Panels, Findings and Plans of Action

FINDINGS

Business owners expressed a great deal of interest in federal, state and quasi-public contracting opportunities and how to access them. This was especially true of programs that may not be as visible to business owners as other programs are. For example, many businesses were familiar with the state's Operational Services Division, the State Office of Minority and Women Business Assistance, the Affirmative Market Program, the Massachusetts Department of Transportation and MassHousing. However, fewer businesses seemed as knowledgeable about the Department of Housing and Community Development (DHCD). In some ways, it is not surprising that the business owners are less familiar with DHCD. DHCD is a conduit for the receipt of financial resources, which flow from the state to third party entities - local housing authorities, community action agencies and private developers. While each of these third party end-users procure construction, design and other commodities, the fact that third parties are the source of procurement opportunities makes these opportunities less obvious to members of the vendor community that are not as familiar with them.

Business owners were also able to learn about the various programs offered through the federal government (HubZone, 8(a) and DBE programs) as well as through the state government (MBE/WBE programs and its ancillary components). However, given the level of complexity, or at least paperwork, of each program and the lack of transferability of "certification status" from one program to another, business owners expressed a degree of frustration that these programs do not work more in harmony with each other, especially since each program has a similar objective - increasing access to small businesses, especially minority and women businesses. Of course, each program has its own statutory history, which represents an evolving public policy response designed to ensure access to the target businesses. The reasons for the level of complexity, degree of paperwork and lack of transferability are of little comfort to the business owners.

One additional item that emerged was the time involved in seeking and obtaining minority business enterprise (MBE) and women business enterprise (WBE) certification from the state. While any statements offered during the summit are anecdotal; it seems clear that there is a perception engrained in the business community that it takes a long time to receive certification from the state.

PLANS OF ACTION

• Office of Access and Opportunity (OAO) to work with the Massachusetts Supplier Diversity Office (SDO) and state agencies, in particular the Department of Housing and Community Development (DHCD) to identify ways to continue to provide information on state agency contracting opportunities and how businesses can connect to them.

• OAO to provide input to federal efforts to improve business opportunities targeted to small, minority and women businesses. The federal government has formed an Interagency Task Force on Federal Contract Opportunities and Small Businesses. The work of this Task Force affords an opportunity to streamline programs to make them more user friendly to the target businesses.

• OAO to convene working group sessions with the Massachusetts Supplier Diversity Office, the Small Business Administration (SBA), and the Office of Small Business and Entrepreneurship (OSBE) to identify and bring forward public policy responses to address the concerns raised by business owners in attendance.

• OAO to work with the Massachusetts Supplier Diversity Office to identify and bring forward solutions to streamline the MBE/WBE certification process.

ACCESS TO TECHNICAL ASSISTANCE / BUSINESS DEVELOPMENT SERVICES AND ADVOCACY

FINDINGS

Minority and women businesses expressed a need for a variety of technical assistance and business development services. It is not clear that the range of available services is widely known to the summit attendees. Additionally, business owners also expressed a desire to be in alliance with other businesses.

A broad range of no / low cost technical assistance and business development services. Some of the organizations that provide such services include:

• The Massachusetts Supplier Diversity Office (SDO) offers access to technical assistance and business development services to certified MBE/WBE firms as well as DBE firms. In addition, over the past three years, the SDO (under the banner of SOMWBA) has offered multiple workshops focused on access to capital, access to legal services, etc. Finally, since its inception, the Operational Services Division (OSD) has provided workshops, open to all businesses but targeted to MBE and WBE firms, on state procurement processes.

• The Massachusetts Small Business Development Center Network, funded in part by the federal government (through the SBA) and in part by the state (through the Department of Business Development), provides one-to-one free comprehensive and confidential services focusing on, business growth and strategies, financing and loan assistance as well as strategic, marketing and operational analysis. In addition, the Network offers low cost educational training programs are offered across the state targeted to the needs of small business.

• The Massachusetts Office of Small Business and Entrepreneurship (OSBE) provides grant funding, each fiscal year, to support the provision of technical assistance to small businesses. Grant funding is targeted to non-profit, community-based organizations and is disbursed in such a way that funding reaches each region of the Commonwealth.

Additionally, throughout the history of M/WBE programs in the Commonwealth and continuing to the present, there has not been a consistent source of funding to support the provision of education and training, technical assistance, and capacity building services to M/WBE contractor firms. The state should identify a funding source that can be brought forward and maintained in support of the provision of education and training, technical assistance, and capacity building services.

PLAN OF ACTION

• OAO to work with OSBE, SDO and MSBDC Network to identify any gaps in technical assistance / business development services delivery and to develop strategies to close the gaps.

• OAO to work with ANF and MASSDOT to develop and implement an on-going technical assistance / capacity building program targeted to M/WBE contractor firms.
  

ACCESS TO CAPITAL, SURETY AND GUARANTY PRODUCTS

FINDINGS

For minority- and women-owned businesses access to affordable capital is essential. Whether it is start-up costs, expansion, purchasing or repairing equipment or even employee costs, there are always new expenses for minority and women entrepreneurs. Traditionally, minority- and women-owned small businesses have fewer assets to pledge as collateral and uncertain earnings, which present greater difficulty than larger businesses when it comes to securing necessary capital.

Today minority entrepreneurs still face challenges in securing capital. In general, banks make smaller loans to minority firms than to non-minority owned firms, even when controlling for equity capitalization, owner education, race, age, and experience. Recent research suggests that African American and Hispanic-owned businesses are subject to a higher denial rate for loans than are non-minority entrepreneurs, even after controlling for differences between firms. The challenges have been greater since the onset of the "Great Recession" and bank tightening of lending to all businesses, especially small businesses.

The situation facing women businesses is not too different from the experience of minority businesses. According to a December 2009 Forbes Magazine article, although it is difficult for all small businesses to obtain financing in the current environment, women-owned businesses face greater challenges. Additionally, according to research conducted by Babson research, only about 5% of all equity capital investments in the U.S. go to women-led businesses and just 3% get investments from venture capital. Women start-up companies use more of their own money, and less capital from outside investors, than men.

In sum, in order for minority- and women-owned small businesses to realize their full potential, these challenges must be overcome.

PLANS OF ACTION

• The Governor has filed legislation to create the Massachusetts Growth Capital Corporation with a recommended capitalization amount to meet the capital needs of small businesses, including minority- and women-owned businesses. Via the proposed legislation, the GCC will become a tool for meeting the capital needs of businesses that are not able to access traditional financing sources.

• The Office of Access and Opportunity will work with the Massachusetts Supplier Diversity Office, the Office of Small Business and Entrepreneurship and the Small Business Administration to understand how current federally- guaranteed loan programs may not be meeting the needs of minority- and women-owned businesses. The purpose will be to improve stakeholder understanding of these federally-guaranteed programs as well as to improve minority and women business access to and participation in these programs.

BEYOND CERTIFICATION - ACCESS TO SMALL BUSINESS SERVICES

FINDINGS

One of the challenges inherent in promoting access and opportunity to minority and women-owned businesses is that policy makers, program staff and the business owners themselves tend to view these businesses more according to the adjectives that describe the owner's ethnicity and/or gender and less according to the fact that these businesses are typically small businesses, which face the same challenges and barriers that other small businesses face in the market place. This specific panel was meant to break out of this paradigm and to engage the business representatives as what they are - small businesses! As such, this panel focused less on the challenges that confront minority and women-owned businesses and more on the range of services that are available to all small businesses, irrespective of ethnicity or gender, in the Commonwealth.

Based on the question and answer session that followed the panel discussion, the overwhelming majority of participants were most interested in two areas: improving and expanding access to state procurement opportunities and accessing working capital.

PLANS OF ACTION

• On Tuesday, June 29, 2010, the Governor signed an Executive Order establishing a Small Business Purchasing Program (SBPP). The program, which will be run by the state's Operational Services Division, requires Executive Branch agencies and departments to target small businesses when seeking non-construction goods and services valued between $5,000 and $150,000.

• On July 1, 2010, the consolidation of SOMWBA and AMP into the new Massachusetts Supplier Diversity Office becomes operationally effective and brings about the following benefits: Minority- and women-owned businesses will have a single point of entry to access certification services, technical assistance/business development services geared to enhancing businesses ability to compete and win public contracts, and access to procurement information.

• The Governor has filed legislation to create the Massachusetts Growth Capital Corporation with a recommended capitalization amount to meet the capital needs of small businesses, including minority- and women-owned businesses. Via the proposed legislation, the GCC will become a tool for meeting the capital needs of businesses that are not able to access traditional financing sources.

• The Office of Access and Opportunity will work with the Massachusetts Supplier Diversity Office, the Office of Small Business and Entrepreneurship and the Small Business Administration to understand how current federally guaranteed loan programs may not be meeting the needs of minority- and women-owned businesses. The purpose will be to improve stakeholder understanding of these federally-guaranteed programs as well as to improve minority and women business access to and participation in these programs.