President Obama's Big Plan for Small Businesses

President Obama’s Big Plan for Small Business

Gene Hale is a true believer in President Barack Obama’s approach to create an economy that’s “built to last” with its special focus on supporting small- and medium-sized companies as engines for job creation and industrial innovation.

In fact, the CEO of Gardena, California-based G&C Equipment Corp. (No. 34 on the BE Industrial/Service Companies list with $100 million in revenues), stresses that prime beneficiaries of the administration’s financing and contracting programs have been and will continue to be the nation’s 1.9 million black-owned businesses. “I think that the president has put in place some policies for the future, not just for the next two or three years, that will impact African American businesses and small businesses across the country,” asserts Hale. “Because of President Obama’s policies through the Small Business Administration, some small businesses have been able to secure working capital loans.”

Obama’s understanding of the need for businesses to gain access to capital as well as his crafting of opportunities through stimulus-driven construction projects, Hale says, has had a positive impact on larger companies like G&C, giving his customers the wherewithal to purchase construction supplies. Hale also embraces Obama’s vision of entrepreneurs expanding into advanced manufacturing, renewable energy, and global trade. As chair of the Small/Medium Enterprise Committee of the President’s Export Council, he applauds the SBA’s STEP (State Trade and Export Promotion) grant program and the Commerce Department’s collaboration with the Export/Import Bank to help small and minority companies gain credit and “navigate the system.”

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As Obama goes into full campaign mode, he must cite such examples to make his case to black entrepreneurs that his policies will move their companies forward in the next economy. That message is important to scores of African American entrepreneurs we interviewed for this article. The overwhelming majority maintain that his leadership in resurrecting the economy, encouraging business innovation, and passing a historic healthcare reform package, among other accomplishments, will earn their support come November. Some, however, want clarity on his second-term agenda and whether it will include targeted programs for minority businesses.

In his first term, Obama continued to support programs such as the SBA’s 8(a), New Markets Initiatives, and HUB (Historically Underutilized Business) Zone that directly benefit black and minority firms. However, the president stressed his initiatives sufficiently lift all entrepreneurial ships. In an exclusive interview with black enterprise, he maintains: “I’m not the president of black America. I’m the president of the United States of America … I’ll put my track record up against anybody in terms of putting in place broad-based programs that ultimately had a huge benefit for African American businesses.”

As the administration came to power, its first priority was overhauling a battered and bruised economy, one in which black businesses suffered the harshest blows. Says Ron Busby, president of U.S. Black Chamber Inc., an association of more than 100 business organizations: “The entire economy was headed down the tubes when the president took office so there’s no question that black-owned businesses were struggling, too. We probably won’t know the true, final answer for a couple of years, but the early signs are positive.”

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From the beginning, it has been evident that Obama has made bolstering small business a key component of his massive economic agenda that included the $700 billion Troubled Asset Relief Program, or TARP, which he inherited from the Bush administration; a $15 billion plan that increased SBA 7(a) and 504 Community development loan guarantees; gaining control and forcing the reorganization of General Motors and Chrysler; and enactment of the $787 billion American Recovery and Reinvestment Act that provided for, among other things, funding for highway and bridge construction as well as renewable energy and weatherization contracts. The president also says many small and mid-sized businesses can’t dismiss the fact that they were able to generate revenues during the Great Recession because of the “expansion of things like Earned Income Tax Credit and extending unemployment insurance … there were more customers who had money in their pockets.” At the same time, he assembled one of the most diverse economic and business development teams, demanded that cabinet members collaborate on inventive ways to fix the economy, and fostered a fully inclusive environment for business through legislative action and executive fiat.

Take the Small Business Jobs Act of 2010, considered the most sweeping such legislation in more than a decade. The law provides for “parity” among federal small-business contracting programs; makes it harder for agencies to “bundle” contracts; and holds prime contractors accountable to their own subcontracting plans. Moreover, Obama has reached out to mayors such as Atlanta’s Kasim Reed and Detroit’s Dave Bing to address economic challenges including small business development in the nation’s urban hubs.

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John W. Rogers Jr., CEO of Chicago-based Ariel Investments L.L.C. (No. 7 on the be asset managers list with $4.4 billion in assets under management), a major supporter who has known Obama for three decades, says the nation’s chief executive has routinely met with African American business leaders since his days as a state legislator.  Rogers has held “conversations with him about the contribution of a successful minority business community to the national economy. He has a lot of priorities as leader of the free world, but he vigorously supports areas tied to his core values.” Rogers, who also serves on the President’s Advisory Council on Financial Capability, adds that he has developed strong leaders in the White House such as Senior Advisor Valerie Jarrett, Deputy Assistant to the President Michael Strautmanis, and Executive Director of the President’s Council on Jobs and Competitiveness Don Graves, all of whom bring muscle and expertise to push his agenda through the federal bureaucracy.

But not everyone has been pleased with the administration’s first-term performance. Harry C. Alford, president and CEO of the 19-year-old National Black Chamber of Commerce, argues that black entrepreneurs have “fared far worse. Black procurement numbers are now the lowest since the beginning of the Civil Rights Act of 1964.” Kenneth Blackwell, a former Ohio State Treasurer and Republican candidate for governor in 2006, says although he doesn’t “root for the failure” of the president, “Obama’s policies failed to meet the objectives of economic growth and job creation; “they’re not working in jobs produced and people employed.” He also says his tax policies will “cut demand and business growth.”

And the Republican Chairman of the House Small Business Committee Sam Graves (no relation to Don) states that “the administration has not come to me with any solutions to help these businesses. The healthcare law, the Dodd-Frank Wall Street reform, the threat of tax increases, and the record amount of costly federal regulations have simply suffocated small businesses.”

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Democrats such as Rep. Cedric Richmond (D-La.) defend the president’s programs stating it has been “the Republican-led Congress that has held back economic growth and opportunity expansion.” But frustrated entrepreneurs like W. Randolph Lee, CEO of Jacksonville, Florida-based Raven Transport Co. Inc. (No. 42 on the be industrial/service companies list with $85.9 million in revenues) have grown tired of political jousting and believe both the Obama administration and the “do-nothing” Congress share blame for not changing the current U.S. federal tax structure. “You can’t have a 35% corporate tax structure, the highest in the world, and expect corporations to create jobs.”

The economy has hit black firms like a sledgehammer. Even with the administration’s inclusive approach and intra-agency outreach efforts, African American firms got a thin slice of stimulus-related contracts. For example, a report from the Kirwan Institute for the Study of Race and Ethnicity revealed that African American companies received only 1.1% of such construction contracts awarded between 2009 and 2010. Rep. Yvette D. Clarke (D-N.Y.), a member of the House Small Business Committee and Congressional Black Caucus, says the impact had been “limited because so many of the businesses that access those legislative initiatives are the businesses that are always in the know. And to a large extent, you’re talking about even more complicated issues of bonding [and] available capital. That’s always a challenge for our businesses.”

Rep. Emanuel Cleaver II (D-Mo.), chairman of the Congressional Black Caucus, also faults government officials with not providing minority firms with details on the benefits packages. He says: “One of the things people don’t realize is one-third of the stimulus bill dealt with tax reductions or benefits for small businesses and I think we all, including the White House, did a poor job of getting that information to [entrepreneurs].”

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As for black financial services companies, few gained lucrative underwriting and financial management services assignments. For example, Siebert Branford Shank & Co. L.L.C. (No. 1 in tax-exempt securities with $7.5 billion in lead issues and No. 5 in taxable securities with $87 million in lead issues on the be investment banks list) was one of a handful of firms to take advantage of the $64 billion Build America Bonds program in 2009, becoming the seventh leading underwriter of taxable securities to help states and municipalities complete construction projects. Other be 100s financial services companies such as Piedmont Investment Advisors L.L.C., The Williams Capital Group L.L.C., CastleOak Securities L.P., and Loop Capital Markets L.L.C. were able to position their firms for participation in TARP or TALF (Term Asset-Backed Securities Loan Facility designed to make credit available to consumers and businesses). Rep. Gregory W. Meeks (D-N.Y.), a member of the CBC and House Financial Services Committee, believes Treasury and Federal Reserve officials could have done much more to create access. “We had a number of companies that had the capability, but weren’t able to get a seat at the table.”

Increasingly, black-controlled banks have received cease-and-desist orders and, in turn, must raise funds to meet capital requirements, hampering small business lending. And the Minority Business Development Agency recently started the process of shutting down regional offices as part of federal budget-cutting measures. Deputy SBA Administrator Marie C. Johns says, “We are partners with David Hinson and Alejandra Castillo at MBDA, and we make sure that we put our resources together by utilizing the networks of each agency and through cross participation in events.”

She points to the fact that for FY 2011 the federal government has awarded 22.7% of contracts to small enterprises–just shy of its goal of 23%–and small disadvantaged businesses exceeded its goal of 5% for the same year.  MBDA reports $2.1 billion in contracts and capital for black firms, a 16% decrease from the prior year, though the first three years of Obama’s administration have seen a 155% increase. Johns maintains that part of SBA’s outreach is tracking African American enrollment in its 8(a), HUB Zone, and Service Disabled Veterans initiatives, among others. “I urge people to take advantage of known small business programs.”

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Obama cites the rescue of the domestic auto industry as a crowning achievement, one that not only saved roughly 1 million jobs but kept thousands of suppliers–including some of the nation’s largest black businesses–from being road kill. Obama told be: “The number of black businesses that are involved in the supply chain and involved in various services, whether its advertising or other aspects of the industry, and dealerships … have all been impacted positively by the steps that we took.  The significance of the administration’s action to the continued vitality of black business cannot be understated: The nation’s largest auto dealers and auto-related manufacturers represented roughly 42% of the be 100s’ $24.6 billion in 2011 revenues. Says Busby: “Black suppliers to the automotive industry are actually getting stronger and are recording significant gains.”

Obama has taken an aggressive stance in solving the capital crunch as well. When he successfully gained passage of the Small Business Jobs Act, a major provision was the $30 billion Small Business Lending Fund that provides capital to qualified community banks and community development loan funds with assets of less than $10 billion. Thus far, the fund has disbursed $4 billion. Also, Johns says her agency is working with the National Bankers Association to find ways for minority-controlled institutions to achieve “preferred lender status” as well as developing financing options for entrepreneurial retirees through its Encore program, a partnership with AARP.

From day one, Obama has pushed Treasury officials to create more inventive financing solutions. His charge has resulted in the development of what Don Graves, who also serves as deputy assistant secretary for Small Business, Community Development and Housing Policy, calls “a real game changer”: Jumpstart Our Business Startups Act (JOBS). The new law allows companies to raise capital through crowd funding–a process in which firms can use a registered broker or a registered “funding portal” (sanctioned by the Securities and Exchange Commission) to expand its pool of potential backers from wealthy investors to anyone accessible by text, e-mail or a social network. Even Rep. Graves (R-Mo.) has applauded the president for signing the legislation. Already, black financiers are looking for ways to adopt the JOBS financing model for African American firms.

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Obama believes “aggressive outreach” through his business council, a group of deputy secretaries from every agency, will make the difference, traveling “around the country to meet with small businesses to let them know ‘This is not your father’s SBA.’” He adds, “We are going out in the communities and saying, “These resources are available. Show us a business plan. Show us that you have a way of potentially servicing this debt. We want to make a loan.”

And SBA’s Johns cites efforts such as the council for underserved  communities–headed by Radio One chair, and be 100s  CEO Cathy Hughes–the White House Urban Entrepreneurial Forums, and the HBCU/SBA initiatives as means to reach out to minority firms.

If Obama wins a second term, black entrepreneurs like Hale believe the president will need to establish an advisory committee similar to the board for historically black colleges and universities to send a stronger message to some larger companies that are reluctant to do business with small African American subcontractors. And Obama will have to continue to be vigilant in a tradition of advocacy for small and minority vendors.

–Additional reporting by Cliff Hocker, Joyce Jones & Joel Lyons

Inside the Oval Office
Oval Office Interview with President Barack Obama