New Bill Would Distribute $3 Billion to Support Minority Firms Affected By COVID-19

Minority firms—including black-owned businesses—could get a whopping $3 billion equity infusion to help deal with the fallout from the coronavirus crisis under a new proposed bill.

The funding is part of the U.S. House of Representative’s “Take Responsibility for Workers and Families Act.”   Consisting of many provisions, the $2.5 trillion bill introduced in late March by House Democrats addresses the impact of the coronavirus crisis on families, businesses, and communities. The bill is separate from the $2 trillion coronavirus economic stimulus package that became law in late March.

A section of the fresh House act calls for funding of the “Initiative to Build Growth Equity Funds for Minority Businesses.” The bill authorizes $3 billion in grants that would be administered to those firms through the Minority Business Development Agency (MBDA). Part of the U.S. Department of Commerce, the MBDA’s efforts include supporting minority firms in all industries ranging from construction to manufacturing to information technology to professional services.

Grant recipients would have to issue a report to the MBDA every six months detailing how they used grant funds received and any other information MBDA requires.

The bill would require fund managers to annually report on their fund management activities, including providing information on such matters as fund performance; impacts of capital investments by industry and geography; and, racial, ethnic, and gender demographics of minority businesses receiving capital among them.

Black Enterprise was unable to get a comment from the MBDA on the proposed bill.

William Michael Cunningham, an economist and banking expert, says the MBDA deal has the potential to be very good for black-owned businesses. But he adds the $3 billion in capital needs to be allocated in a way that maximizes social return, not in a way that maximizes political gain for one side. If passed, the House bill would join other efforts to provide equity financing and investment for black and minority-owned firms.

In January 2020, the $150 million Citi Impact Fund was announced by the New York-based financial services giant. The support is largely intended to make equity investments in private American companies that have an upbeat effect on society.

Citi maintains it is actively pursuing opportunities to invest in businesses owned or run by minority and women entrepreneurs, including black firms. Mature minority-owned businesses can receive investments up to $10 million. Plus, early-stage companies can get seed investments.

In October 2019, the MBDA awarded a $1.4 million grant to the National Association of Investment Companies (NAIC), supporting a venture that will raise about $1 billion for new investment into minority-owned businesses. Calling itself the nation’s largest network of diverse-owned private equity firms and hedge funds, the NAIC’s goal is to start to deploy capital to MWBEs by this year.

Access to capital lingers as one of the biggest factors limiting the ability of many of the nation’s 11 million minority- and women-owned business enterprises (MWBEs) to increase in scale. The $1.4 million grant recognizes the obstacles faced by minority asset managers and the prioritization toward addressing the many challenges faced by these businesses, officials say.