the state, including colleges and universities not under the govenor’s direct control. Some states ran and hid when unfavorable court decisions came out. North Carolina fine tuned its effort to its commitment. The state of Georgia, ranked the seventh-friendliest state for black-owned businesses, has d the positive steps taken by Atlanta leaders such as the late former Mayor Maynard Jackson. The state prepares an annual report on Minority Business Utilization and started a mentor-protege program under former Gov. Roy Barnes to link minority firms with larger contractors. State procurement rose from 2.5 percent to 7 percent for minority businesses from 1997 to 2001. “Minority business development needs to be accountable and to get results,” said Templeton. “Georgia has been using its record keeping to drive progress.” The state of Florida is the eighth-friendliest state. Florida has directly focused on access to capital. Beginning July 2002, House Bill 1323 created the Florida Minority Business Loan Mobilization Program which provides working capital loans to small and minority businesses that serve as contractors and subcontractors on contracts that have been awarded to them by the state. It is clear that access to business credit is a real barrier, Florida is taking steps to address that. Indiana has monitored the specific barriers facing black owned businesses. Public Law 34 created the Commission on Minority Business Development in 1983 run under the Department of Administration. The state followed up on that effort with a disparity study in 2001, which pointed out areas of improvement. States need to realize that black businesses equate to economic development. Their needs deserve constant attention. The state of Mississippi is rated the tenth-friendliest state. Mississippi has attempted to include black businesses in the overall economic development effort. The Mississippi Development Authority operates the state’s minority business enterprise division, which maintains a list of certified minority businesses. It also supports a minority/micro loan program, surety bonding efforts, franchising support and a linking program between minority businesses and the new Nissan factory. There are regional offices in areas such as the Delta and Gulfport. “If black businesses get the same kind of help that other firms routinely get, they will do well,” said John William Templeton, executive editor. “Mississippi is using business development to go after poverty.” Seven factors went into the state-by-state evaluation. 1. Did the state recognize that black owned businesses have unique needs? 2. Are there public or private efforts to assist with access to capital? 3. Is there accountability for meeting goals to contract with public or private agencies? 4. Is there growth in public procurement opportunities for black-owned firms? 5. Is the number and scale of black-owned businesses growing? 6. Are technical support programs readily available? 7. Is there executive leadership on behalf of black-owned businesses? “Loaded Dice: The State of Black Business” found that five states create a hostile environment to black-owned businesses through specific policies or practices. California ranked as the most hostile state, followed by Texas, Washington state, Washington, D.C. and New Jersey. Even prior to the passage of Proposition 209, California only achieved a level of 1.7 percent contracts awarded to black-owned companies, notes Loaded Dice editor John William Templeton, executive editor of blackmoney.com. Now the state does not address the needs of black businesses directly at all and conservative activists challenge the efforts of localities to do so, using Proposition 209. “For three years, the Wilson administration and that of previous Republican Gov. George Deukmejian failed to write implementing legislation for the program approved by the legislature in 1988,” he noted. “After two years of implementation, the amount of contracts awarded to black-owned businesses was only 1.7% of all contracts let by the State of California (source. State Office of Small and Minority Business 1993-1994 report). In Washington state, which passed a similar initiative, black-owned business procurement fell 60 percent in the first year after the law’s implementation. Texas lacked a visible public policy to promote black-owned businesses. Washington, D.C.’s government concluded in a task force report that its programs to help local small businesses were ineffective. New Jersey decided in 2003 to stop enforcing a contracting diversity law that specifically targeted black-owned firms. “Loaded Dice” prepared John William Templeton is former editor of the San Jose (CA) Business Journal and author of “Blackmoney: Advanced Strategies for Maximizing the $1 Trillion Blacks Receive Worldwide Yearly and Success Secrets of Black Executives”. “Loaded Dice” can be purchased online at blackmoney.com. BlackCommerceMall.com is headed by Frederick E. Jordan, board chairman of the National Black Chamber of Commerce and past president of the San Francisco Black Chamber of Commerce. The site provides e-commerce access to 300 black-owned companies. Templeton prepared the report. •

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