Revisiting The Concept of “Access to Capital”
The phrase “Access to Capital” means different things to different people. Far too often in the minority and women-owned business community access to capital is far too narrowly defined. For many well documented reasons and throughout recent years, access to capital for underserved populations was fundamentally about gaining more access to bank capital. And while of course access to bank capital is critically important, if you are a business owner trying to grow a larger scale firm with the bank as your sole audience for capital, you are severely limiting your chances for success. In this day of emerging technologies and industries, dramatically changing national and international competition among small and mid-size business owners, and a host of other shifting trends, it’s time for more minority and women-owned businesses to start thinking about private equity and venture capital as a source of funding to grow their businesses, and move beyond the traditional path of credit cards and bank debt.
This shift from bank debt to private equity is fundamentally about changing the way you look at your business. In short, you must think about your business in much larger terms. For your business to be attractive to a private investor or investor group, you should generally think about doing business across multiple states in the country or perhaps other countries. As you consider this larger territory, do your homework on the existing businesses that you would now compete against in this broader geography, and decide on the best way to effectively compete. Often this means developing an innovative product or process that will enable you to offer superior value to customers in your chosen market, but it certainly doesn’t mean that you have to do this alone. Given the current economic challenges across the nation, you may be quite surprised as to how willing existing businesses are to form an alliance and jointly develop a plan of attack to approach investors. For a comprehensive listing of minority oriented private equity firms across the country and the types of transactions these firms have supported please see the following information on the National Association of Investment Companies webpage:
Once you have determined a possible plan of attack to grow your business or idea to a larger scale, let us assist you in expanding your options as you rethink the term “Access to Capital”.
Darrin is Chief Economic Inclusion Officer of JumpStart and President of JumpStart Inclusion Advisors. He founded and ran his own strategic planning and management assistance firm and spent 16 years in the commercial banking and finance industry. Darrin has an MBA from Baldwin Wallace College and an undergraduate degree from Mount Union College. He has led a series of workshops and seminars on matters of economic development and diversity.