Derek T. Dingle: Secretary Locke, thank you for granting us this interview.
Commerce Secretary Gary Locke: Oh, it’s my pleasure.
Dingle: We are here at the MEDWEEK conference and I’m wondering if you can outline Commerce’s agenda for minority business and how are you going to support minority business and what are your goals and objectives?
Locke: It’s our view that the economic recovery will not be successful unless minority businesses also share in that recovery and are part of the turnaround in the growth. It’s important for minority businesses to succeed if we want all of America to succeed. Minority businesses are such a large component of small to medium-sized businesses in America now. In just the last four years they’ve grown from just a couple of hundred thousand minority businesses to more than 4 million, employing millions and millions of Americans all across this country.
So, for instance, Small Business Administrator Karen Mills and I have been asked by the President and the Vice President to help lead all of our cabinet activities to ensure that with all the stimulus money that is going out, that minority firms are front and center in getting their fair share of those contracting opportunities. So in the next 90 days we’re going to have some 200 workshops and opportunities for minority businesses all across the country about the contracting opportunities. So we’re making it a high priority to ensure that minority businesses receive their fair share of dollars and are able to be part of this economic recovery.
Dingle: So is that to answer some of the frustrations that we’ve heard, in terms of minority firms being able to access recovery contracts, and in terms of that, what are the specific targets that you have for minority businesses, in terms of gaining those contracts?
Locke: Well, we don’t really have firm targets. We’re going to be using the power of the administration to inform the states, notify the states that we really want minority firms to be part of contracts and subcontracts that are let, whether it’s building a bridge, repairing roads, constructing dormitories and college laboratories or modeling schools. Within the federal agencies we will be really working with all the cabinet secretaries with the money that they administer, even if it is unique to that federal agency to make sure that minority businesses are considered and encouraged and given the opportunity to compete and hopefully win some of the contracts.
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Dingle: How do you monitor that on the local level? Many minority businesses have been very enthusiastic about what the Obama Administration proposes, but the challenges that they have on the local level where you are dealing with different bureaucracies, different systems, different priorities, how do you reconcile that so that minority businesses gain the contracts that they deserve and that they grow their businesses?
Locke: Well, it all starts with data collection and monitoring all those contracts so that, for instance, the State of Washington gets a contract for road repair. We will be working with state officials to document where the money goes and to what extent minority firms were either prime contractors or subcontractors. And, of course, the Vice President is having very frequent telephone conversations, conference calls, with the country’s mayors and governors. This is one of his key issues.
Dingle: I think the real challenge for a number of firms is gaining financing. Without financing they can’t handle the contracts. Even though there’s been glimmers of hope, as the President has said, credit is still tight. It’s still a challenge in terms of getting financing.
How do you ensure that minority businesses gain financing they need to complete contracts and strengthen the infrastructure of their companies?
Locke: A very good and legitimate point because we are seeing that problem, access to capital, adequate capital for businesses of all sizes, all the way from GM and Chrysler, and you can imagine that it’s even tougher for small to medium sized businesses, especially minority businesses. Minority businesses are sometimes newer and don’t have quite the credit history as other well-established firms. That’s why, for instance, under the Recovery Act over $100 million was made available in terms of higher guarantee loans and funding available for small and medium sized companies, including minority firms. And even within the Small Business Administration they’re using some of this to offer up to 90% guaranteed loans. That is if you’re able to get a bank loan, the SBA and the federal government will guarantee to the bank that we will back it up, 90% of that loan. It still requires the bank to assume 10% of the risk, but by raising the guaranteed level, we’re making it a lot easier for minority firms to access that capital.
Dingle: But are you concerned that, at this point, looking at through August 14th, that guaranteed loans are down 43% from last year? Isn’t that a concern, especially with what the government has put in place to make the guaranteed loans more accessible and more palatable?
Locke: Well, what we’re trying to do is we know that with the tough economic times that a lot of companies are facing, they are not taking advantage of these. Earlier in the year
we saw a lot of banks just not offering loans to anybody. Even if it was almost a 100% guarantee they just weren’t offering loans because they didn’t have any money to give out, and it’s still up to them to give up the money even though we might guarantee the loan and the repayment of the loan down the road. There was so much scrutiny on the banks that they weren’t giving out loans, even to their most trusted, longtime customers. But now we are seeing the banks starting to free up money and by us raising, the federal government raising the guarantee behind these loans, we’re seeing a lot more receptivity and a lot more action. But nonetheless, this is something the President is very much committed to, very much focused on, because we know how tough it is. Because companies, minority firms are still having to pay their monthly bills and pay their expenses. At the same time they are not getting timely payment for products delivered or for services rendered. So they are really facing a cash flow crunch and that’s where access to capital, even short-term loans can be very, very important.Dingle: That’s the challenge. On the one hand we say get prepared for these emerging industries, become innovative, embrace them, and right now so many firms are dealing with survival. How do you reconcile those two issues? How do you keep companies going while focusing on the emerging industries of tomorrow?
Locke: Well, it’s actually a combination of both. We need to focus on making sure minority firms stay strong, viable, are able to survive because so many companies, especially small companies, are not able to survive in this tough economic recession. So many of the job losses that we have seen in the year 2008 and part of early 2009 have occurred among those small businesses, and we know so many of them are minority owned businesses.
So we’ve got to help them and that’s why the president is really focused on, through the Recovery Act, providing funds, guaranteed loans, even outright grants for small to medium-sized businesses. And especially grants and loans in the emerging fields. And I want to say if you’re a minority firm and you are able to hang on and survive, start thinking about these emerging industries. Be prepared to start diversifying your activities to get into these emerging industries, especially surrounding alternative energy and energy efficiency. This whole new green jobs, alternative energy, environmental energy efficiency really has very few players in it and what players there are are all new, so they don’t have a huge credit history themselves. Because it is relatively new everybody is on the
same early-stage of development. They are not these companies that have been around for 20, 30, 40 years that have such a monopoly on it that it’s very difficult for others to enter into the field.So what is the hallmark of many of our minority businesses is that they are aggressive. A lot of sweat involved, a lot of passion, a lot of hard work, a lot of ingenuity and creativity, those same skills and strengths that will help them move into these new emerging fields, especially in energy.
Dingle: You’re seeing a lot of that around this conference —
Locke: That’s right.
Dingle: — the passion and the energy. In terms of accessing the green economy and these opportunities, how does Commerce and MBDA or SBA support that? For example, do you develop incubators for companies to go into these emerging industries? How do you create or help companies redesign themselves to take advantage of the green economy?
Locke: Well, the Minority Business Development Agency is the only federal agency committed to helping minority businesses grow and thrive and succeed. We’ve been able to, in just the last year, help minority businesses gain access to some $2 billion in capital and to increase their profits, just the ones that we’ve helped, and secure sales of some $2 billion. So we’re really focused on them. We’ve got a whole array of services to help minority businesses and all businesses in general. We have various programs that can, for instance, take a look at their operations and suggest ways in which they become more efficient, leaner using technology, therefore becoming more profitable. We also have programs to help the company sell their products all around the world. And too many small businesses that export export only one country. If they are exporting to one country there really is no reason why they should not be exporting to three, or four or five. We have people in consulates and embassies all around the world that will help these companies, American companies, find customers, find clients all around the world.
Dingle: So how do you get small firms to embrace the global market, to think of themselves as global companies? Because a lot of companies they don’t have the resources or they don’t have the capital to do so? Is there another answer that we can provide minority businesses to make sure that they access these opportunities globally?
Locke: Well, if a minority company, for instance, is already manufacturing the product, there is not much of a leap to ship it from one part of the United States to another corner of the United States. It doesn’t cost that much more to send it and
ship it to another country. We have the people that will help find those customers, find those clients, and do the due diligence into the background checks on these potential customers. And all you have to do as a company is take advantage of our services, eventually perhaps travel to that foreign destination. We’ll line up all of the interviews and bring in all of these companies to meet with you and we will have prequalified them. Then we’ll help you even with the financing steps and all the credit issues that might be involved in selling your product to another country and receiving payment.Dingle: I talked to a representative of your business liaison area and he said major corporations meet with Commerce all the time, but small businesses don’t because they don’t know that those resources are available to them. How do you get small businesses to access the liaison office and grow from small entities to larger entities?
Locke: Well that is really a burden and challenge for us. We and the Department of Commerce are revamping our services to make ourselves a lot more accessible, relevant, and known to small businesses all around the country. We’re starting what we call one-stop shop, business advocacy centers where you come in to one office, let’s say in Detroit, you meet with one person who will be cross trained in all the different programs and services at the Department of Commerce, as well as even some other federal agencies like the Small Business Administration, or even something in the Defense Department that will help manufacturers diversify and repair or supply parts for let’s say military vehicles and military equipment. But we’re offering and we’re going to be starting these one-stop shop businesses advocacy centers first in Detroit and, if successful, all around the country, so that a small business owner who is so consumed about how to find customers and clients and meet the payroll and keeping the operations going, that owner doesn’t have time to go to five separate different Commerce Department offices in their local city. And if you are 50 or 60 miles away you probably don’t have time to go to any place. So we’re going to be offering these one-stop business assistance centers, one place that you go to to get the full array of Commerce Department services, and we’re going to do it over the Internet, so you don’t even have to go by car to a city.
Dingle: So you provide the infrastructure, they access the opportunities?
Locke: That’s right.
Dingle: Thank you, Mr. Secretary.
Locke: My pleasure.