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The Real Roadblock
To Black Business Advancement

12 June 2013
Updated 7 February 2014
Steven Lemon

There has been a lot of talk and posturing among the Black business community agonizing over the problem of funding (or the lack thereof) of the Black business environment.

Many government programs have been born, grown old and died without even so much as causing a ripple in the pool of water that the black Business community finds itself almost immersed in.
The latest craze, CROWD FUNDING, which gained prominence after the passage of the much ballyhooed (and ballyhoo is all it is) JOBS Act.

Crowd funding has been around for decades, under different names and disguises. The old world practice of SUSU, practiced in some Black communities, operates by gathering contributions from many members of the community and investing it in a business, with the contributors sharing any profits derived from the project.

Sometimes a SUSU just collects the contributions and then the chosen representatives choose an already profitable business, with any profits shared by the contributors, pretty much like a corporation pays dividends to shareholders.

The JOBS Act, passed early in 2012, allows small companies to sell their stock to small less financially sophisticated investors, friends, people who just want to help out, even strangers in some cases, without the onerous and expensive registration that new issues require with the Securities and Exchange Commission (SEC). Of course the act was passed without apparent regard of the fact that very few Black owned companies are incorporated and those
that are would still have to be attractive enough to engender investor interest. I wrote an article while the Act was still on the grill that it would not impact Black businesses enough to make a difference, but what do I know? It is now almost three years later. Check the evidence and make your own decision about how successful it has been for US..

The JOBS Act was designed to make it easier for the small investor (net worth less than $1,000,000), but there is nothing in it that helps the issuing company create a viable project worthy of investing one's hard earned dollars  into. The smaller investor would be risking a greater percentage of his or her disposable income anyway, and the JOBS Act doesn't help them determine if that investment is worthy or not. It just makes it easier for them to get involved.

I'm saying all this to illustrate MY contention that the real solution to the problem of financing in the Black community lies not in the myriad of various and sundry programs dreamed up by politicians who have no business experience in the first place, nor is there a solution in the various charities and social service programs that constantly spring up, demanding funding form big corporations and government, money which would then be funneled to deserving Black businesses and projects.

The real solution is in the Black business community itself. Instead of wasting our time and energy chasing government and corporate gift (AKA "GUILT") money the Black business community could fully fund itself within LESS than five years if a large enough number of businesses pried some of their cash on hand and created a common fund, be it credit union, investment club, or even an actual bank and created the financial infrastructure that White businesses would create within six months if such a problem reared it's ugly head in THEIR areas of operation.

In other words, one thousand Black investors, whether business owners, trust companies, speculators, charities, savings clubs, etc contributing $1,000 each (That is a paltry $84 per month. If a business can't afford that, then it is not really a business in the first place). to a common, organized fund managed by a carefully selected board of directors who would evaluate and select recipients from among the throng of applicants sure to fill the mailboxes seeking funds. BTW, the fund shold be a FOR PROFIT organization so that contributors could have some expectation of tangible benefit from being so bold as to take the risk that 90% of their peers shun like the plague.

Of course only a small portion of the applicant pool would qualify for serious consideration as an investment project. Indeed, only six of one thousand funding requests by WHITE entrepreneurs are even considered for further review by investors, and the project proposals of Black companies are demonstrably less prepared than that of their White counterparts, but the Black created service organization could help make those businesses stronger by creating an adjunct service designed to educate the small business in navigating the treacherous waters of the business world.

There are approximately two million Black owned businesses in the country and if one thousand of us can't come together and even attempt something like this, then the best thing for all of us to do is close shop and submit our resumes to the White guy down the street who has a better idea how to run a business and the guts to do it.
Maybe we'll learn something from them.


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