Access to Equity Capital
 

Expert Policy Workshop
 

* * *
 * National *
 * WOMEN'S *
 * BUSINESS *
 *Council*
 

in coordination with
 

The Federal Reserve Bank of Chicago
 

Chicago, Illinois 

WORKSHOP REPORT
 

June 3, 1994
 
NATIONAL WOMEN'S BUSINESS COUNCIL
 

ACCESS TO EQUITY CAPITAL - EXPERT POLICY WORKSHOP
 

REPORT
 

Table of Contents 

PAGE 

Letter from NWBC Council Chair, Mary Ann Campbell, CFP 2
 

Letter from NWBC Council Vice Chair, Ron Brown . . . . . . . . . . . . . . . . . . . . . . . . 3
 

Letter from Federal Reserve Bank of Chicago . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
 

NWBC Members 5
 

Scope of Conference 7
 

Agenda 8
 

Action Items 10
 

Appendicies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
 

A.	 Building a Finance Ladder for Women-Owned
 

Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
 

B.	 Speaker, Panelist and Facilitator Profiles 33
 

C.	 Workshop Participants 47
 

D.	 SBIC Regulations 53
 

E.	 The Federal Reserve Bank of Chicago's Guide for
 

Consumers - The Equal Credit Opportunity Act . . . . . . . . . . . . . . . . . 65
 

F.	 Resource Guide 71
 

G.	 Reference Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
 

H.	 NWBC General Information 74
 

I.	 NWBC Council Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
 

J.	 NWBC Staff 79
 
WASHINGTON, D.C. OFFICE . ~-:: :; .,~

~...:: ~~,:.~;~':';~ 409 THIRD STREET. S. W

SUITE ~8~0 NWBC ...~. :V~.~_- .'{j;

.... 

WASHINGTON. D.C. 20024 ./.

-'. 202/2015-38150 FAX: 202/205-68215 National Women's Business Council f. 

The National Women's Business Council is pleased to present the following 

report from our Access to Equity Capital Expert Policy Workshop. Not only 

are the ideas expressed futuristic, the resulting initiatives reflect your 

outstanding foresight as active participants. Thank you for helping shape 

the future of women business owner's access to financing in such a positive 

way. The workshop was successful due to your sincere input. 

As you will see through this report, The Access to Equity Capital Workshop 

was an in-depth, comprehensive discussion of the barriers women 

entrepreneurs face in gaining access to capital and credit. In cooperation 

with the Federal Reserve the Council has identified issues of concern to 

women business owners and establish plans of action. 

We are committed to our mission of ensuring the full participation of 

women business owners in the free enterprise system. The Council will 

continue to address the needs and concerns of our country's women 

entrepreneurs. It is our hope that this document will not only vocalize our 

policy recommendations but serve as the catalyst for their implementation. 

May this document serve as a useful tool. 

IJkh I J

~aj~~~~ Chair 

LITTLE ROCK. ARKANSAS OFFICE 

10020 RODNEY PARHA~ • SUITE C. LITTLE ROCK. AR 72207 • 501/224-7272 FAX: :-;01/227·0513 
THE SECRETARY OF COMMERCE 

Washington. D.C. 20230 

As Vice Chair of the National Women's Business Council, I, along with 

President Clinton and this administration, am committed to increasing opportunities 

for women-owned businesses. With more than 6 million businesses owned by 

women today, optimism for their success is well-founded; but efforts to assist 

them as they strive to overcome long-standing barriers are still needed. 

Women-owned businesses are the fastest growing sector of our economy. 

Increasing the number of businesses they own will enhance our efforts to create 

jobs and stimulate the economy. Thus the work of the National Women's Business 

Council is more important than ever. Under Mary Ann Campbell's leadership, the 

NWBC has made great strides, achieving measurable goals for women business 

owners, including new initiatives which will increase their access to capital. 

This is, perhaps, one of the most pressing issues the NWBC seeks to 

address. Exploration of different and innovative sources of funding is necessary for 

most women when starting or expanding a business. Forums like this one are 

useful for explaining what options exist. Additionally, it can help reinforce the 

message to traditional commercial lenders and other capital providers that women 

business owners are a serious and growing force in the business world; that ~hey

embrace the entrepreneurial spirit which drives this country. 

The Department of Commerce supports and encourages the discussion here 

today. I commend the National Women's Business Council's work to increase 

public awareness about problems facing women business owners and its actions to 

resolve them. 

Ronald H. Brown 

," • 
FEDERAL RESERVE BANK 

OF CHICAGO 

Dear Participant: 

On behalf of the Federal Reserve Bank of Chicago, I want to express our 

appreciation to you for making the "Access to Equity Capital - Expert Policy Workshop" a 

success. Your participation in this workshop helped us gain a better understanding of the 

barriers that prevent women entrepreneurs from tapping private capital markets, and 

possible ways to overcome them. 

As Federal Reserve Board of Governor Susan Phillips stated, the Federal Reserve 

System has long recognized the importance of improving access to capital for small and 

women-owned businesses. In line with that commitment, the Federal Reserve has hosted 

and actively participated in all of the "Access to Capital Workshops" conducted by the 

National Women's Business Council (NWBC). 

This workshop provided an opportunity to discuss the investment decisions of pension 

funds, insurance companies, and other investors. Because such institutions represent major 

potential sources of funding for women-owned businesses, understanding their investment 

process is critical. Our participation in these discussions helped us in our efforts to foster 

equal and fair access to the whole array of funding sources for all segments of the 

community. 

The Federal Reserve Bank of Chicago welcomed the opportunity to participate in 

this event and looks forward to being a part of future forums focusing on the issue of access 

to capital for women-owned business. 

Sincerely, 

~Ih~ Nancy M. Goodman 

Senior Vice President 

_'to,,,' T l·\,\a[ T~[(l

\, tw \ Illl 1)1 h\h, ..1 1': 
MEMBERS OF THE NATIONALWOMEN'S BUSINESS COUNCIL
 

PRIVATESECTOR l\fEMBERS 

Mary Ann Campbell
 

Chair, NWBC
 

Money Magic Inc.
 

10020 Rodney Parham Street
 

Suite C
 

Little Rock, AR 72207
 

Office 501 227-6644
 

Fax 501 227-9513
 

Barbara Aiello
 

President
 

Aiello & Company
 

183 Port Road
 

Kennebunkport, ME 04043
 

Office 207 967-5338
 

Fax 207 967-4306
 

Pastora San Juan Cafferty
 

The University of Chicago
 

The School of Social Services
 

Administration
 

969 Sixtieth Street
 

Chicago, IL 60607
 

Office 312 702-8959
 

Fax 312 702-0874
 

Saundra R. Herre
 

President
 

Herrewood Associates
 

4101 Pennington
 

Racine, WI 53403
 

Office 414554-8301
 

Fax 414 554-7339
 

Barbara L. Laughlin
 

Executive Vice President
 

Manufacturers and Traders Trust Co.
 

One M&T Plaza
 

Buffalo, NY 14203-2399
 

Office 716 639-6189
 

Fax 716 842-5901
 

Marilu Bartholomew Meyer
 

President and Owner
 

Castle Construction Corporation
 

3062 West 167th Street
 

Markham, IL 60426-5618
 

Office 708339-2600
 

Fax 708 339-2659
 

PUBLIC SECTOR l\fEMBERS 

The Honorable Ron Brown
 

Vice Chair, NWBC
 

Secretary
 

Department of Commerce
 

Herbert C. Hoover Building
 

14th & Constitution Avenue, N.W.
 

Room 5430
 

Washington, DC 20230
 

Office 202 482-2112
 

Fax 202 482-2741
 

The Honorable Erskine Bowles
 

Administrator
 

U .S~ Small Business Administration
 

409 3rd Street, S.W.
 

Suite 7000
 

Washington, DC 20416
 

Office 202 205-6605
 

Fax 202 205-6802
 

Dr. Susan Phillips
 

Board of Governors
 

Federal Reserve System
 

20th & C Streets, N.W.
 

Room B-2046
 

Washington, DC 20551
 

Phone 202 452-3201
 

Fax 202 452-3819
 

5
 
". 

Federal Reserve Bank of Chicago
 

June 3, 1994
 

Five years of investigations by the National Women's Business Council (NWBC) 

into the status of women-owned businesses has identified the foremost barrier to 

success of these entrepreneurs was access to capital and credit. The NWBC has 

documented that the number of women-owned businesses in the United States has 

increased dramatically in recent years. Today, there are more than six million 

women-owned businesses with receipts of over $1 trillion. They constitute one of 

the fastest growing sectors and are significant contributors to the revitalization of 

the American economy. They employ more workers than the Fortune 500. But 

these numbers belie the fact that women still face significant obstacles to obtaining 

necessary financing to start or expand their businesses. This fact must be 

addressed if women business owners are to be successful in their enterprises and 

continue to contribute to the growth and stability of our economy. 

On June 3, 1994, the Council, in coordination with the Federal Reserve Bank of 

Chicago, sponsored a public policy workshop which focused on the sources and 

uses of equity capital. Women business owners are too rarely recipients of venture 

capital funds. The Council invited decision-makers from the public and private 

sectors to discuss the investment opportunities that will fill the capital gaps which 

limit the growth potential of women's business enterprises. Investment practices 

by public and private pension funds were a primary focus of our discussions. As 

one of the economy's principal sources of financial assets, pension funds can play 

a major role by investing in programs, venture funds and other mechanisms that 

support both small and women-owned businesses. 

The National Women's Business Council, a federal advisory council, makes annual 

policy recommendations to the President and Congress regarding critical issues of 

concern to women-owned businesses, with special emphasis on increasing access to 

business opportunities and the financial marketplace. The intent of this workshop 

was to employ the talent of experts in the investment field to aid the NWBC in 

formulating an action plan to incorporate into its policy recommendations. 

7 
·.AGENDA 

ACCESS TO EQUITY CAPITAL 

EXPERT POllCY WORKSHOP 

HOSTED BY 

THE FEDERAL RESERVE BANK OF cmCAGO 

in cooperation with 

THE NATIONAL WOMEN'S BUSINESS COUNCIL 

The Federal Reserve Bank 

230 S. La Salle 

Chicago, Dlinois 

June 3, 1994 

8:00 Registration and Coffee 

8:30 Welcoming Remarks by Mary Ann Campbell, NWBC Chair 

Remarks and Introduction by Nancy M. Goodman, Senior Vice President 

Federal Reserve Bank of Chicago 

Remarks by Dr. Susan Phillips, Board of Governors, Federal Reserve System 

8:45 KEYNOTE - Sources and Uses of Capitll for Women-<>wned Businesses 

Linda Tarr-Whelan, President and Executive Director 

Center for Policy Alternatives 

9: 15 Panel Discussion - Institutional Sources of Funding 

Moderator: Anne Stelle 

Deputy Manager 

Brown Brothers, Harriman & Co. 

Presenters: 

Miriam Santos 

City Treasurer of Chicago 

David Tseng 

Pension and Welfare Benefits Administration 

Department of Labor 

Bob Stillman 

Associate Administrator for Investment 

Small Business Administration 

Monte Tarbox, Vice President 

Marco Consulting Group 

8 
10:00	 PANEL DISCUSSION - Investing in women-owned businesses 

Moderator:	 Susan Davis
 

President
 

Capital Missions Company
 

Presenters: 

Margaret Fisher
 

Principal
 

Inroads Capital
 

George Kalidonis
 

President and CEO
 

Chicago Capital Fund
 

Xcylur Stoakley
 

Principal
 

Ark Capital Management
 

10:45	 Break 

11:00	 EXPERT ROUNDTABLE SESSION - Areas for discussion: 

•	 Building and expanding the partnerships which connect investors, 

public programs, financial intermediaries and women business owners 

•	 Policy Initiatives 

•	 Alternative Financing Sources 

12:30	 Lunch 

Remarks by Betsy Meyers, Director, Office of Women Business Ownership 

Small Business Administration 

Remarks and Introduction by William Conrad, 1st Vice President 

Federal Reserve Bank of Chicago 

HONORED GUEST: Luncheon Speaker 

The Honorable Mary Ellen Withrow 

U.S. Treasurer 

1:30	 REPORTING our FROM ROUNDTABLE SESSION 

Facilitator:	 Austin Fitts
 

Hamilton Securities Group, Inc.
 

•	 Action Plan 

2:30	 Conclusion 

9 
THE NATIONAL WOMEN'S BUSINESS COUNCIL
 

ACCFSS TO EQUITY CAPITAL - EXPERT POllCY WORKSHOP
 

ACTION ITEMS
 

Federal Reserve Bank of Chicago
 

June 3, 1994
 

The three challenges targeted in this paper represent the major themes discussed during the 

roundtable session. Many other important challenges were identified, but for the purposes of 

this report, have not been highlighted. Those issues we hope will be further explored and 

pursued at a later date by the National Women's Business Council and other women business 

advocates and organizations. 

Two underlying ideas agreed upon by all, were the need for more extensive data collection, 

training and technical assistance to ensure the full participation of women business owners in 

the free enterprise system. 

*	 The lack of consistent and reliable data on women-owned businesses hampers 

the analysis of why women face barriers in their search for financial resources 

and how these restrictions can be overcome. Facts and figures are needed that 

substantiate that women business owners are good credit risks, run stable 

companies and are a viable investment opportunity. 

*	 Information exchange, educational outreach, and special marketing and training 

strategies on the part of investors, lenders and government entities are essential 

components of any successful fmancing program. Business owners expressed 

frustration with the difficulty in obtaining information on available resources, 

lending programs and criteria. It was determined that certain statutes and 

regulatory guidelines may restrict lenders from providing information and 

feedback on the credit-worthiness of business owners. Lifting the veil of 

secrecy that inhibits the free flow of information and technical assistance 

should be a priority. 

10
 
SECTION A. The Classification of Womeo-<>wned Businesses as Economically Targeted 

Investments (ETIs) 

The National Women's Business Council recommends: 

(1)	 classifying women-owned businesses as BTls and including this sector in the 

Department of Labor's clearinghouse. 

Background: 

According to the 1993 data from the Federal Reserve Board - Flow of Funds Report, 

pensions funds alone, with assets of $4.4 trillion, constitute over 30% of all U.S. financial 

assets. This figure is virtually equivalent to the value of all the stocks listed on the New 

York Stock Exchange and more than the amount of money held in- personal savings accounts 

in the United States. Pension funds are second only to corporate earnings as the largest form 

of domestic holdings. In 1992, public and private pension funds paid out $156 billion in 

benefits to almost eleven million retirees and furthermore were responsible for over one 

trillion dollars in investment decisions. 

Investors and policy makers alike, recognize the vast and virtually untapped potential that 

pension funds have to stimulate economic activity, especially in those areas of greatest need. 

There has been interest expressed by policy makers for creating incentives that will 

encourage large institutional funds to invest in economically targeted enterprises and 

undercapitalized sectors of the economy. These include low income and multi-family 

housing projects, child care centers, resource conservation and job training. 

In June 1994, the Department of Labor released an interpretive bulletin identifying 

Economically Targeted Investments (ETls) as viable pension fund investment alternatives. 

BTls are investment strategies that include any prudent investment filling a capital gap in an 

underfinanced area of the economy mlQ earn a risk adjusted market rate of return. The 

Department of Labor is creating a clearinghouse that will gather and examine information 

about the investment performance and attributes of BTls. They will provide this information 

to the pension fund community to aid investment decisions. Initiatives, such as this one, 

should facilitate investments in those sectors that have been overlooked by lenders and 

investors. 

11
 
Women-owned businesses have demonstrated high levels of endurance and stability. More 

than 40% of all women-owned businesses have been in operation for more than 12 years. 

Women-owned businesses have proven to be more conservative in their outlook, favoring 

measured, rather than rapid growth strategies. Plan sponsors of pension funds have long 

range investment timelines and can afford to make the medium to long-term commitments 

necessary to support small and women-owned businesses, as they modernize and grow. This 

is exactly the type of business philosophy needed to boost the health and productivity of the 

economy. 

The National Women's Business Council has spent considerable time examining financial 

models and their inflexibility to meet the capital and credit needs of women-owned 

businesses. These enterprises have experienced difficulties accessing sufficient start-up, 

modernization and expansion capital and perceive the reasons have less to do with their merit 

and more to do with their gender. These efforts by the Department of Labor are the type of 

creative policy making that is bridging capital gaps between potential investors and 

underserved areas. National economic policy must create a framework in which the capital 

markets will respond to America's need for economic development resources. 

****************************************************************************** 

SECTION B. A Seat At The Table For Women 

The National Women's Business Council recommends: 

(1)	 adopting policies, by plan sponsors, that directs the selection of trustees to 

reflect the gender of beneficiaries; 

(2)	 adopting policies, by plan sponsors, to vigorously pursue hiring women as 

emerging managers and pension fund managers; 

(3)	 investment profiles of women-owned businesses be routinely considered when 

making policy and investment decisions. 

12
 
BOCqTound,· 

The membership of pension fund boards do not often reflect the gender distribution of their 

beneficiaries. The discretionary nature of investment decisions, made by these trustees, 

greatly affects capital allocation to women-owned businesses. The fact is that even though 

50% of the beneficiaries are women, there are too few women on pension boards and too 

few pension fund investments going to women entrepreneurs. A strong case has been made 

for representational boards and the power those boards have to affect changes in policy and 

decision making. 

Pension fund managers and emerging managers must also be mindful of who are the 

beneficiaries, incorporating that sensitivity into their investment strategies. Recognizing that 

their managers have significant control over how the pension's monies are invested, the 

California Public Employees' Retirement System (CALPERS), has instituted a program to 

hire a certain percentage of emerging managers and pension fund managers that are women. 

While this doesn't guarantee investments in women-owned businesses, it introduces a new 

prospective into the decision making process. Without a seat at the table, it could take a very 

long time to see an increase in pension investments going to women. 

13
 
The National Women's Business Council recommends: 

(1)	 creating mechanisms that facilitate the building of a secondary market for 

small business loans. These include partnership programs between the federal 

government (U.S. Small Business Administration, Department of Housing and 

Urban Development, Department of Commerce's Economic Development 

Administration and/or appropriate agencies) and state governments (state 

economic development agencies, state financial authorities and/or appropriate 

agencies) that establish risk-sharing, financial guarantee programs, loan pools 

and other incentives that would offer some protection and allow capital to flow 

more freely to women-owned businesses. 

(2)	 establishing a secondary market to secure small business loans that would 

expand opportunities for participation by financial institutions and 

intermediaries. We recommend one of the following structures: 

(a)	 a new government-sponsored enterprise (GSE) for small 

business loans, similar to those that have boosted housing and 

student loan credit, or 

(b)	 easing restrictions in federal laws to make it easier for the 

private sector to create the market itself. Examples include: 

allowing banks to hold less than the current 8 percent capital 

against small business loans that are sold on the secondary 

market if they can demonstrate that the loans are sound; 

simplifying paperwork requirements, allowing firms to file a 

single registration form with the Securities and Exchange 

Commission, instead of separate ones with the individual states; 

and instituting favorable tax rules to encourage pooling of small 

business loans. This is similar to the 1984 law that helped set 

up a private sector secondary market in home mortgages. 

14 
Background,' 

In the May 1, 1993 Conm;ssional Quarterly, Federal Reserve Board Chairman Alan 

Greenspan was quoted as having forecasted the inevitability of a small business secondary 

loan market, "There is no question in my mind that if we could find a way to expedite a 

secondary market in small-business loans, it would be".a major contribution to the financial 

vitality of this country. " 

The idea of creating a secondary market for small business loans has been debated for almost 

a decade. Currently, Congress is considering legislation to address this issue, The concept 

is to encourage banks to lend to small businesses by making it easier for these institutions to 

package those loans for sale to investors or a quasi-government entity. Such vehicles would 

spread the risk of making small business and commercial loans, ensuring a steady flow of 

capital to small and women-owned businesses. These businesses are key to economic growth 

and job creation, 

Of the 6.5 million women business owners in the United States, 5,5 million are sole 

proprietors with relatively small capital needs who often lack the necessary collateral 

requirements that would make their businesses attractive to institutional lenders. Reducing 

the risk of funding to small and women-owned businesses would be greatly facilitated 

through the provision of a secondary market. A secondary market for loans granted to these 

businesses will provide the essential momentum for the businesses to grow to the point of 

recognition in venture capital, regional banking and national banking arenas. 

As banks attempt to meet the lending needs in their individual communities, they will be 

better able to provide longer term commitments to developing businesses through the 

securitization of small business loans. The subsequent sale of these loans to institutional 

investors creates liquidity in the market, freeing bank capital. This will make additional 

funds available for non-traditional investments in community development projects and 

emerging businesses. The benefits of small business loan securitization will accrue to ill 

small businesses - including women-owned businesses - and thus, to the economy as a whole. 

Support for the mechanisms to facilitate and create a secondary market were 

recommendations of both the 1980 and 1986 White House Conference on Small Business and 

the NWBC in its 1992 Annual Report. 

15
 
SECTION A. Venture Fund Investments in Women-<>wned Businesses 

The National Women's Business Council recommends: 

(1)	 the U.S. Small Business Administration (SBA) initiate a more comprehensive 

review of the investment practices of the SBIC and SSBIC programs. Ifit is 

found that few investments are made to women-owned firms, the SBA should 

encourage the SBICs and SSBICs to take a more proactive approach and 

identify more women-owned businesses who fit their investment crite~.

(2)	 the SBA expand data collection requirements on investment (form 1031) 

made by every SBIC and SSBIC to include the gender, race, type and size of 

organization, collateral offered andlor used. The tum down rate and a 

checklist of reasons for denials of investments should be included within the 

annual financial statement (form 468). 

These data are essential to: determine investment patterns; identify any 

disparities in service to groups such as women and minorities which have 

alleged discriminatory practices in the past; and evaluate the cause of such 

disparities and develop methods to ameliorate the situation, such as outlined in 

the Equal Credit Opportunity Act. 

Based on the findings revealed through the review process and data analysis, 

the NWBC recommends the following initiatives: 

(a)	 Establishment of a task force to study and make 

recommendations to the SBA within one year, on measures to 

increase the flow of investment dollars to women-owned firms. 

16 
(b)	 Creation of a Women's Specialized Small Business Investment 

Company (WSSBIC) pilot which would specifically target 

investments to women's business enterprises. 

(c)	 Creation by the SBA of incentives for SBICs to invest in 

women-owned businesses, designing ways to assist the SBIC and 

SSBIC programs to assess and meet the financing needs of 

women-owned businesses. 

(d)	 License as SBICs, separate and distinct from SSBICs or 

WSSBICs, investment companies which are reaching out to 

women. Funds, such as these, are interested in including 

women-owned businesses in their portfolios. A regular SBIC 

license would give them more latitude in their investment 

decisions and allow such an entity to make a wider variety of 

investments. 

Background: 

Licensed by the SBA, SBICs are private investment firms that make loans or equity 

investments in small businesses. These venture capitalists benefit through the ability to 

supplement their own private capital with funds obtained on favorable terms through 

assistance from the federal government. Small businesses benefit because this program 

increases the amount of money available to them to grow, modernize and expand their 

businesses - monies that would normally not be available to them. 

The SBIC program was created by Congress in 1958... By 1972, Congress established a new 

class of SBICs, called Specialized SBICs or SSBICs. Unlike SBICs, these new funds were 

intended to provide financing for small businesses owned by persons who are deemed to be 

socially QI economically disadvantaged. 

Ideally, SSBICs should provide an opportunity for most women-owned businesses to access 

investment dollars. These funds typically invest "smaller" amounts of capital than SBICs or 

other private venture capital funds and thus are tailor-made for the needs of many womenowned businesses. Statistics compiled by the National Association of Investment Companies 

indicate that more than 90% of the investments made in 1993 through SSBICs were to 

minority firms, however, there was no information available on whether any of those 

investments were made to women-owned businesses. 

17 
The National Women's Business Council's analysis of the experience of women in accessing 

SBIC fmancing has been hampered because very little data is collected on gender. The SBA 

does not require SBICs to collect gender based data on the investments they make, nor are 

SSBICs required to include gender as part of their documentation for eligibility profiles. 

Under the new regulations, the SBA will be receiving economic impact data from the 

licensees with their annual reports. In addition, the Investment Division of the SBA (the 

division that oversees the SBIC programs) is reviewing proposals that would include gender 

on the schedule for investments (schedule 1), within the annual financial statement (SBA's 

form 468). This data would be of great assistance to the SBA in determining who is actually 

benefitting from the SBIC program, just as the Collection of gender based data from the 

SBA's 7(a) loan program has been helpful in identifying the need to place more emphasis on 

increasing the number of loans to women. 

On a similar issue, the NWBC recently reviewed and commented on the proposed changes to 

the regulations which implement the Community Reinvestment Act (CRA). The CRA 

requires depository institutions to meet the credit needs of their communities. The Council 

urged strongly that data collection requirements on loans, made by both large and small retail 

banks, be expanded to include the gender, race and income levels of borrowers, which is 

similar to the Home Mortgage Disclosure Act (HMDA) requirements. This same concept 

could apply to the SBIC's investments as well. ­

In addition, the proposed CRA regulations provide for a constructive review process, with 

measures available to assist institutions in restructuring their plans to adequately meet the 

communities needs. A similar structure could be created to monitor SBICs and SSBICs. 

The CRA-type evaluation, review process and comprehensive analysis could serve the 

investment community as well. In addition to eligibility, one of the criteria could be the 

degree of marketing to socially or economically disadvantaged business owners, including 

women-owned businesses. It would also be helpful to determine whether women business 

owners who apply for funding from the SBIC and SSBIC programs are being turned down at 

higher rates than their male counterparts. 

****************************************************************************** 

18
 
•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 

SECTION B. Adding Gender as a Factor for Consideration of SSBIC Investment Criteria 

The National Women's Business Council recommends that: 

(l)	 the guidelines for determining if a small business concern is socially or 

economically disadvantaged, the "SBA Policy and Procedural Release #2017" 

Section V, be clarified, adding a factor to read: 

• 

Congress has not fully and consistently defined the terms "socially or economically 

disadvantaged". Various programs on the local, state and the federal levels, employ different 

factors in determining what comprises a socially or economically disadvantaged business. 

The NWBC has recommended in its 1992 and 1993 annual reports that a consistent definition 

of women-owned businesses be adopted. This recommendation would also apply to the need 

for a consistent, across the board, government-wide definition of what factors constitute a 

disadvantaged business enterprise. 

A composite of factors is reviewed and examined to determine eligibility for the SSBIC 

program. In the "SBA Policy and Procedural Release #2017" Section V, seven factors are 

specifically listed concerns to which consideration may be given. They are: 

*	 race;

•	 low income; . 

•	 unfavorable location such as urban ghettos or depressed rural areas of 

high unemployment or under-employment;

•	 limited education; 

•	 physical or other special handicap; 

•	 inability to compete effectively in the marketplace because of prevailing 

or past restrictive practices; and 

•	 Vietnam era service in the Armed Forces. 

"or such other factors as contribute to a disadvantaged condition..Jacking in basic resources 

or conditions necessary to an equal position in society." 

19
 
SECTION C. Increasing Funding for the SSBIC Program 

The National Women's Business Council recommends that: 

(1) given the anticipated increased level of private investment in SSBIC's, the 

Congressional appropriation be increased for the SSBIC program. 

Background: 

Within the provisions of the Revenue Reconciliation Act of 1993, there are new incentives to 

encourage more private investments in SSBICs. A corporation or individual can elect to use 

the proceeds from the sale of publicly traded securities to purchase common stock of, or a 

partnership interest in, an SSBIC. The capital gains tax would be deferred. It is anticipated 

that this action will result in a dramatically increased level of investment in SSBICs. The 

current funding level is insufficient to meet the needs of a larger SSBIC program. 

20
 
Appendices
 

21
 

". 
BUILDING A FINANCING LADDER 

FOR 

WOMEN-oWNED BUSINESSES 

March 1994 

In the spring of 1988, the Committee on Small Business of the United States House of 

Representatives held extensive hearings on the contributions that women-owned businesses 

make to the economy. At the conclusion of the hearings, the committee issued a 

comprehensive report entitled, New Economic Realities.' The Rise of Women Entrepreneurs, 

which led to the passage of Public Law 100-533, the Women's Business Ownership Act of 

1988. In its report, the Committee disclosed that: 

·Small businesses generally cite limited access to capital as a primary detriment to 

business success. Capital is essential for business formation, expansion and operating 

expenses. No matter bow marketable the idea, or bow capable the management skills 

of the owner, unless an emerging business has sufficient funds available to .keep it 

nmning until it can generate its own cash flow, it is bound to fail. • 

In 1994, the experiences of women business owners are no different than when the 

Committee first conducted it's inquiry. Access to capital and credit remain among the most 

significant factors in determining the success of women-owned businesses; lack of access 

continues to be the most likely reason for failure of such businesses. 

In passing PL 100-533, Congress established the National Women's Business Council 

(NWBC) to address critical issues of concern to women-owned businesses, including access 

to the public and private marketplaces, as well as sources of capital and credit. In creating 

the NWBC, Congress sought to bring together government officials and representatives from 

the business community to make recommendations for action to deal with the barriers to 

access. Congress selected six women business owners to work together with three senior 

public sector policy makers: the Chairman of the Board of Governors of the Federal Reserve 

Board, the Secretary of the Department of Commerce and the Administrator of the Small 

Business Administration. 

23 
During the first five years of its existence, the Council sponsored a series of workshops and 

hearings on barriers to success for women-owned businesses. In 1992, the NWBC and the 

Federal Reserve Board, hosted a symposium on access to capital at the Board's Washington 

headquarters. The invited guests, experts in the areas of capitalization and credit, women 

business owners and advocates, federal, state and local regulators and policy makers, were 

asked to discuss the financing needs of women business owners, including the programs, 

innovations and obstacles accessing capital and credit. The symposium employed the expert 

roundtable model developed by the National Women's Business Council as a means of 

defining possible remedies for the barriers discovered in the course of our hearings. 

Three	 major issues were identified during the roundtable discussions: 

* Women business owners don't fit the standard profile for traditional lending sources. 

They tend to be concentrated in small businesses with low funding needs and in 

industries lacking traditional collateral. 

* Lack of availability of loan sources in that range between very small loans and 

venture capital. 

* Lack of access to the network of financing sources. 

From those discussions the NWBC made three recommendations to the Congress and the 

President in its 1992 Annual Report: 

*	 Change banking practices to include more unsecured loans, allow banks to price for 

risk so they can make some of these loans, enable individuals to use contracts and 

accounts receivable as collateral. 

*	 Increase the number and types of lending pools/funds, including pubic/private 

partnerships and joint ventures. 

*	 Allow banks special lower capital requirements for small business loans or high risk 

small businesses. 

Among the other outcomes of the symposium was a recommendation, subsequently 

incorporated into the FY 1994 strategic plan, which called for additional expert roundtable 

workshops. 

24
 
An analysis of women-owned businesses by the Small Business Administration, based on the 

most recent available data, shows that: 

*	 The number of women-owned businesses increased by 57.4 percent - to 4.1 million ­

- between 1982 and 1987. This rate of growth is more than four times the rate for all 

businesses during the same period. 

*	 The rate of growth in the number of women-owned businesses with paid employees 

increased 98 percent during the same period. 

*	 Total receipts for women-owned businesses nearly tripled -- rising to $278.1 billion 

by 1987. Women-owned businesses accounted for about 30 percent of all U.S. 

businesses in 1987, and about 14 percent of total U.S. business receipts. 

Information from the Internal Revenue Service on non-farm sole proprietorships, which at 70 

percent, comprises the largest share of U.S. businesses, shows strong growth among sole 

proprietorships owned by women. That number increased by more than 96 percent - to 

nearly 5 million - between 1980 and 1989. By comparison, the growth rate for all sole 

proprietorships during the same period was just 63.6 percent. 

This data, more recent trend analyses and state specific surveys show that there has been an 

unprecedented growth in the women's business sector. The National Foundation of Women 

Business Ownership (NFWBO) estimates that there are now 6.5 million women-owned 

businesses and that these businesses employ more workers than the Fortune 500. If the trend 

continues, NFWBO projects that women-owned businesses will account for 50% of all U.S. 

businesses by the year 2000. 

Despite the significant growth in this sector, women business owners still face barriers in 

identifying and obtaining the financing necessary to operate and expand their businesses. 

The economic impact of this reality cannot be understated. Traditional lenders and other 

capital providers must be encouraged to look seriously at women-owned businesses as sound 

economic investments. 

25
 
Hearings, conferences and workshops conducted by the Council have identified capital and 

credit needs as significant factors contributing to the success of women-owned businesses. 

NWBC is not alone in reaching this conclusion. Every woman business owner, and each 

membership and advocacy organization in the nation acknowledges that financing is the key 

to success for .all small business owners. 

A myriad of financing programs and products exist for women entrepreneurs, whether they 

are starting new enterprises, trying to grow their business, or planning for major expansion. 

What does not exist, however, is a profile that shows women business owners as consistent 

users of lender or investment services, or clear information on how well women business 

owners are being served by lenders and investors. 

Although women-owned businesses are represented throughout the economy, the majority are 

in the service sector. Most entrepreneurs tend to go into business in an area where they have 

had experience. It is a natural transition for women to begin businesses in the areas of child 

care, food services, home and plant maintenance, as well as professional services such as, 

psychological counseling, teaching, accounting, medicine and law. These and other service 

businesses have few, if any, business assets that would be accepted as collateral by a bank. 

Consequently, many service businesses lack sufficient collateral to secure a traditional bank 

loan. 

To overcome the barriers to bank financing, efforts have been undertaken to require banks to 

restructure the methods by which they qualify applicants for a loan. New sources of capital 

must also be identified which might be more appropriate to the needs and characteristics of 

certain types of women business owners at different phases in their development. The 

demand is certainly there, however, the marketplace must be prompted to provide needed 

services. It is now up to the marketplace to provide the needed services. 

The economic expansion of the 1980s spawned a series of innovations in business capital and 

credit formation. Bank mergers and acquisitions resulted in more centralization which 

supplanted traditional community-based lending practices. This trend clashed with local 

economic development and community empowerment priorities. The reaction was a renewed 

interest in strengthening laws such as the Community Reinvestment Act as a means of 

refocusing lending practices on underserved populations. While many believe that the 

solution lies simply in requiring banks to make more loans to women, the answer for some 

businesses may be found outside the traditional lending arena. 

26 
The 1980s also saw the creation of non-bank financing opportunities designed to meet 

entrepreneurial needs that banks were unable or unwilling to service. Venture capital 

emerged as a significant tool, expanding beyond its traditional niche supporting high-tech 

industries into other emerging business areas. Enterprise development issues, including 

creation of new government programs and public/private partnerships to address financing 

issues, became a focal point of federal, state and local government programs. Women's 

businesses, multiplied during this time at a rate far exceeding those of their male 

counterparts, demanded these services in geometrically increasing numbers. 

Possibilities for new sources of financing are limited only by the demand, the regulatory 

environment in which businesses operate and their ability to market and manage their 

resources. A survey of federal, state and local government initiatives has revealed a number 

of new ventures supported by both private and public monies. Many of the more recent 

programs are geared toward expanding options for emerging and micro-entrepreneurs. 

The following are a few examples of successful and innovative financing programs : 

*	 The Women's Business Initiative Corporation (WBIC) of Milwaukee, Wisconsin 

developed a microloan fund targeted to women-owned businesses. The pilot loan 

fund was initially set up with state funds and then attracted corporate support. In 

1992, this program leveraged S900,OOO in SBA funding. Microloans up to S25,OOO 

are now available to clients who must participate in WBIC training programs or work 

with an approved business advisor. 

*	 In a move to supplement traditional bank lending, the State of lllinois created the 

Women's Finance Initiative. WFI is a public/private partnership comprised of the 

illinois State Treasurer, technical assistance centers such' as Small Business 

Devdopment Centers, women's business organizations and associations, and financial 

institutions. The State Treasurer deposits state funds in participating financial 

institutions to back approved loans. Participating organizations help to market the 

program, sponsor workshops, and provide technical assistance to both banks and 

applicants in writing business plans and completing the loan process. 

*	 In May, 1994, Women's Collateral Funding, Inc. published The Women's Directory, 

a business resource guide to support women business owners in Philadelphia's fivecounty region. The Directory provides an alternative source of funding for qualified 

women entrepreneurs seeking small expansion loans (SI0,OOO-S25,OOO). Funding is 

structured in the form of venture collateral, a risk investment with an equity return. 

A triangular relationship is established between the lending bank, the entrepreneur and 

Women's Collateral Access Fund, Inc. 

27 
*	 On a national level, the Capital Circle was fonned in 1993 to dramatically increase 

the flow of financial resources to women-owned businesses. The Circle has invited 

individuals who have expertise in providing financial services, business advocacy and 

private investment to join this catalytic network. Training for individuals interested 

in becoming "angels" by investing their own personal capital in enterprises owned by 

women is also provided by the Circle. 

*	 Small Business Investment Companies (SBICs) are fonned to supply equity capital, 

long-term loans and management assistance to qualifying small businesses. These 

may be another source of credit for women-owned businesses. The privately owned 

and operated SBICs use their own capital along with funds borrowed from the Small 

Business Administration to provide financing to small businesses in the form of equity 

securities and long-term loans. SBICs are profit seeking organizations that select 

small businesses to be financed within rules and regulations established by the SBA. 

Specialized SBICs (SSBIC) provide assistance solely to small businesses owned by 

socially or economically disadvantaged persons. Establishing an SSBIC targeted to 

women business owners has been explored as a way to introduce women to this 

source of credit. 

These are just a few of the innovative financing options developed to close the gaps on the 

credit ladder. As the National Women's Business Council moves forward with our 

investigation, other ventures and new opportunities will be identified. We plan to introduce 

these tools and concepts to women business owners during our workshops and to encourage a 

continuing dialogue between users, lenders and investors. 

Designing and implementing innovative approaches to meet specific financing needs are 

proving to be more productive than trying to develop a "one stop shop" approach. We've 

come a long way from the days when a business owner could walk into the nearest bank, ask 

for a loan, sign on the dotted line and be in business. Now we know that banks are often 

just a starting point and that business owners may need to explore a variety of sources before 

securing a loan and/or other credit arrangement. 

Getting the word out about these different programs is the challenge. There are so many 

choices these days, yet, most business owners remain in the dark about what options are 

available, which ones they are eligible for and what requirements they will have to meet. 

The possibilities are endless and the process daunting...so much so that credit cards are the 

financing mechanism of choice of many start up businesses. 

Infonnation exchanges, educational outreach, and special marketing and training strategies on 

the part of lenders, government entities, business advocacy organization and educational 

28
 
institutions are essential components of any successful financing program. This makes good 

business sense, both from the perspective of the lender and the borrower. 

At the Council's policy workshops, participants offered the following recommendations to 

improve the financial service delivery to address concerns raised by women business owners 

who had great difficulty finding sufficient resources to start or expand their businesses. 

*	 Educational programs should be offered by lenders and government regulatory 

agencies to help women business owners understand the types of capita1lcredit 

options, eligibility requirements, and the realities and expectations of the marketplace. 

*	 Awareness and information programs are needed to help financial institutions 

understand specific characteristics of women-owned businesses, which are incorrectly 

viewed as riskier than other business ventures. Possible programs include information 

programs on the viability of character-based lending, enterprise development 

experience and innovative financing programs. 

Financial institutions need to become aware that lending to women-owned businesses 

is profitable. It makes good sense to open new routes of credit for these businesses. 

*	 Education and awareness programs for policy makers are needed on the range of 

options available to address the capital and credit needs of women-owned businesses. 

Information on successful state and local programs to leverage public and private 

sector resources to ensure that women business owners have access to the best options 

throughout the country should be shared. 

*	 Programs must be created to educate corporations along with private and public 

foundations on the value of and need for them to support business development, for 

women, such as SBA's Office of Women's Business Ownership's Demonstration 

Programs. 

29
 
Action which addresses some of the financing concerns expressed by the participants at 

NWBC's conferences has already been taken. 

The following items specifically target the financing concerns of women-owned businesses. 

*	 Early in 1994, the U.S. Small Business Administration launched the Women's 

Prequalification Pilot Loan Program, which enables women business owners to 

receive pre-qualification from SBA for a loan guarantee under the 7(a) program 

before making a presentation to a bank. This streamlines the application process and 

provides a quick response to loan requests of $250,000 or less to women business 

owners. It focuses on the character, credit, experience and reliability of the 

applicants, de-emphasizing strict collateral requirements. 

*	 SBA has expanded the size and scope of its Microloan Demonstration Program which 

was originally authorized in October 1991. The microloan program was designed to 

increase the availability of capital to borrowers normally not able to receive credit 

from traditional lending sources. Since their creation, over 1500 microloans have 

been made, approximately 44% of these loans were to entrepreneurs and small 

businesses in rural areas. The average loan amount is just over $10,000 and it has 

been estimated that 3.1 jobs have been created or retained with each microloan. 

Further changes are anticipated that would permanently authorize this popular 

program, expanding its scope. 

As a result of the Federal Reserve Board meetings, the following recommendations have 

been incorporated in NWBC reports to the President and Congress, requesting: 

Public Policy Initiatives: Private InYestment 

*	 legislation to encourage and support development of a formal network and/or 

methodology for "private" investment in small and women-owned businesses; 

*	 security laws that provide greater flexibility in allowing and encouraging 

alternative investment vehicles and networks for linking private investors with 

small, minority and women-owned businesses; 

*	 tax legislation that includes incentives for individuals to invest in small 

businesses. 

30
 
Public Policy lnitiatiyes: Lendin~ Institutions 

* legislation to facilitate the creation and operation of a secondary market for 

securing small business loans that would expand opportunities for participation 

by financial institutions; 

* Community Reinvestment Act credit for loans and investments extended to 

women-owned businesses; 

*	 review of the "real world" impact of character-based lending; 

*	 stimulation of bank lending by revision of the Financial Institution Reform, 

Recovery and Enforcement Act (FIRREA) regulations to provide lower riskbased capital requirements for loans provided to women- or minority-owned 

businesses whose borrowing needs are not served by the Small Business 

Administration; 

*	 simplifying the paperwork required for SBA guaranteed loans and instituting a 

"pre-qualification" process to speed up the approval process, and 

*	 clarification of Federal Reserve Regulation B (12 CFR 202B) to relieve lender 

liability and allow for debriefings for applicants whose loans are rejected. 

************************...**************...*********....*************.*...... 

Five years of Council research has defined access to capital and credit as the foremost barrier 

to success for women-owned businesses. At every rung of the ladder--from the small, homebased business operating on creativity and sheer nerve to the growth enterprise preparing to 

go public-inadequate financial resources are cited as the reason for a woman's inability to 

establish, maintain and expand her business. 

Women are starting businesses at twice the rate of men, and over the past ten years, have 

increased their economic power four fold. The achievements of wpmen business owners are 

remarkable, considering their limited access to capital and credit. 

The National Women's Business Council is seeking innovative ways to remedy the financing 

inequities perceived and experienced by women business owners. The initiatives identified in 

this paper are a sampling of the efforts undertaken to ease the credit crunch. These and other 

creative ideas should be advanced, as well as efforts to educate and inform women of the 

alternative financing options and new protocols. 

31 
*	 Sources of equity capital which could be directed towards investments in womenowned businesses. 

*	 Financing needs of women-owned businesses in each stage of entrepreneurial 

development. 

Innovative debt and equity programs. 

*	 Designing new lending products to fill gaps in the financing ladder. 

*	 Encouraging banking institutions to developing specialized loan programs and to 

participate in "loan pools" that benefit women business owners. 

*	 Exploring ways that government programs can create incentives for development of 

new financing mechanisms. 

*	 Analyzing the effects on women-owned businesses of increased commercial lending 

by non-bank lenders. 

*	 Institutionalizing and promoting continuing education and development for women 

business owners, lending institutions, other institutional investors, and policy makers. 

*	 The efficacy of requiring banks and investors to collect and disseminate the numbers 

of applications received from women business owners and the numbers of 

loans/investments made. 

32
 
BIOGRAPIDES
 

FOR
 

SPEAKERS, PANEUSTS AND FACnJTATORS
 

Linda Tarr-Whelan - Keynote Speaker 

Linda Tarr-Whelan has been President and Executive Director of the Center for Policy 

Alternatives since November 1985. The Center is a nonprofit, non-partisan, progressive 

public policy center which focuses on innovative policies and leaders in the fifty states. Ms. 

Tarr-Whelan has had 23 years of public policy experience as an advocate and government 

official in the areas of health care, employment, economic development, education and 

women's issues. She served in the White House as Deputy Assistant under President Carter, 

Director of Government Relations for the National Education Association, Administrative 

Director of the New York State Department of Labor and Director of Program Development 

for the American Federation of State, County and Municipal Employees. Ms. Tarr-Whelan 

serves on numerous boards and advisory committees and is a nurse by training. She received 

her BSN from John Hopkins University and holds an M.S. from the University of Maryland. 

"Women entrepreneurs are energizing our economy. Women business owners are the fastest 

growing sector of the business community - now 32% of small business ownership, up from 

5% in 1970. The small business sector is increasingly important to women seeking 

employment and advancement opportunities. According to the Department of Commerce, in 

the decade between 1977 and 1987, the proportion of private sector employment in firms 

over 500 employees declined from 43.3% to 28.7% of total employment. This trend has 

clearly accelerated with large-scale industrial "downsizing" and.defense cut-backs. Strategies 

for the economic advancement of women cannot depend upon the stabilization of larger 

businesses. 

Many women have started their own businesses to: "create my own job" when women's 

work pays less than poverty wages or where few jobs exist; balance family and work; or 

escape the unfriendly atmosphere for women in corporate life. In an interesting harbinger of 

the future, women choose self-employment at a rate five times greater than men and are 

successful in 80% of the businesses they begin. According to the National Foundation for 

Women Business Owners, the annual receipts of women-owned business are greater than 

those of any single state in the nation and quadrupled between 1982 and 1987. 

33 
Investing in women-owned businesses creates the nationwide growth that leads to long-term, 

sustainable growth in the national economy. Pension funds are a key part of that framework. 

With long-term investment horizons and the substantial need for diversification, pension 

funds are appropriate investors for economic revitalization. Government and community 

leaders should challenge private investors to target investments in women-owned businesses 

that meet their criteria for market return. 

These economically targeted investments (ETIs) include any prudent investment that fills a 

capital gap in an underfinanced area of the economy and earns a risk adjusted market rate of 

return. An effective ETI strategy enables a plan sponsor to meet legal obligations to plan 

participants while creating an additional corollary benefit to a geographic area, demographic 

group, industry or plan participants. 

A 1993 Center for Policy Alternatives study of state public retirement programs, found 27 

public pension systems, with over 60 different successful ETI programs. These programs 

that can make a difference for women entrepreneurs include 12 small business loan programs 

targeted to women; and 14 equity financing - primarily venture capital - programs. 

California pension funds are in the lead in this area. CALPERS invests up to 1% in ~mall

business capital and CALPERS invests $75 million in early and expansion capital in 

California firms. 

Pension funds control $4.4 trillion in pension assets - more than banks and traditional 

financing for women-owned businesses. Pension funds are so large they are the market. If 

2% of all pension funds were .invested in ETIs, it could yield $90 billion worth of investment 

capital needed to create jobs and growth in capital-starved areas of the economy. Women 

deserve and need access to these new capital sources. 'Women Empowered: We mean 

business. " 

The Honorable Mary Ellen Withrow - Luncheon Speaker 

Mary Ellen Withrow was confirmed unanimously by the Senate to be the 40th Treasurer of 

the United States and was sworn into office March 1, 1994. She is the first person to have 

held the post of treasurer at all three levels of government - local, state and national. As 

Treasurer of the United States, Withrow is responsible for the operations of both the U.S. 

Mint and the Bureau of Engraving and Printing. During her tenure as Ohio's State 

Treasurer, Withrow's innovative programs, management efficiencies and record earnings for 

Ohio earned her nationwide recognition. In 1992, she received the Donald L. Scantlebury 

Memorial Award from the Treasury's Joint Financial Management Improvement Program for 

34
 
financial excellence and improvement in government. She is past President of the National 

Association of State Treasurers and the National Association of State Auditors, Comptrollers 

and Treasurers. Ms. Withrow is a member of the "Board of Directors of Women Executives 

in State Government, an inductee into the Ohio's Women's Hall of Fame and a recipient of a 

Women Executives in State Government fellowship to Harvard University. 

"The goal of increased access to capital is of vital interest to me. We are no longer at the 

stage of trying to decide whether there is a problem, or what the problem is. We know the 

answers to those questions. The questions now is: what can be done to expand access to 

capital, and more specifically, what changes in federal policy are needed. Women-owned 

businesses are an integral part of the foundation of the U.S. economy and without the access 

to much needed funds to begin or grow and expand a business, they are stifled. I applaud 

the National Women's Business Council's efforts, along with the many women business 

advocates here today, to tackle this issue. My hope is that by stimulating dialogue, we can 

come up with viable solutions - solutions that will change existing federal laws or create new 

ones. As women in the business and financial worlds, we must strive through meetings and 

workshops like this to make sure that access is opened up to minority- and women-owned 

businesses. We need to level the playing field and then let the games begin!" 

William C. Conrad. - Federal Reserve Bank of Chicago Representative 

Mr. Conrad, First Vice President and Chief Operating Officer of the Federal Reserve Bank 

of Chicago, has responsibilities for overseeing Operations and Check Services, Automation 

Support and Electronic Services, Financial and Management Services and Support Services, 

as well as the Bank's Detroit Branch and the offices in Des Moines, Indianapolis and 

Milwaukee. Mr. Conrad additionally has responsibilitY for the Federal Reserve System's 

Securities Product Office in Chicago and is the Chairman of-the Bank~s Committee on ' 

Securities and Fiscal Services. He is also a member of the Federal Reserve System's 

Conference of First Vice Presidents. He began his career with the Federal Reserve Bank in 

1959. He received a B.S. and an M.B.A. from Wayne State University. He also attended 

the Graduate School of Banking at the University of Wisconsin and the Advanced 

Management Program at Harvard University. 

"Women-owned business face financing gaps, but at the same time there are many examples 

of successful and innovative financing arrangements and numerous laws, regulations, and 

programs intended to help women obtain capital. Although these programs exist, without the 

consensus building, partnering and networking, it is difficult to access these programs." 

35
 
- Expert Moderator for Panel #2 

Ms. Davis is the founding director of a dynamic new network of key investors, financiers 

and women's business advocates. The Capital Circle is a group of key influencers who have 

come together to promote their common goal of dramatically increasing the flow of capital 

and support to women-led businesses. Ms. Davis serves as the President of the Capital 

Mission Company of Chicago which she founded in 1990 to create networks of 

socially-responsible business leaders who use assets and influence to solve social problems. 

In addition to the Capital Circle, Capital Missions also created the Investor's Circle, whose 

membership includes leading private investors in America who seek social dividends as well 

as market returns. Ms. Davis has a 25 year history of involvement in launching 

socially-responsible business ventures. For nine of those years, she was a Division 

Administrator for the Harris Bank in Chicago. Ms. Davis received a B.A. cum laude in 

Russian from Brown University and did graduate work in anthropology at Harvard Graduate 

School of Education. 

"There is a great business opportunity for women-led businesses to attract equity investments 

from angel networks. In particular, a recent national study established that the most effective 

feature in the success of an angel network (a not-for-profit association of private investors) 

was the extent to which it developed relationships among its members. The reason is that 

members then tend to bring their best deals to each other and invest in each other's deals. 

This results in larger amounts of money moving into entrepreneurial companies. 

Most existing angel networks feature computer matching services to introduce investors and 

entrepreneurs. However, this has been found less effective than networking the investors 

with each other. There are only two networks in the country which focus on developing 

co-venturing relationships among investors and both of these networks give special attention 

to investment opportunities in women-led business deals to find particular favor among angel 

investors generally. " 

Marpret Fisher - Expert on Panel #2 

Ms. Fisher is a general partner with Inroads Capital Partners, L.P., a newly formed venture 

capital firm which is raising $75 million for the purpose of originating and managing private 

equity-related investments in middle-market companies, with special focus on the undeserved 

marketplace. Ms. Fisher provides the Fund with extensive venture capital experience. Since 

1981, she has been a founding general partner of Seidman Fisher & Co., a successful 

venture capital firm, that has raised two funds aggregating approximately $45 million~ It is 

believed that she was the first female to become an initial founding partner of a private 

venture capital firm in the U.S. During her fourteen years in the venture capital industry, 

Ms. Fisher has completed numerous equity investments across a wide variety of industries. 

36
 
She currently serves on the boards of directors of Tessco, Inc. and Cornerstone Technology. 

She graduated cum laude and Phi Beta Kappa with a B.A. in sociology from the University 

of Pennsylvania and an M.B.A. in finance from the University of Michigan. 

"The venture capital industry is the nation's largest and most vital source of equity funds to 

private companies in all stages of maturity, but particularly to early stage companies with 

high growth potential. In 1993, the industry provided $3 billion of funding to such 

companies. Unfortunately, women have been largely shut out of the venture capital process, 

despite their substantial ownership of U.S. companies. 

Companies owned by women have an annual demand for equity of $12 billion which is 

largely unmet by professional capital sources. I have spoken to many of the women in the 

industry; with few exceptions, neither they not their firms have ever backed a female 

entrepreneur. One pension fund advisor who invests its clients in venture capital LP's 

surveyed 100 limited partnerships in which their clients invested, and over 1,()()() companies 

in which those LP's invested. Not a single company was minority or female owned. Thus, 

there is a tremendous imbalance in supply and demand of capital for women-owned 

companies and the demand is increasing dramatically. Unfortunately, venture capitalists 

work through a relatively small, close knit, old boys network which often doesn't consider 

funding women-owned businesses. We need to examine ways to integrate women into this 

network and make venture capitalists recognize the feasibility of backing a women-owned 

business. " 

Austin Fitts - Expert Policy Workshop Facilitator 

Ms. Fitts is a principal in the Hamilton Securities Group, Inc., a real estate merchant 

banking firm that provides financial advisory and broker, dealer services for the real estate 

community and related financial institutions. In addition,. the fmn is involved in managing 

and investing in private placement equity, nonperforming and subperforming tax-exempt 

debt, and publicly traded real estate stocks and other securities. Prior to her work with 

Hamilton, Ms. Fitts was the Assistant Secretary for Housing-Federal Housing Commissioner 

for the U.S. Department of Housing and Urban Development. Prior to her government 

service, she was managing director of Dillon, Read & Co., NY, NY. She earned a B.A. at 

the University of Pennsylvania and an M.B.A. in Finance from the Wharton School, 

University of Pennsylvania. She serves on the board of First American Bankshares, Inc. 

and the National Multi-Housing Council. She is a member of the Council for Excellence in 

Government, the Urban Land Institute, the Economic Club of NY, the Financial Women's 

Association and the Capital Circle. 

37 
Nmcy M, Goodman - Federal Reserve Bank of Chicago Representative 

Ms. Goodman is Senior Vice President of the Federal Reserve Bank of Chicago, in charge of 

the Community and Information Services Department. Ms. Goodman has management 

responsibility for the Bank's Community Affairs Office, which implements various outreach 

activities related to community reinvesting and fair lending. Nancy Goodman joined the 

Bank in 1962 as a senior research analyst in the economic research department. Goodman 

holds a bachelors degree in economics from the University of Michigan and did graduate 

work in economics at Columbia University. She is also a graduate of the Graduate School of 

Banking at the University of Wisconsin. 

"The Council and the Federal Reserve Board have worked closely together, holding regional 

conferences and workshops to tackle the issue of access to capital. We are pleased with the 

liaison and feel we are closer to achieving our goal of giving women-owned businesses the 

same advantages in the financial marketplace that their male counterparts have. 

"A Guide to Business Credit for Women, Minorities and Small Business" is a publication of 

the Board of Governors and it is included in your registration packet. 

I am very pleased to see the two National Women's Business Council members, Marilu 

Meyer and Saundra Herre, who have been on the Federal Reserve Bank of Chicago's 

Advisory Council. Their input has been invaluable - I'm sure you all know what great 

resources they can be! Our hope is that all of us will come away with new ideas and better 

information about opportunities and strategies that can be pursued by providers and users of 

capital alike." 

George Kalidonis - &pen on Panel #2 

Mr. Kalidonis has had a remarkably varied business and academic career. In 1982, after 

spending many years as an executive for several large consumer products corporation, he 

founded Technology Planning & Development Corporation. He also serves as President & 

CEO of the Chicago Capital Fund. His primary focus is to motivate operating managers to 

understand the changing fundamental structures and dynamics of their business environment 

and to develop innovative responses to the emerging demands of the future marketplace. Mr. 

Kalidonis is a columnist, has written and directed videotape features and has been a frequent 

commentator on radio and television programs. He earned a PhD in Technology Policy at 

the University of Illinois, an M.B.A. and a B.S. in Industrial Management from Wayne State 

University. He has undertaken post doctoral studies in political science/critical theory and 

has taught at the Keller Graduate School of Management, the University of Illinois at . 

Chicago and the Poynter Institute for Media Studies. In 1988, he received the Clarence 

Darrow Award for outstanding contributions to human dignity and social justice. 

38 
"It is critically important to distinguish between self-employment, lifestyle businesses and 

growth businesses. Only growth businesses can attract arms length (non-relatives or friends) 

investment capital. The principal reason for this situation is because only growth businesses 

retain earnings for reinvestment into growth. The other two types of business' earnings are 

withdrawn by its owners, in one fashion or other, for personal use. This puts the outside 

investor in the unacceptable situation of substituting their capital for investment into growth 

for the earnings withdrawn by the firm's owners. No one is willing to invest more money in 

a privately-held business than the owners have invested. 

Venture capital partnerships are deluged by business plans. From their prospective, they 

must use very efficient screening mechanisms to filter investment criteria. Therefore, your 

plan will receive an in depth review, only if it is specifically and realistically tailored to each 

recipient's investment criteria. Mass mailings are a waste of time and lead to unnecessary 

disappointment. Research each potential investor's investment criteria, and mail your plan 

only to those venture firms who could be interested in your plan. Remember, from the 

prospective of the investor, you are selling an investment opportunity. 

Finally, if you really believe in your idealbusiness and in yourself, follow Winston 

Churchill's advice, "Never, never, never ever give up". Do whatever it takes. With enough 

time, you sneak ahead while no one is watching. The idea is to endure long enough to 

prevail... 

Betsy Myers - u. S. Small Business Administration Representative 

As the Associate Administrator for the Office of Women's Business Ownership at the U.S. 

Small Business Administration, Ms. Myers serves the fastest growing segment of the small 

business economy. Ms. Myers received her Bachelor of Business Administration from the 

University of San Diego. A former small business owner in California, she serves as an 

advocate for women small business owners and oversees the SBA's procurement, financing, 

technical assistance and mentor programs of the Office of Women's Business Ownership, 

which are designed to provide the tools most needed by women business owners to be 

successful in their enterprises. 

"The Small Business Administration is the government's best kept secret for small, minority 

and women owned businesses - it is the single largest financial backer of U.S. businesses! 

The SBA has 68 district offices, 950 Small Business Development Centers, 6 Business 

Information Centers, an on-line program and a service core of retired executives. The SBA 

has provided over 1/2 million loans and loan guarantees, with our current portfolio at 

approximately $26 billion. 

39 
The SBA's new microloan program is making a tremendous impact on accessibility to credit 

by providing access to capital for women- owned businesses. The purpose of the program is 

to assist women, low income and minority entrepreneurs and business owners. These 

individuals must demonstrate good character with enough management expertise and 

commitment for a successful operation to assure repayment of the loan. Under this program, 

the U.S. Small Business Administration is authorized to make direct loans to eligible and 

qualified intermediary lenders who will make fixed interest rate microloans to start up, newly 

established and growing businesses. The loans are given for not more than six years and 

range from $100 to a maximum of $25,000. 

One of the most significant programs which will have a great impact in increasing access for 

to the SBA lending program is the new Women's Prequalification Pilot Loan Program. This 

program allows a woman business owner to receive prequalification from the SBA for a loan 

guaranty before going to a bank. The program streamlines the application process and 

provides a quick response to loan requests of $250,00 or less to women business oWners. It 

focuses on the character, credit, experience and reliability of the applicants. 

These programs are two examples of this Administration's revitalized commitment to 

ensuring small business owners, particularly women, fair access to credit and capital. " 

Dr. Susan M. Phillips - Federal Reserve Board ofGovernors Representative 

Dr. Susan M. Phillips was sworn in on December 2, 1991, as a member of the Board of 

Governors of the Federal Reserve System, to fill an unexpired term ending January 31, 

1998. Prior to becoming a member of the Board, Dr. Phillips served as Vice President for 

Finance and University Services and Professor of Finance at the College of Business 

Administration at the University of Iowa. Previously, she served on the faculty at Louisiana 

State University. She also has been a Brookings Economic Policy Fellow and an Economic 

Fellow with the Securities and Exchange Commission. In 1981, Dr. Phillips was appointed 

to the Commodity Futures Trading Commission and became its Chairman in 1983, serving 

until her resignation in 1987 to return to the University of Iowa. Her areas of specialization 

include options and commodity futures, financial management and economic theory of 

regulation. 

"In enacting the statute that created the National Women's Business Council, Congress 

included the Federal Reserve: 1) in part because of our responsibilities for ensuring that the 

Equal Credit Opportunity Act was effectively implemented and enforced; 2) in part because 

of our role as a supervisor of banks, given the general perception that banks currently are the 

major source of funding for small business regardless of gender; and 3) in part because of 

40
 
our monetary policy responsibilities for maintaining stable prices and a growing economy 

which requires that we have a clear understanding of how different productive sectors in our 

economy are faring along with how the financial system in the United States is changing. 

The Federal Reserve has undertaken several initiatives to gain better information about small 

business access to credit and the financial situations confronting small businesses. 

Small Business Survey:
 

In 1989, the Federal Reserve Board, with support from the Small Business
 

Administration sponsored a survey on small business financing to identify the sources
 

of credit and the balance sheet characteristics of small businesses. This year we are
 

essentially repeating that survey, but with an even larger sample to ensure that there
 

are enough women and minority participants to allow us to compare the experiences
 

of various groups within our economy.
 

Small Business and A&ricultural AdyisOl)' Committees:
 

For more timely and immediate feedback on economic and financial conditions facing
 

small business, each of the 12 federal Reserve banks that are part of the Federal
 

Reserve System created Small Business and Agricultural Advisory Committees.
 

First Symposium on Access to Capital: Washington, DC
 

The ongoing interest in the availability of credit and access to capital led the Federal
 

Reserve to agree to host the National Women's Business Council's first symposium
 

on Access to Capital in Washington, DC in September 1992. At that conference, the
 

participating women business owners discussed tIleir perceptions of how they are
 

treated by lenders while bankers described the constraints under which they operate in
 

extending credit. What emerged from the conference was the idea that creating a
 

secondary market for small business loans could expand the total.pool of funds
 

available to small business. By developing instruments to securitize such loans,
 

bankers would be able to "sell off" loans to other investors. These instruments could
 

be similar to those that exist in the home mortgage market. It was also
 

recommended at the conference that the Council together with the Federal Reserve
 

sponsor similar roundtables on a regional basis so that information on different
 

aspects of the issue of access to capital could be obtained.
 

41
 
First Re&iQnal RQundtable Qn Access to Capital: RichmQnd, VA 

In September 1993, a wQrkshQp was held at the RichmQnd Federal Reserve at which 

participants discussed the cumbersomeness Qf the loan-applicatiQn process, alQng with 

the need fQr mQre centralized infQrmatiQn fQr small business Qwners Qn training and 

Qn sources Qf financing. The conference tQuched briefly Qn the need to look beyQnd 

the banking system tQ alternative sources Qf finance, particular as a business expands 

beyQnd the start-up phase. 

Today, we are here to discuss some ideas about alternative sources Qf financing...As we will 

learn frQm Qur lead speaker, commercial banks in the US arena are nQ IQnger the Qnly source 

Qf financial assets, thus it is important that we understand investment decisiQns Qf pensiQn 

funds and insurance companies. It 

Miriam Santos - Expert on Panel #1 

The HQnQrabie Miriam SantQs has been the ChicagQ City Treasurer since 1989. She is the 

first WQman and first hispanic elected tQ this Qffice. As the city's banker, the Office Qf the 

City Treasurer manages an annual cash flQW Qf mQre than $60 billiQn. Ms. SantQs has 

undertaken a massive restructuring Qf the Qffice. Recognizing the untapped community 

development potential Qf the treasurer's jQb, Ms. Santos has allocated mQre that $50 million 

tQ assist small businesses. In less than twQ years she successfully helped WQmen and 

minQrity-owned businesses Qbtain shQrt-term loans and lines Qf credit by investing $20 

milliQn in her linked Deposit Programs while earning the city clQse tQ $1 milliQn in 

additiQnal interest. After conducting the first financial analysis Qf the city's fQur pensiQn 

funds, she has recommended sweeping changes in pensiQn fund refQrm including the 

consolidatiQn Qf the funds' $5.88 billiQn in assets. Ms. Santos Qbtained a B.A. and law 

degree frQm DePaul University and earned an M.B.A. frQm NQrthwestern University's 

KellQgg School Qf Business. 

"It is my belief that all gQvernment functiQns shQuld ultimately be fQr the benefit Qf the 

taxpayer. As the city's "banker", I believe that it is Qur responsibility to level the playing 

field fQr WQmen and minQrity Qwned business in this city. I fQund that tQ make that a 

reality, I had my wQrk cut Qut fQr me. My missiQn...tQ transfQrm my Qffice intQ a model 

municipal Treasury...tQ be at the fQrefrQnt Qf the grQwing trend fQr municipal gQvernments: 

linking city bank deposits tQ accomplish a particular gQvernmental goal. ThQse goals include 

encouraging the growth Qf small business, especially WQmen and minQrity-owned concerns, 

stimulating jQb creatiQn and prQviding fQr business develQpment, retentiQn and expansiQn. 

42
 
To accomplish this we created several economic development programs beginning with the 

Linking Deposit Program for small emerging and minority and women-owned businesses 

(262 loans were made on 25 million dollars and the city earned an additional $1 million 

dollars in interest). Additional programs which help small businesses receive the money they 

need to survive, improve a banks CRA rating and help reinvest taxpayer money back into the 

community are: Deposits for Industrial Development program for small manufacturing 

companies; Public Investments for Exports program for small exporting firms; 

Contractors' Assistance program for small prime and sub-contracting contractors; and the 

Americans for Disabilities Act (ADA) Compliance Program.· 

Anne Stell.c - Expen Moderator for Panel #1 

Ms. Stelle is the Deputy Manager, Director of Marketing, Investment Advisory Department 

for Brown Brothers Harriman & Co. She is a marketing executive specializing in financial 

services and sales, including developing and implementing successful and innovative asset 

gathering programs. Her background includes relationships with high net worth individuals 

and institutions, with experience in the financial marketplaces of a registered investment 

advisor, bank trust department, Wall Street investment bank and major brokerage frrm. She 

is very active in community and church activities. Anne earned a 'B.A. from Sweet Briar 

College. 

BQ.b Stillman - &pen on Panel #1 

Mr. Stillman is the Associate Administrator for Investment at the U.S. Small Business 

Administration with responsibility for the administration of the Small Business Investment 

Company (SBIC) program. He was formerly Executive Vice President, Treasurer, and 

Director of AEA Investors Inc., from 1972 to 1992, a New York private investment firm 

financed by institutional investors and former CEOs of major companies, which specializes in 

buyouts of medium-sized companies. Prior to that, Mr. Stillman was a general partner with 

Payson & Trask. This firm was one of the first organized venture capital concerns in the 

U.S. During his years with AEA and Payson & Trask, he served as director of numerous 

corporations. Mr. Stillman received a B.E. degree in Chemical Engineering from Yale 

University and an M.B.A. from the Harvard Business School. 

"Small Business Investment Companies (SBICs) and Specialized Small Business Investment 

Companies (SSBICs) are profit-motivated businesses that independently either make loans or 

equity investments. They are licensed by the U.S. Small Business Administration (SBA) to 

stimulate the flow of equity capital and long-term loan funds into small businesses, so that 

they can grow and develop. 

43 
The benefits of the SBIC and SSBIC programs are extensive. Not only do small businesses 

benefit, but venture capitalists profit through the ability to supplement their own private 

capital with funds obtained on favorable terms through assistance from the federal 

government. More permanent full-time private sector jobs are created by businesses that are 

financed by SBICs and SSBICs. A bank may invest up to 5% of its capital and surplus in a 

partially or wholly-owned SBIC or SSBIC. This permits banks to invest in small businesses 

in which they could not otherwise invest because of banking laws and regulations. 

Investments made through an SBIC may also assist in meeting Community Reinvestment Act 

requirements. Finally, the U.S. taxpayer also benefits due to tax revenues generated each 

year by companies that have become successful through SBIC investments. This more than 

covers the cost of the program." 

Xcylur Stoa1dey - Expert on Panel #2 

Mr. Stoaldey is a principal in the firm, Ark Capital Management. Ark's Mission is to 

provide competitive returns to its investors through its pro-active management of private 

equity funds targeted to invest in women and minority-owned businesses. He managed one 

of the most substantial private equity investment programs ever developed in the United 

States. As a member of the Ameritech Investment Management Group he managed 

Ameritech's private equity program from inception to over $650 million under management 

in over 100 separate fund investments in the U.S., Europe and Asia. He maintained a . 

significant presence in the industry by providing input on industry policy and direction and 

by organizing educational and networking events. Xcylur is recognized as a leading 

spokesperson and educator regarding the venture capital investment process. Mr. Stoakley 

earned a B.S. in Electrical Engineering from Bradley University and an M.B.A. from the 

Keller Graduate School of Management. 

"Greater investment in and development of women and minority-owned businesses is an 

economic necessity. From an investor's standpoint, there is no way to continue to make 

market returns if you are not investing in the segments of the market where new 

opportunities are coming from. The demographics say that this is the growth segment. 

Many would wrongly tend to classify these companies as disadvantaged, when it is more 

accurate to categorize them as disenfranchised. They lack nothing other than opportunity. 

They represent markets that have been ignored. They offer a great deal of untapped human 

potential, talent, creativity, buying power, and economic strength. 

44
 
IDtimately, we believe that this is one investment opportunity that can truly enhance our 

competitiveness as a nation, a way to capitalize on a broader approach to being more highly 

competitive as a country. We maintain that it is from competitiveness that you generate 

business returns. We also recognize that there will be social benefits to be gained by this 

process. The way to create social advancement and broader economic stability is to create 

quality, long-term viable businesses. The rewards then will accrue to those who have 

provided the capital. II 

Monte Ta.rtmx -Expert on Panel #1 

Mr. Tarbox is the Vice President of Marco Consulting Group. He advises pension fund 

trustees on investment policy, asset allocation, invested manager selection, fund performance, 

custodial bank operations, proxy voting and other investment issues. Prior to this, Mr. 

Tarbox was the Director of Governmental Relations with the Citizens Utility Board and Chief 

Administrative Assistant for Chicago Alderman David Orr where he drafted local and state 

legislation and was the liaison to the various city departments. Monte graduated Magna cum 

laude with a B.A. from Carleton College and earned an M.B.A. in Finance from the 

Chicago Graduate School of Business. 

IIGiven the rapid growth in pension fund assets, the day will soon arrive when pension funds 

will own a majority of the equity of corporate America. When that happens, conventional 

investment management strategies may result in pension funds bidding against each other for 

the same shares. As pension assets grow, trustees and their money managers will need 

inevitably to look to Economically Targeted Investments (ETls) and alternative forms of 

investment to play a role in their portfolios. 

Well structured BTls can offer pension funds the opportunity to diversify their investments 

and to achieve competitive risk adjusted rates of return. But more importantly, pension fund 

capital will be a critical catalyst for growth in our economy. The investment decisions made 

by pension trustees may well determine which businesses thrive and what new industries 

emerge. Now is the time to begin creating the tools and the analysis which will allow 

pension funds to play this role effectively and profitably. 

We are looking to women investment managers and venture capital professionals to generate 

innovative products with successful track records. We are looking to progressive pension 

trustees like Treasurer Santos to show us how to manage these alternative investments within 

a larger institutional portfolio. We are looking to the Small Business Administration and 

other government agencies to provide support in the form of guarantees, start up loans and 

technical support. And we are looking to the Department of Labor to grant us the breathing 

room to try innovative investment strategies. These are the steps needed to give pension 

fund trustees the confidence to branch out into new investment realms... 

45 
Dayid Tsen~ - &pen on Panel #1 

Mr. Tseng is the special assistant to Olena Berg, the assistant secretary for the U.S. 

Department of Labor's Pension and Welfare Benefits Administration. Tseng's agency is 

responsible for the administration and enforcement of the Employment Retirement Income 

Security Act (ERISA), the feden1llaw regulating pension operations and other job benefit 

plans by private companies and unions. The agency oversees approximately 750,000 pension 

plans with assets of more $2.3 trillion and another 4.5 million plans involving other job 

benefits such as health and dental policies. Tseng's role includes acting as Berg's liaison to 

the ERISA Advisory Council and overseeing a project involving pro-bono legal services with 

the American Bar Association and ERISA attorneys throughout the country. Prior to this, 

Mr. Tseng worked as an employee benefits attorney. He graduated with honors from 

Columbia University and earned his J.D. from U.C.L.A. 

"The ERISA Advisory Council has endorsed Economically Targeted Investments (ETIs) as 

viable pension fund alternative investments. These investment opportunities are intended to 

create jobs and improve local economies while providing competitive investment returns. 

ETIs are an often overlooked investment opportunity for the more than $4 trillion capital 

held in American pension plans. The Department of Labor wants to dispel the mistaken 

perception in the investment community that investments in ETIs are incompatible with 

ERISA. .­

Additionally, the Department of Labor is currently in the process of establishing a 

clearinghouse on ETIs. This clearinghouse will gather information about the investment 

performance and attributes of ETIs and make that information available to the pension 

community to aid its investment decisions. " 

46
 
3

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3

Ch

drienne Allen
 

esident
 

bridon Corporation
 

13 Oak Avenue
 

anston. IL 60201-4245
 

8869-9755
 

8 869-9757 fax
 

lly A. Anders
 

uman Resource Consultant
 

at Solutions
 

55 Partridge Road
 

eForest. WI 53532
 

8 846-9744 voice/fax
 

t Arnold 

esident
 

oenix Productions. Inc.
 

32 West Vollmer Road. Suite 332
 

ympia Fields. IL 60641
 

8481-8600
 

8 481-7296 fax
 

u Bettes
 

arebolder
 

nkens and Gilchrist
 

45 Ross Avenue. Suite 3200
 

lias. TX 75202
 

4855-4378
 

4 855-4300 fax
 

a Bialik 

wnerlPublisher 

omen in Business YeHow Pages 

58 North Lincoln Avenue
 

icago, IL 60648
 

708 679-7800
 

708697-7845 fax
 

AtteDdees for the June 3, 1994
 

NAll0NAL WOMEN'S BUSINESS COUNCIL
 

Access to Equity Capitol
 

Expert Policy Workshop
 

The Federal Reserve Bank
 

Chicago, a
 

Sandy Blazina
 

Meetings Coordinator
 

Federal Reserve Bank of Chicago
 

230 S. LaSalle Street
 

Chicago, IL 60604
 

312 322-5114
 

312 322-5515 fax
 

Nina Brown
 

President
 

Women's Collateral Funding, Inc.
 

1616 Walnut Street, Suite 1010
 

Philadelphia, PA 19103
 

215772-1900
 

215 772-1935 fax
 

Judith Ann Calder
 

Managing Director
 

Abacus Financial Group, Inc.
 

300 West Washington Street.
 

Suite 1120
 

Chicago, IL 60606
 

312553-9300
 

312553-9308 fax
 

Brian Caldicott 

Business Consultant 

Economic Development Commission 

of the City of Chicago
 

20 North Clark Street, Suite 2800
 

Chicago, IL 60602
 

3127~38

312744 7676 fax
 

Jerrold B. Carrington 

General Partner 

Inroads Capital Partners, L.P. 

525 West Monroe Street 

Suite 2100
 

Chicago, IL 60661
 

312 902-5347
 

312902-1061 fax
 

Mollie Cole 

Women Business Advocate 

Department of 

Commerce/Community Affairs
 

State of lllinois
 

100 West Randolph, Suite 3400
 

Chicago, IL 60601
 

312 814-7176
 

312 814-2807 fax
 

William Conrad 

1st Vice President 

Federal Reserve Bank of Chicago 

2nd Floor
 

230 S. La Salle Street
 

Chicago, lllinois 60604
 

312322-5003
 

312 322-2141 fax
 

Linda Darragh 

Finance Program Coordinator 

Women's Business Development 

Center
 

8 S. Michigan, Suite 410
 

Chicago, IL 60603
 

312 853-3477 ext. 22
 

312 853-0145 fax
 

47
 
L. Gay Davidson 

Owner 

Computer Catalyst 

1905 S. College 

Springfield, IL 62704 

217 525-9339 

217 525-0258 fax 

Susan Davis 

President 

Capital Missions Company 

2400 East Main Street 

Suite 103 

St. Charles, IL 60174 

708 876-1101 

708876-0187 fax 

Rick Dean 

Assistant to the Treasurer 

Office of the City Treasurer 

City Hall, Room 204 

121 N. LaSalle Street 

Chicago, IL 60602 

312 744-8422 

312 744-3220 fax 

Connie Evans 

President 

Women's Self Employment Project 

166 W. Washington Street, Suite 730 

Chicago, IL 60602 

312 606-8255 

312 606-9215 fax 

Margaret Fisher 

Principal 

Inroads Capital Partners, L.P. 

525 West Monroe Street 

Suite 2100 

Chicago, IL 60601 

312902-5347 

312902-1061 fax 

Austin Fitts 

President 

Hamilton Securities Group, Inc. 

1410 Q Street, NW 

Washington, D.C. 20009 

202 483-1888 

202 462-7761 fax 

Dwight Floyd 

Vice President 

Harris Trust & Savings Bank 

111 West Monroe 

Chicago, IL 60690 

312461-2417 

312 765-1750 fax 

Julia Girsch 

Vice President 

Bank of America 

Community Development Bank 

200 W. Adams, 27th Floor 

Chicago, IL 60606 

312 269-4614 

312269-4614 fax 

llyce Glink 

Reporter 

Working Woman Magazine 

360 East Randolph Street 

Suite 1705 

Chicago, IL 60603 

312~

312 540-Q441 fax 

Nancy Goodman 

Senior Vice President 

Federal Reserve Bank of Chicago 

230 S. La Salle Street 

Chicago, IL 60604 

312 322-5003 

312 322-5062 fax 

Misty S. Gruber 

Attorney 

Shefsky & Froelich Ltd. 

444 N. Michigan Avenue 

Chicago, IL 60611 

312 836-4012 

312527-5921 fax 

Carla Harris 

Vice President 

Morgan Stanley & Co. Inc. 

1251 Avenue of the Americas 

New York, NY 10020 

212703-5085 

212703-5996 fax 

Suzanne Heffner 

Manager of Media Relations 

& Special Events 

Federal Reserve Bank of Chicago 

230 S. La Salle Street 

Chicago, IL 60604 

312322-5108 . 

312 322-5515 fax 

Marjorie Herter 

President 

Vee See Construction, Inc. 

400 W. 105th Street 

Oak Lawn, IL 60453 

708 425-3420 

708 425~15 fax 

E. Rachel Hubka 

President/Owner 

Rachel's Bus Company, Inc. 

3014 West Fillmore Street 

Chicago, IL 60612 

312 533-1008 

312533-1406 fax 

48
 
.

icholas Jones 

ice President 

omen's Collateral Funding, Inc. 

616 Walnut Street, #1010
 

hiladelphia, PA 19103
 

15772-1900
 

15772-1935 fax
 

eorge Kalidonis
 

resident and CEO
 

hicago Capital Fund
 

00 N. Michigan Avenue, Suite 1920
 

hicago, IL 60611
 

12855-1135
 

12 855-1134 fax
 

atricia M. Kandziora
 

etail Banking Officer
 

irst Bank Milwaukee
 

01 West Wisconsin Avenue
 

ilwaukee, WI 53259
 

14227-5642
 

14 227-5726 fax
 

usan Kezios
 

resident
 

omen in Franchising
 

3 West Jackson Boulevard
 

Suite 756
 

hicago, IL 60604
 

12431-1467
 

12431-1469 fax
 

Virginia Kirkpatrick 

esident
 

VK Personnel Management &
 

Training Specialists
 

25 South Meramec, Suite 406
 

t. Louis, MO 63105
 

14725-3112 voice/fax
 

Anke Koning 

Business Consultant 

Inroads Capital Partners, L.P. 

525 West Monroe 

Suite 2100A
 

Chicago, IL 60661
 

312 902-5347
 

312902-1061 fax
 

Michael Kuhns
 

Director of Finance and Operations
 

The Heartland Partnership
 

124 S.W. Adams Street, Suite 300
 

Peoria, IL 61602
 

309 676-0755
 

309 676-7534 fax
 

Margarette Lawless
 

Assistant Vice President
 

Harris Trust & Savings Bank
 

111 West Monroe
 

Chicago, IL 60609
 

312461-2746
 

3124614092 fax
 

Sherry E. Lee 

Small Business Lending Officer 

First Banks, Inc. 

P.O. Box 3126
 

801 Lincoln Highway
 

First Heights, IL 62208
 

618 632-7480
 

618632-7491 fax
 

Stacey Lehman
 

Meetings Assistant
 

Federal Reserve Bank of Chicago
 

230 S. La Salle Street
 

Chicago, IL 60604
 

312 322-5186
 

312 322-5515 fax
 

Dr. Barbara Lowrey
 

Associate Secretary of the Board
 

Federal Reserve System
 

20th & C Streets, NW
 

Washington, DC 20551
 

202 452-3742
 

202452-3819 fax
 

William R. Luckinbill 

Assistant Branch Manager 

The Money Store Investment 

Corporation 

8750 West Bryn Mawr 

Suite 420
 

Chicago, IL 60631
 

312 693-2100
 

312 693-2104 fax
 

Salli Martyniak
 

Economic Development Officer
 

Firstar Bank, Madison
 

Madison, WI 53703
 

608 252-4342
 

608252-4379 fax
 

Eileen McCarthy 

Coordinator of Economic 

Development
 

Office of the City Treasurer
 

City Hall, Room 204
 

121 N. La Salle Street
 

Chicago, IL 60602
 

312 744-3365
 

312744-3220 fax
 

Peg Miota
 

President
 

Spa Vesta Limited
 

2640 S. Root River Parkway
 

Milwaukee, Wi 53227
 

414321-1502
 

414321-1911 fax
 

49
 
Grace Morgan
 

The Hamilton Securities Group, Inc.
 

1410 Q Street, NW
 

Washington, DC 20009
 

202 483-6009
 

202462-7761 fax
 

Betsy Myers 

Director 

Office of Women's Business 

Ownership 

U.S. Small Business Administration
 

409 Third Street, SW
 

Washington, DC 20024
 

202 205-6673
 

202 205-7287 fax
 

Harry Pestine
 

Community Affairs Specialist
 

Federal Reserve Bank of Chicago
 

230 S. La Salle
 

Chicago, IL 60604
 

312322-5877
 

312322-5062 fax
 

Judy Phillips
 

Senior Vice President
 

Harris Trust & Savings Bank
 

111 West Monroe
 

Chicago, n.. 60690
 

312461-5079
 

312461-4092 fax
 

Hedy Ratner 

Director 

Women's Business Development 

Center
 

8 S. Michigan, Suite 410
 

Chicago, n.. 60603
 

312 853-3477
 

312 853-0145 fax
 

Martha Rayner 

Executive Director 

Dlinois Economic Development 

Network
 

111 North Canal Street, Suite 111
 

Chicago, IL 60606
 

312 876-9900
 

312 876-3826 fax
 

Cheryl Reich 

Executive Vice President 

Harris Trust & Savings Bank 

111 West Monroe 

P.O. Box 755
 

Chicago, n.. 60690
 

312461-5739
 

312 765-1750 fax
 

Lynda Russo
 

Vice President
 

Mexus Worldwide
 

4237 N. Western Avenue
 

Chicago, n.. 60618
 

312 868~36
 

312 868-9726 fax
 

Colleen Ryan
 

Vice President
 

Firstar Bank, N.A.
 

136 South Washington Street
 

Naperville, n.. 60516
 

708983-3940
 

708 637-2798 fax
 

The Honorable Miriam Santos
 

City Treasurer of Chicago
 

121 N. La Salle
 

City Hall, Room 206
 

Chicago, IL 60602
 

312744-3356
 

312 236-6938 fax
 

Barbara Sims-Shoulders 

Community Affairs Administrative 

Assistant 

Federal Reserve Bank of Chicago 

230 S. La Salle Street 

Chicago, n.. 60604
 

312 322-8232
 

312 322-5062 fax
 

Nancy Smith 

Regional Manager 

Women's Business Program 

U. S. Small Business Administration
 

300 S. Riverside Plaza, Suite 19755
 

Chicago, n.. 60606
 

312 353-500Q-ext.764
 

312 353-3426 fax
 

Herbert L. Spira 

Tax Counsel 

Independent Bankers Association of 

America 

One Thomas Circle, Suite 950
 

Washington, DC 20005
 

202 659-8111
 

202 659-9216 fax
 

Anne Stelle 

Deputy Manager 

Brown Brothers, Harriman & 

Company 

125 S. Wacker Drive, 21st Floor 

Chicago, n.. 60606
 

312 781-7120
 

312368-1287 fax 

Bob Stillman 

Associate Administrator for 

Investment 

U.S. Small Business Administration
 

409 Third Street, SW, Suite 6300
 

Washington, DC 20024
 

202 205-6510
 

202 205-6959 fax
 

50
 
cylur Stoakley
 

. cipal
 

k Capital Management
 

9 N. Wacker Drive, Suite 795
 

hicago, IL 60606
 

12541-0330
 

12 541-0335 fax
 

ary Strickland 

omen's Business Advocate 

omen's Business Ventures 

State of Wisconsin 

Department of Development 

123 West Washington Avenue 

P.O. Box 7970
 

Madison, WI 53707
 

608 266-0593
 

608 267-2829 fax
 

Mary EHen Swensen 

Owner 

Swensen Communications 

1000 East 14th Street 

Suite 443
 

Plano, TX 75074
 

214423-4125
 

214 424-5993 fax
 

Patrice Sudduth, R.N.
 

ExceH One Hi Tech Nursing Inc.
 

12201 South Western
 

Suite 8
 

Blue Island, IL 60406
 

708 396-8669
 

708 396-8673 fax
 

Dr. A. Charlene Sullivan 

\ssociate Professor of Management 

urdue University
 

.",.rannert Center 217
 

West Lafayette, IN 47907
 

317494-4382
 

317494-1533 fax
 

Monte Tarbox
 

Vice President
 

Marco Consulting Group
 

54 West Hubbard, Suite 205
 

Chicago, IL 60610
 

312527-4200
 

312 527-3230 fax
 

Linda Tarr-Whelan 

President and Executive Director 

Center for Policy Alternatives 

1875 Connecticut Avenue, NW 

Suite 710
 

Washington, DC 20009
 

202 387-{i()30
 

202 986-2539 fax
 

K.C. Theis, CPA 

Corliss Hartge & Associates
 

Suite 1000
 

E. Wisconsin Avenue
 

Milwaukee, WI 53202
 

414278-1244
 

414273-3158 fax
 

Kathy Tholin
 

Executive Vice President
 

Woodstock Institute
 

407 S. Dearborn
 

Chicago, IL 60605
 

312 427-8070
 

312427-4007 fax
 

Ronald W. Tigner, Esq. 

Director, Center for Community 

Development
 

American Bankers Association
 

1120 Connecticut Avenue, N.W.
 

Washington, DC 20036
 

202 663-5480
 

202 8284544 fax
 

David Tseng 

Special Assistant 

Pension and Welfare Benefits 

Administration 

Department of Labor 

200 Constitution Avenue, NW 

Suite South 2524
 

Washington, DC 20210
 

202219-8233
 

202 219-5526 fax
 

Alicia Williams
 

Assistant Vice President
 

Community Affairs Offi~er
 

Federal Reserve Bank of Chicago
 

230 S. LaSalle Street
 

Chicago, IL 60604
 

312 322-5910
 

312 322-5062 fax
 

Brenda Wince 

President 

Stryder Graphics 

213 West Institute Place 

Suite 310
 

Chicago, IL 60610
 

312587-7000
 

312587-7287 fax
 

The Honorable Mary Ellen Withrow 

U.S. Treasurer 

U.S. Treasury
 

1500 Pennsylvania Avenue
 

Washington, DC 20220
 

202622-0100
 

202 622-2258 fax
 

Amy Zisook 

Special Assistant to the President 

for Public Liaison
 

Old Executive Office Building
 

Washington, DC 20501
 

202 456-2930
 

202 456-6218 fax
 

* NWBC Council Members & Staff 

51
 
Small Business 

Investment Companies 

The S B I C Program 

Investment Division 

53 
Small Business
 

Investment Companies
 

The SBIC Program 

In the 1950s, an entrepreneur looking for the capital to launch or grow a 

small business had few places to seek risk capital. There weren't many institutions whose business was to back promising but unproven ideas. To help solve 

this problem, Congress created The Small Business Investment Company 

(SBIC) Program in 1958. 

Licensed by the U.S. Small Business Administration (SBA), SBICs are 

private investment fIrms that independently make their own investment decisions. These companies are participants in a vital partnership between the 

federal government and the private sector. Utilizing their own private capital 

plus funds obtained on favorable terms through assistance from the federal 

government, SBICs provide fInancing to small businesses for growth, modernization and expansion. 

Because the statements in this document contain simplifiedsummaries ofcomplex 

regulatory and statutory provisions. which laws and regulations are subject to change. 

nothing herein should be viewed as legal interpretations ofregulations alld lall'. Before 

any business decisions are made. current regulations alld statutes sholtld be re\'iewed: 

proposed challges published in the Federal Register should be reviewed: alld ijllecessary. 

legal and tax counsel should be consulted. 

54
 
What is 

anSBIC? 

Virtually all SBICs are profit-motivated businesses that either make loans or 

equity investments. Today, there are two types of SBICs: the "regular" SBICs, and 

the Specialized Small Business Investment Companies (SSBICs). SSBICs are 

specifically oriented towards the needs of entrepreneurs whose opportunities to own 

and operate businesses have been limited by social or economic disadvantages. 

Although the name "SSBIC" is used in this brochure. it is an unofficial term. 

Technically,such companies are known as "Section 30I(d) licensees" because theyare 

organized underSection 301 (d) ofthe SmallBusinessInvestmentAct of 1958, as 

amended. With afew exceptions, the same rules and regulations apply both to "regular" 

SBICs and to SSBICs. Therefore, unless otherwise specified. when the term "SBIC" is 

used, it refers to both types ofentities. 

Purpose of 

SBICs 

SBA licenses SBICs to stimulate the flow ofequity capital and long-term loan funds 

into small businesses so that they can grow and develop. As defined by regulations, a 

small business(formally referred to as a"small concern") is an operating entity that has a 

net worth not greaterthan $18 million and has not had average after-tax income for the 

previoustwo fiscal yearsin excess of$6 million. (There are other alternate tests of 

eligibility based upon numbers of employees, depending upon the Standard Industrial 

Classification or S.I.c. code.) 

Who Benefits 

from the 

SBIC 

Program? 

Smallbusinesses benefitfrom the receipt ofequity capital, long-term loans and 

managementassistance. 

Venture capitll/ists benefit through the ability to supplement their own private 

capital with funds obtained on favorable terms through assistance from the federal 

government 

Employees benefit because more permanentfull-time private sectorjobs are 

created by businesses that are financed by SBICs. 

The U.S. taxpayer also benefits. Tax revenues generated each year by companies 

that have become successful through SBIC investments more than coverthe costofthe 

program. 

Private Capital 

and 

Management 

Requirements 

Any corporation, limited partnershiporlimitedliabilitycompanyformed solely for 

the purpose ofoperating as alicensee under the Small Business Investment Act and its 

regulations may apply for alicense. While an SBIC must be domiciled in the U.S., itmay 

be controlled and operated by foreign entities. The basic requirement as mandated by 

Congress is that there be sufficient private capital and management expertise for the SBIC 

to be operated with safety and soundness. 

55 
On acase-by-case basis. SBAexamines an applicant'sbusiness plan, taking into 

accountthe types offinancings that are proposed to detennine the adequacy ofthe proposed 

private capital. SBA also ascenains whether an SBIC's proposed overhead expenses are in 

line with its capital base. The absolute minimum capital amounts established by law for the 

licensing ofnew SBICs and SSBICs are $2.5 million and $1.5 million,respectively. In 

practice, these minimums are usually not sufficient for an SBIC to be economically viable, 

considering the overhead required. Generally, a$5 millionminimumisthe smallestfeasible 

capital amount. and for applicants that intend to utilize participating securities. the regulations require $10million undermost circumstances, with an absolute minimumof 

$5 million. 

Forlicensing and regulatory purposes. this capital base may include firm commitmentsfrom institutional investors(asdefinedinSBAregulations), as well as comminnents 

from other sources that carry an institutional guarantee. 

In addition to raising sufficientcapital to support its planned operations. aprospective 

licensee mustdemonstrate to SBA that its proposed management team has somethingmore 

than general business experience-that it has specific experience making the types ofloans 

and investments in small businessesofthe types and sizes contemplatedin the business plan. 

Once licensed. an SBIC must adhere to certain statutory and regulatory restrictions 

governing types ofinvesnnents and mannerofoperations. andbecomes subjectto cenain 

financialreportingrequirementsandon-sitecomplianceexaminations. 

The Concept of 

Government 

Leverage 

Within the SBIC program. the term "leverage" has a special meaning. It refers to the 

funds that an SBICin good standing may receive by issuing itssecurities eitherdirectly to 

the government orwith agovernment guarantee. AregularSBIC may receive leverageof 

as much as 300 percent ofits private funds, and for an SSBIC, up to 400 percent The 

amountofleverage provided isdependent upon five factors: 

1.	 Types ofleverage requested; 

2.	 The amountofprivate capital within an SBIC; 

3.	 Whether the licensee is an SBIC or SSBIC; 

4.	 Typesofinvesnnentsbeingmade; and 

5.	 Availability ofleverage, which is contingentupon the amountofguarantee 

authority orfunds provided byCongress, coupled with the competition from 

other SBICs for leverage funds that have been appropriated. 

56
 
Leverage
 

Eligibility
 

The maximum amount ofleverage for which an SBIC may be eligible is determined 

by its private capital base. Ifprivate funds do not exceed $15 million, leverage may be 

available in amounts notto exceed, in the aggregate, 300 percentofprivate funds. Ifthe 

private capital base is more than $15 million, but not more than $30 million, leverage shall 

not exceed$45 million plus 200 percentofthe amount over $15 million. Ifthe private 

capital base is greater than $30 million, leverage shall not exceed $75 million plus 

100 percentofthe amount ofprivate capital over$30 million, up to amaximum of 

$90million. ForSSBICs, the total ofsubsidized debentures plus preferred securities 

may not exceed$35 million regardless ofthe amountofprivate capital. 

Debentures The most basic type ofleverage is a five- or 1o-yeardebenture that issold in the

public markets and which carries afull faith and credit guarantee ofboth principal and 

interest by the U.S. government. Typically, adebenture isissued at arate of75 to 100 

basis points overtheTreasury yield for comparablematurities, and requiresthe paymentof 

semiannual interest with principal repayment at term. Prepayment may be made at any 

time, with adecreasing penalty during the first five years. The total issuing costs charged 

to an SBIC are approximately 2.625 percent. 

SSBICs may issue 1o-yeardebentures in amountstotalling up to 200percentof 

private capital with an interestrate subsidy of300 basis points during the frrst fiye years of 

the debenture's life. To effect the subsidy, SBA pays the difference between the subsidizedand nonsubsidized interestrates. ForanySSBIC,subsidizeddebentures are limited 

to 200percentofprivate funds, andmay not be refinanced with anothersubsidized 

security. 

Preferred
 

Securities
 

SSBICs may also issue nonvoting preferredsecurities (eitherstock in acorporation 

orpreferred limited partnership interests in alimited partnership) with a 15-yearmandatory 

redemption. Such securities carry a4percentcumulativedividend which is payable no 

later than the redemption date, regardless ofthe earnings that may have been realized by 

the SSBle. All SSBICs qualifying for leverage may issue preferred securities in amounts 

up to 100percent ofprivate funds. Ifan SSBIC has met certain criteria for making equity 

investments, additionalpreferredsecuritiesleverage up toan additional 100percentof 

private funds may be available. 

Participating 

Securities 

Ifan SBIC makes equity investments which generate littleorno current income, but 

its leverage is in the form ofdebentures requiring semiannual interest payments, the result 

is amismatch between the sources and uses offunds. Thisislikely to create cash flow 

problems for the SBle. To remedy this, Congress amended the Small Business Investment 

Act in 1992, allowing SBA to guarantee participating securities. Aunique feature of 

participating securities is that the SBA sharesin the profits ofan SBIC, generally in the 9 

percentto 12 percentrange (afterthe basic dividend rate is paid). Those SBICsissuing 

participatingsecuritiesmustmeetcertain guidelinesformaking equityinvestments. 

57 
Thisinstrument has a 15-yearmaximumtenn, although in most cases, SBAexpects 

the actual tenn to be 10 years. It providesfor paymentofdividends orinterest and profit 

participations to SBA only when an SBIC has earnings (as defmed in the regulations). As 

with debentures, the rate on participating securitiesis based on the Io-yearTreasury-yield 

curve. Under nocircumstancesmay participating securities exceed 200percentofprivate 

funds. SSBICs may issue participating securities, but participating securities and preferred securities, in the aggregate, may not exceed 200 percentofprivate funds. 

Advantages Abank may invest up to 5percent ofits capital and surplus in apartially orwholly to 

owned SBIC. This permits abank to invest in small businessesin which they could not 

Banks otherwise investbecauseofbanking laws andregulations. Investmentsmade through an 

SBIC may alsoassistinmeetingCommunity ReinvestmentAct(CRA) requirements. 

Regulatory 

Requirements 

Withinthe SBICProgram. SBAdoes notdirectly orindirectly approve ordisapprovefinancing decisionsmade by anSBIC. Investmentdecisions aremade independently by the SBIC management and general partners or board ofdirectors. However, 

SBAdoes monitor SBICs to assure theircompliance with'applicable regulations. 

These regulations have two primary purposes: (I) to help insure that SBICs are 

benefitingsmall businesses and are notmaking loans andInvestments which can be 

detrimental to small concerns, and (2) to reduce the risk to SBA on the leverage assistance 

thatis provided. 

Types of 

Financings 

AnSBIC maymakeequityinvestments,loans, andcombinationfmancings, 

including the use ofconvertibledebt and warrants. Loansmay be secured andamortizable, butnonnallymust have aminimumtenn offive years, exceptfor loansto disadvantaged concerns which can be for as little as four years. Under certain circumstances, 

where aloan is necessary to protectexisting financings or is clearly made in contemplation 

ofalong-tenn financing, aloan with ashortertenn is allowed. The maximum tenn 

pennissible is 20 years. All financings may be made in conjunction with other lenders or 

investors, public orprivate, including otherSBICs. 

In general, funds used to purchase securities must go directly to the small concern 

issuing the securities. The purchaseofpublicly offered securities ofasmall business 

through an underwriteris permitted aslong as the proceeds ofthe purchase go to the 

issuingcompany. SBICfunds may be usedto purchasealready-outstanding securities 

only when reasonably necessary as aminorpartofthe sound financing ofan eligible small 

concern, oras partofaplan to finance achange ofownership thatmeets SBA regulatory 

guidelines. Undercertain circumstances, an SBICmaypurchase securitiesfrom another 

SBIC orevenfrom SBA. 

58
 
Loan Interest 

Rates 

When aloan is made to an eligible small concern, the interestrate charged is notonly 

governed by applicable state laws and regulations, but also by SBA regulations. Ifa 

financing is astraight loan without any equity features associated with it, an SBIC may 

charge up to 7percent overacomputed cost ofmoney base. Ifaloan has equity features, 

the lending spread isreduced to 6percent. In general, the computed base isthe higherof 

the debenture interest rate determined at the most recent public sale ofinterests inpools of 

SBA guaranteeddebentures, orthe SBIC'sown weighted average costofborrowings. 

Certain fees in addition to interest are also permitted, as is adefault penalty rate of700 

basis points overthe contract rate. 

Restrictions on 

Financings 

SBICs may only invest ineligible small concerns defined in SBAregulations. 

Without written SBA approval, aregularSBIC with outstanding leverage may not invest 

more than 20 percentofits private funds in securities, commitments, orguarantees ofany 

single small concern. ForSSBICs, thislimit is 30percent. SBICs without leverage are not 

subject to this ceiling. 

SBICs may not invest in other SBICs, passive or casual businesses (i~e., those not 

engaged in regularand continuous business operations), orcompanies with less thanonehalfoftheir assets and operations in the United States. 

Neithermay SBICsfinance any small concerns whose primary business activities 

involve,directly orindirectly, providing funds toothers, purchasingdebtobligations, 

factoring, orleasingequipmenton along-termbasis when there is no provision for 

performingmaintenanceandrepairservices. However, SBICs andSSBICsmayfinance 

sociallyoreconomicallydisadvantaged firms thatare engaged in relending orreinvesting 

activities, except for agricultural creditcompanies and banking orsavings and loan 

institutions not insuredby agenciesofthe federal government. 

There are also restrictions on real estate-related investments. Except in connection 

with financing an operating small concern, the financing ofreal estate is generallyprohibited. Forexample, an SBIC may notfmance the purchase offarmland orfinance real estate 

speculators, nor finance any small concern classified under Major Group 65 (Real Estate) 

ofthe S.I.c. manual, except subdividers and developers, title abstract companies, and real 

estate agents, brokersand managers. 

Even where certain othertypes ofreal estate related investments may qualify, their 

percentage islimitedtoone-thirdofan SBIC's portfolio, with combined real estate related 

activities (building contractors, hotels, lodging places, etc.) being limited to two-thirdsof 

anSBIC'sportfolioinvestments. 

59
 
SBICs that have leverage, and temporarily have excess liquidity, may invest "idle 

funds" incertain short-tenninstruments: 

•	 Federal governmentsecurities; 

•	 U.S. governmentrepurchaseagreements; or 

•	 Deposits in, or CDs of, a federally insured bank or savings and loan. 

SBICs not having leveragemay invest idle funds in abroaderrange ofshort-tenn 

investments as long as the securities purchased are not ineligible under the regulations. 

Conflicts of 

Interest 

An SBIC may not engage in "self-dealing" to the advantage of, or with favoritism to 

its associates. Furthennore, an SBIC may not directly or indirectly provide financing to 

any ofits associates, normay it borrow money from asmall concern that it has financed or 

from any ofthe small concern's owners orofficers. UnderSBAregulations, "associates" 

is adefined tenn that includes: 

•	 Anofficer, director, employee oragentofacorporate licensee; 

•	 Ageneralpartner, employee oragentofan unincorporated licensee; 

•	 Amanagerorinvestment advisorofthe SBIC; 

•	 Any attorney regularly on retainer: and/or 

•	 Any personorentity owning orcontrolling, directly orindirectly, 10 percentor 

more ofthe stock orparmershipcapital ofthe SBIC, exceptfor an institutional 

investorwith lessthan a33 percentlimited partnership interest which constitutes lessthan 5percentofthe investor's net worth. 

Control An SBIC is not permitted to control any small business. eitherdirectly orindirectly.

or in participation with its associates or other SBICs. In cases where the risks to an 

SBIC's investments are inordinately high, SBA may allow the SBIC to assume temporary 

control in orderto protectitsinvestment. However, the SBiC must obtain SBA'swritten 

approval ofaplan ofdivestiture. 

Miscellaneous In addition to the regulations and elements ofthe Small Business Investment Act that

have been described in this brochure, SBICs are subject to certain other regulations

Regulations regarding theirfinancing activities, operations and reporting whichmust be followed in 

orderto ensure the continuation ofthe SBIC license and its related advantages. 

60 
Congressional
 

Appropriations
 

The Office ofManagement and Budgetestablishes guidelines to measure the cost to 

the taxpayerofall programsofgovernment. Utilizing these guidelines as acriteria, 

Congressauthorizes andthen appropriates budgetsfor eachgovernment program, including the various SBIC programs. 

SBA can commitfunds to an SBICfor aperiod ofup to 22 months into the future. 

However, leverage applicants should be aware that due to increased demand for funds, no 

SBIC can be assured that all the funds that it desires will be available at any given time 

even iftheSBICisin complete regulatory compliance and is economically sound. Atthe 

time ofconsidering alicense, it would be prudent to inquire about leverage availability. 

Considerations The business plan that is prepared plays amuch more importantrole in the licensing in 

processthan it did in the past. The SBA is looking to see that three overall elements ofthe 

Obtaining a prospective SBICare satisfactorilyconsistentwith each other: 

License I. Management

The managers ofthe proposed SBIC must be suitable. This meansthat they 

should have significantexperience that relates to the types ofinvestments that 

are contemplated. Theymust befree ofany felony convictions,securities 

violationsorotheractivities inappropriatefor someone serving in a 

fiduciarycapacity. 

2. Forecasts 

The projections ofoverhead should be realistic relative to the types of 

fmancings proposedand the geographic regionsthat are expectedto be 

covered. Forinstance, an SBICthat is making loansin asingle metropolitan 

area will typically have loweroverhead than afirm making seed capital 

investmentsnationally. . 

3. Capital 

The private funds that are available, together with some ofthe leverage 

anticipated, should be sufficient so that overhead will not consume an excessive amount ofthe firm's capital. 

At this time, because the ceiling on leverage has been raised from $35 million to 

$90 million, both the SBA and Congress are more interested in ensuring that newly 

licensed SBICs have high prospects for success. This means that the business plan must 

demonstrate astrong probability ofasuccessful future. In the venture business, there can 

obviously be no guarantees ofsuccess, butthere are certain elementsthat can point to a 

higherpotential for profitability. 

61
 
Abusiness plan, as utilized within the contextofthe licensing process, is often 

synonymous with an offering memorandum utilized in private placements, but allofthe 

customary legal caveats are not necessary. At aminimum. the plan should provide 

detailed forecasts ofoverheadexpenditures and uses and sources offunds, including: 

•	 Infonnation on the proposedtypes andmix ofinvesunents(debtorequity); 

•	 Thesizesofinvesunentsanticipated: 

•	 The types ofindustriesin which the SBICplansto invest; 

•	 Thedevelopmentalstagesofthese businesses andtheirgeographic 

locations; and 

•	 Whetherthe SBICintendsto be primarily alead investor,
 

aparticipant or both.
 

There should also be adiscussion ofthe anticipated sources ofdeals and why it is 

believed that those sources are feasible. 

The Procedure If you are interested in obtaining a license, you should follow these steps:

I.	 Begin by obtaining acurrent "Licensing Kit" from the address on the last for Obtaining page ofthis brochure. Be sure to review the application, the instructions, and 

anSBIC especially all the regulations that are in effect, as well as proposed regulatory

changes. Ifyou believe that you can meet the criteria and would be comfortLicense able operating within the parameters that have been established, then proceed. 

2.	 Prepare your license application. Be sure that your business plan spells out 

clearly the types offinancings you plan to make and that your forecast is 

realistic in terms ofoverhead and when profits may be realized. 

3.	 Submit yourcomplete license application with the fee then in effect. SBA will 

review all documents and perfonn backgroundchecks on all officers,directors 

orgeneral partners, and shareholders orlimitedpartners proposed to be 

"associates" or"control persons" within the contextofthe regulations. 

During this process, you can expect that SBA will request additional information. The more promptly you respond, the faster your application will be 

processed. 

4.	 The [malstep in the processisissuance ofthe license. Ifyou have submitted 

alicensing application priorto actually having raised yourminimum capital, 

you may request a "suitability letter." This does not give you the authority to 

actually operate an SBIC, but would assure your investors that you were 

considered qualified within the contextofthe business plan that was submitted. You could then raise your capital and subsequently continue the licensing 

process. 

62 
For Further SBA encourages qualified individuals and organizations to establish SBICs. You, 

your attorneys orotheradvisors are welcome to contact SBA with any questions regarding Information	 the SBIC Program. However, it should be understood that SBA cannot provide either 

legal or tax advice, but can discuss the Small Business Investment Act, regulations and 

general practices. To obtain aLicensing Kit orotherinformation, telephone,fax orwrite: 

AssociateAdministratorforInvestment 

Attn: ProgramDevelopment 

U.S.SmallBusinessAd.ministration 

Mail Code 7940 

409 Third Street, S.W. 

Washington, DC 20416 

Tel. (202) 205-7582 

Fax: (202)205-6959 

TOO: (202) 205-7333 

AllofSBA 'sprogramsandservicesareprovidedtothepubliconanondis(riminatorybasis. 

*U.5. OOVERNMENT PRINTING OFFICE : 1994 0 - 378-212 OL : 3 

63
 
THE 

EQUAL 

CREDIT 

OPPORTUNIlY
 

Acr 

A Guide for Consumers
 

Enacted in 1974, the Equal Credit 

Opportunity Act, or ECOA seeks 

to ensure that non-eredit-related 

factors. such as a person's race. 

national origin, or sex, do not enter 

into a decision to deny a person's 

request for credit. In all. the Act 

defines the following prohibited 

bases for credit denials: race. color, 

religion, national origin. sex, marital status. age (provided the applicant has the capacity to contract). 

receipt of income from public assistance programs and good faith exercise of any rights under the 

Consumer Credit Protection Act. 

A lender may not deny or discourage a loan applicant for any of the 

above-listed reasons. Lenders do 

have the right to deny loan applications for reasons such as poor 

credit history, insufficient income. 

excessive amounts of debt or high 

debt-ta-income ratios. 

The Act and its implementing regulation, Regulation B, are intended to 

cover all aspects of the credit transaction from the preapplication stage 

to the application and the credit 

decision. The regulation imposes a 

delicate balance on the credit system recognizing both the creditor's 

need to know as much as possible 

about a prospective borrower and 

the borrower's right not to disclose 

information that is irrelevant to the 

transaction. Regulation B does not 

prevent a creditor from determining any pertinent information necessary to evaluate the creditworthiness of an applicant 

65
 
Financial institutions (banks and 

savings and loan associations) are 

regulated by the federal financial 

supervisory agencies (the Board of 

Governors of the Federal Reserve 

System, the Office of the Comptroller of the Currency, the Federal 

Deposit Insurance Corporation and 

the Office ofThrift Supervision). 

These regulatory agencies are responsible for the enforcement of 

Regulation B which implements the 

Equal Credit Opportunity Act and 

examine their member financial institutions for compliance with Regulation B. The examination incorporates a review of the financial 

institution's articulated lending 

standards, loan files, discussions 

and interviews with bank personnel 

including loan officers and any other staff permitted to take applications, and a review of the bank's 

marketing efforts. 

Each regulatory agency also investigates any complaints filed by individuals who believe that they have 

been denied credit or been discouraged from applying for credit on 

a prohibited basis. Complaints 

should be as specific as possible 

and sent to the appropriate regulatory agency. 

The following examples are intended to illustrate some, but 

not all, of the types of situations 

that the Equal Credit Opportunity Act seeks to eliminate. 

ILLEGAL SPOUSAL SIGNATURE 

REQUIREMENTS 

A creditworthy customer enters a 

bank to apply for an individual installment loan,for example, a vacation loan. The banker asks the 

customerfor collateral and the customer offers his/her car which 

he/she owns jointly with his/her 

spouse. The banker informs the customer that he/she must have his/her 

spouse sign on the loan because the 

car is in both oftheir names. 

Under Regulation B, a lender may 

not require a signature other than 

the applicant's or joint applicant's, 

if the applicant meets the lender's 

credit underwriting standards. If 

the applicant does not meet the 

lender's credit underwriting criteria, the lender may ask the applicant to provide an acceptable 

cosigner. The applicant may offer 

his/her spouse, but the lender may 

not specifically request the spouse. 

In the case above, the creditor 

would be allowed to obtain the 

spouse's signature on a security 

agreement which allows the creditor to perfect its lien against the 

collateral offered by the borrower, 

in this case, the borrower's car 

(meaning that the creditor can 

repossess the car in the case of 

default); but the lender would not 

be able to obtain the spouse's signature on the loan. 

PROHIBITED BASIS: MARITAL 

STATUS 

A woman enters a bank and asks to 

speak to a loan officer. She tells the 

loan officer that she wants to apply 

for a car loan. The loan officer asks 

ifshe is married and she replies 

"No." The loan officer tells her that 

the bank doesn't make loans to unmarried people. 

A lender cannot ask an applicant's 

marital status unless the credit 

transaction is to be secured and the 

information may be necessary to 

determine what would be required 

to gain access to the collateral in 

the event of default or if the appli· 

cant and/or the assets used as collateral are in a community property 

state. In this case, the lender has 

committed a substantive violation 

of Regulation B: refusal to take an 

application and grant a loan on a 

prohibited basis, marital status. 

PROHIBITED BASIS: PUBLIC 

ASSISTANCE SOURCE OF INCOME 

A man enters a bank and asks to 

speak to a loan officer. He indicates 

that he wants to apply for a loan to 

purchase a used car. The loan officer 

asks him to fill out an application. 

He does so and returns it to the loan 

officer. The loan officer notices that 

the applicant's only source ofincome 

is social security. The loan officer 

then tells the applicant that it is 

against the bank's policy to make 

loans to people who do not have a 

full-time permanent job. 

Under the Equal Credit Opportunity Act, a lender may not deny, 

or grant credit on more onerous 

terms, because some or all of the 

applicant's income is derived from 

public assistance sources. However, . 

a lender may consider the probable 

continuity of such income. In the 

situation above, the applicant cannot be denied credit solely because 

his income came from a public assistance source. 

66
 
,
 

f 

r ILLEGAL DISCOURAGEMENT 

An African-American couple enter a 

bank and ask to speak to a loan officer. They tell the loan officer that they 

are interested in applyingfor a mortgage. The loan officer sits down with 

the couple and begins to explain the 

mortgage products that the financial 

institution makes available. In doing 

so, the loan officer apologizes because the financial institution has to 

charge a non-refundable $350 application fee to cover all ofthe expenses 

it will incur to process the loan application. The loan officer candidly suggests that the couple talk to the bank 

down the street about its products. 

She tells the couple that the bank 

down the street offers a wide variety 

ofgovernment-insured loan products 

and those are usually more affordable. The loan officer explains to the 

customer that she's just interested in 

seeing that they get the best deal possible, as she sends them away. 

Regulation B's concern with the 

application process starts before 

the application is even taken. 

Lending officers and employees 

must be careful to take no action 

that would, on a prohibited basis, 

discourage anyone from applying 

for a loan. In the example above, 

the loan officer is cordial and seemingly wants to help the couple, but 

what results from the loan officer's 

conversation with the couple is that 

they leave the financial institution 

without applying for a mortgage 

loan. This is an example of possible 

illegal discouragement. 

Please note that most financial institutions do charge application fees 

to cover the cost of their expenses 

in processing loan applications and 

there is NO law against this practice. Application fees are only a concern when they are used to discourage a person from applying for a 

loan on a prohibited basis. Consumers should ask a financial institution for a copy of its credit underwriting guidelines so that they can 

review the underwriting guidelines 

and their own financial position to 

determine if they want to apply for 

a loan. 

In efforts to comply with the 

Community Reinvestment Act (a 

federal law designed to encourage 

financial institutions to meet the 

credit needs of their entire delineated communities including low- and 

moderate-income areas), many 

lenders have chosen to make their 

application fees partially refundable 

if the applicant's income or credit 

history disqualify him/her for the 

loan in the application's initial 

review. 

CONCLUSION 

The examples presented here illustrate some of the more obvious 

forms of discriminatory practices 

and illegal discouragement. 

Lenders are required to provide 

a Notice of Action to each credit 

applicant within 30 days of receiving a complete application. In cases 

of a credit denial, lenders must provide the ability to learn the accurate 

reasons for the denial and the ability to learn what sources of information were used to reach a decision, 

such as a credit bureau report. The 

Notices of Action for credit denials 

are commonly referred to as adverse action notices. Consumers 

who have been denied credit 

should review their adverse action 

notices carefully to ensure that the 

reasons are. in fact, accurate. 

Consumers who believe that they 

or someone they know have been 

denied credit on a prohibited basis 

or illegally discouraged at a financial institution should write to the 

institution's primary federal regulator. Complaints against state member banks (those regulated by the 

Federal Reserve Bank of Chicago) 

in the Seventh District of the Federal Reserve System should be sent 

to the following address: 

Consumer and Community Affairs 

Supervision and Regulation 

Department 

Federal Reserve Bank of Chicago 

P.O. Box 834 

Chicago, Illinois 60690-0834 

The Federal Reserve System encourages consumers to increase 

their awareness of their rights under the federal fair lending laws and 

to communicate any concerns they 

may have to the financial institution 

and the institution's primary federal 

regulator. 

67
 
Small Businesses and the
 

Equal Credit Opportunity Act
 

The Equal Credit Opportunity Act was enacted by 

Congress in 1974 and is most frequently referred to in 

discussions about consumer credit. But it applies to 

business credit transactions - credit extended for business. commercial or agriculture purposes - as well. 

Although specific requirements under Regulation Bt the 

implementing regulation for the Equal Credit 

Opportunity Act (ECOA). may differ for business credit transactions as compared to consumer credit transactions. the general principle is the same. Creditors may 

not discriminate against any applicant on a prohibited 

basis in any aspect of a credit transaction. 

What does this mean? It means that lending institutions 

may not deny an application for credit or discourage a 

potential customer from applying for credit on any of 

the following bases: 

a) Race. Color. or National Origin; 

b) Religion; 

c) Sex; 

d) Marital Status; 

e) Age; 

f) Receipt of Public Assistance; and 

g) Exercise of any right under the Consumer Credit 

Protection Act. 

Regulation B provides specific directions to financial 

institutions about what types of information they may, 

and may not, ask for in connection with a credit application. For example, a creditor may not require a 

spousal guarantee on a loan to a business in which the 

spouse is not a principle, if the loan stands on its own 

merits. If the business loan is being secured by property 

that is jointly owned with a spouse, then the lender may 

require the spouse to sign a security interest agreement, 

allowing the lender access to the collateral in the event 

of default; however, the lender may not arbitrarily require the spouse to sign the loan agreement. 

Regulation B also requires that creditors provide small 

business credit applicants with a notice of action taken 

on the application. In the case of a credit denial, the 

lender must provide the applicant with an opportunity 

to learn the reason(s) for the denial. Business credit 

applicants should learn why their loan was denied and 

should verify that the reason(s) are accurate. If the 

reason(s) are not accurate, the applicant should pursue 

the matter with the lender and correct any inaccurate 

information. 

Finally, if a small business credit applicant believes that 

he has been denied credit or discouraged from applying 

for credit on a prohibited basis, he should send a letter 

of complaint both to the financial institution and to the 

institution's primary federal regulator. You may obtain 

the name and address of an institution's primary federal 

regulator by visiting its main or branch office. Regulated 

depository institutions (banks and savings and loan 

associations) are required under the Community Reinvestment Act to post a Community Reinvestment Act 

Notice in their main and branch offices. This notice 

must include the name and address of the institution's 

primary federal regulator. 

The Federal Reserve System encourages all credit 

applicants to learn more about their rights under the 

Equal Credit Opportunity Act. Business credit applicants are offered protection under ECOA and should 

be as fuily apprised oftheir rights as possible at the time 

of a credit application. 

FEDERAL RESERVE BANK 

OF CHICAGO 

Consumer and Community Affairs 

July 1993 

60 
The Equal Credit Opportunity Act ­


Know Your Rights Before Applying for Credit
 

Enacted in 1974. the Equal Credit Opportunity Act. or 

ECOA. seeks to ensure that non-credit-related factors. 

such as a person's race, national origin, or sex. do not 

enter into a decision to deny a person's request for credit. The Act defines the following prohibited bases for 

credit denial: 

1) race: 

2) color: 

3) religion: 

4) national origin: 

5) sex: 

6) marital status: 

7) age (provided the applicant has capacity 

to contract); 

8) receipt of income from public assistance 

sources; and 

9) good faith exercise of any rights under the 

Consumer Credit Protection Act 

A lender may not deny or discourage a loan applicant 

for any of the above-listed reasons. Lenders do have the 

right to deny loan applications for reasons such as poor 

credit history, insufficient income, excessive amounts 

of debt or high debt-to-income ratios. 

The Act and its implementing regulation are intended to 

cover all aspects of the credit transaction from the 

preapplication stage to the application and the credit 

decision. The regulation recognizes both the creditor's 

need to know as much as possible about a prospective 

borrower and the borrower's right not to disclose information that is irrelevant to the transaction. Regulation B 

does not prevent a creditor from asking any pertinent 

information necessary to evaluate the creditworthiness 

of an applicant. 

Under the Act, creditors are prohibited from discriminating against or discouraging potential loan applicants 

on a prohibited basis. You, as a consumer, may ask for 

the articulated lending standards of your financial institution to determine how your loan application will be 

judged. Since most financial institutions charge loan 

application fees, you may also choose to review your 

own financial position before you apply for a loan. 

If a consumer chooses to apply for a loan. he/she should 

keep in mind that lenders will ask for information that 

will help them determine whether or not the consumer 

has the capacity to repay and has demonstrated a 

willingness to repay his/her debts. This information 

may include tax forms filed in previous years, sources 

of income such as copies of current pay stubs, public 

assistance checks/vouchers or alimony payments and 

some means to verify continuance of the payments: 

credit bureau reports. number of dependents and information about the applicant's assets. 

Lenders are required to provide credit applicants with a 

Notice of Action within 30 days of receiving a complete 

credit application. In cases of a credit denial. lenders 

must provide the ability to learn the accurate reasons for 

denial and the ability to learn what sources of information were used to reach a decision, such as a credit 

bureau report. The Notices of Action for credit denials 

are commonly referred to as adverse action notices. 

Consumers who have been denied credit should review 

their adverse action notices carefully to ensure that they 

are, in fact, accurate. Ifthe reasons are not accurate. the 

applicant should pursue the matter with the financial 

institution and may file a formal complaint with the 

financial institution's primary federal regulator. 

Consumers may determine their financial institution's 

primary federal regulator by visiting the main or a 

branch office of their financial institution. Each office or 

branch of an insured depository institution (banks and 

savings and loan associations) must have a Community 

Reinvestment Act Notice posted in the lobby, and it will 

indicate the name and address of the institution's primary federal regulator. 

Complaints against state member banks (those regulated by the Federal Reserve Bank of Chicago) in the 

Seventh District of the Federal Reserve System should 

be sent to the following address: 

Consumer and Community Affairs 

Supervision and Regulation 

Federal Reserve Bank of Chicago 

230 South LaSalle Street 

Chicago, Illinois 60604 

FEDERAL RESERVE BANK 

OF CHICAGO 

Consumer and Community Affairs 

July 1993 

69 
RESOURCES
 

TIlE NATIONAL WOMEN'S BUSINESS COUNCIL
 

ACCESS TO EQUITY CAPITAL WORKSHOP
 

Ark Capital Management 

29 N. Wacker Drive 

Suite 795 

Chicago, IT. 60606 

312/541-0330 

312/541-0335 fax 

Capital Missions Company 

2400 East Main Street 

Suite 103 

St. Charles, IT. 60174 

708/876-1101 

708/876-0187 fax 

Center for Policy Alternatives 

1875 Connecticut Avenue, NW 

Suite 710 

Washington, DC 20009 

202/387~30

202/986-2539 fax 

Chicago Capital Fund 

500 N. Michigan Avenue 

Suite 1920 

Chicago, IT. 60611 

312/855-1135 

312/855-1134 fax 

Employee Benefit Research Institute 

2121 K Street, NW 

Suite 600 

Washington, DC 20037 

202/659-0670 

202/775-6312 fax 

Federal Reserve Bank of Chicago 

Community Affairs Division 

230 S. La Salle Street 

Chicago, IT. 60604 

312/322-5877 

312/322-5062 

The Federal Reserve Bank of Chicago
 

Chicago, Dlinois
 

June 3. 1994
 

Inroads Capital Partners, L.P. 

525 West Monroe Street 

Chicago, IT. 60661 

312/902-5347 

312/902-1061 fax 

Investment Division 

U.S.	 Small Business 

Administration 

409 Third Street, SW 

Suite 6300 

Washington, DC 20024 

202/205~510

202/205~959 fax 

National Association of 

Investment Companies 

1111 14th Street, NW 

Washington, DC 20005 

202/289-4336 

202/289-4329 fax 

National Association of Small 

BuSiness Investment Companies 

1199 N. Fairfax Street 

Suite 200 

Alexandria, VA 22314 

703/683-1601 

703/683-1605 fax 

National Foundation of 

Women Business Owners 

1010 Wayne Avenue 

Suite 900 

Silver Spring, MD 20910 

3011495-4975 

3011495-4979 fax 

71
 
Pension and Welfare Benefits 

Administration 

Department of Labor 

200 Constitution Avenue, NW 

Suite South 2524 

Washington, DC 20210 

202/219-8233 

202/219-5526 fax 

Office of Women's Business 

Ownership 

U.S. Small Business 

Administration 

409 Third Street, SW 

Washington, DC 20024 

202/205-6673 

202/205-7287 fax 

Texas Capital Network 

8920 Business Park Drive 

Suite 275 

Austin, TX 78759 

512n94-9398 

512n94-0448 fax 

Women's Business Development 

Center 

8 S. Michigan, Suite 410 

Chicago, IL 60603 

312/853-3477 

312/853~145 fax 

Women's Collateral 

Funding, Inc. 

Box 410 

Gladwyne, PA 19035 

610/896-2730 

610/896-2756 fax 

Women's Equity Fund 

P.O. Box 17143 

Boulder, CO 80308 

303/443-2620 

303/449-2122 fax 

Women's Self Employment 

Project 

166 W. Washington Street 

Suite 730 

Chicago, IL 60602 

312/606-8255 

312/606-9215 fax 

Women's World Banking 

8 West 40th Street, 10th Floor 

New York, NY 10018 

212n68-8515 

212n68-8519 fax 

72
 
REFERENCES
 

American Bankers Association and the National Federation of Independent Business, "Steps 

to Small Business Financing".
 

Bowers, Lynn A., "The Fiduciary Duty Aspects of Economically Targeted Investments"
 

1993.
 

Burr, Sara and Strickland, Mary, "Creating a Positive Business Climate for Women: An 

Approach to Small Business Development" Economic Development Review, p.63-66, Winter 

1992. 

California Public Employees' Retirement System, "Economically Targeted Investment 

Policy" Apri11993. 

Canegata, Gizette and Stumberg, Robert, "Incentives for Community Lending" 1993. 

Congressional Quarterly, "Lawmakers Seek Way to Spur Small Business Loans" p.l072­

1075, May 1, 1993. 

Euromoneyeditor, "The Shift to Equities" p.5-128, July 1993. 

Ferlauto, Richard and Clabum, Jeffrey, "Economically Targeted Investments by State-Wide 

Public Pension Funds" 1993. 

Gabrelli, G. and Fano, D., eds. "The Challenge of Private Pension Funds: Present Trends 

and Future Prospects in Industrialized Countries" 1986.
 

Guerard, Yves and Jenkins, Glenn, "Building Private Pension Systems: A Handbook" 1993.
 

Munnell, A., "The Impact of Public and Private Pension Schemes on Saving and Capital
 

Formation" 1987.
 

Ocampo, Juan M., "The ABCs of Asset Securitization" The Bankers Magazine, p.5-9, May­


June 1989.
 

Posner, Bruce G., "How to Finance Anything" INC. Magazine, p.54-68, February 1993.
 

U.S. Department of Labor, Pension and Welfare Benefits Administration, "Interpretive 

Bulletins Relating to the Employee Retirement Income Security Act of 1974" 1994. 

U.S. Small Business Administration, Office of Advocacy, "The State of Small Business" 

yearly publication. 

73 
THE MISSION OF THE NATIONAL WOMEN'S BUSINESS COUNCIL 

"The National Women's Business Council shall ensure the full participation of 

women business owners in the free enterprise system by identifying and 

vigorously promoting their interest in ways that can be measured. " 

In 1993, the National Women's Business Council brought together prominent women 

business owners and advocates to develop a strategic plan to target the Council's efforts to 

those initiatives of greatest importance to women entrepreneurs. On behalf of the more than 

six million women business owners in this country it was determined that policy and 

statutory changes needed to be addressed in three critical areas: 

* increase access to public procurement opportunities by establishing a Federal 

government-wide separate goal for women prime and sub-contractors; 

* improve the ability of women business owners to access essential financial resources 

to successfully start and grow their businesses; and 

* to collect more timely data on the fastest growing sector of the economy through the 

institution of an annual national census of all women-owned businesses. 

In addition to advising Congress and the President about the most effective means to 

accomplish these objectives, the Council has also set out to increase the awareness of the 

contributions that women owned businesses make to the stability and growth of our economy. 

We intend to serve as a catalyst for all women business owner and executive representative 

organizations who wish to participate in the process of improving our lifestyles and the way 

we do business in this country, be it procurement, health or welfare reform, or growing the 

economy and ensuring our personal security. 

74
 
ACCOMPUSllMENrS
 

OF THE
 

NA710NAL WOMEN'S BUSINESS COUNCIL 

The National Women's Business Council was created with the enactment of PL 100-533 to address 

critical issues of concern to women-.owoed businesses, with special emphasis on increasing access to 

the public, private and financial marketplaces. On these and other women's enterprise issues, the 

Council makes annual policy recommendations to the President and Congress. 

CURRENr PROJECIS 1993-1994
 

* NETWORK AND COALmON BUILDING, EXPANSION AND COMMUNICATION 

* IDENTIFY SOURCES AND USES OF CAPITAL FOR WOMEN-OWNED BUSINESSES 

* COMPENDIUM OF STATISTICAL INFORMATION ON WOMEN-GWNED BUSINESS 

* ANNUAL CENSUS FOR WOMEN'S BUSINESS OWNERSHIP 

* SEPARATE FEDERAL PROCUREMENT GOAL FOR WOMEN-OWNED BUSINESSES 

* AGGRESSIVE OUTREACH PROGRAM TO BRING WOMEN TO THE BIDDING TABLE 

* PROMULGATE REGULATIONS FOR DEFINITION OF WOMEN-GWNED BUSINESS 

* FOSTER PARTNERSHIPS BElWEEN WOMEN'S BUSINESS ADVOCATES AND 

PUBLIC AND PRIVATE SECTOR INSTITUTIONS 

NWBCEVENTS II II 

DATE 

January 23, 1990 

July 9-10, 1990 

September 10, 1990 

April 30, 1991 

December 5-7, 1991 

March 16-17, 1992 

September 10-11, 1992 

March 24-26, 1993 

September 28, 1993 

June 3, 1994 

LOCATION 

Washington, DC 

Los Angeles, CA 

Chicago, IL 

Little Rock, AR 

Arlington, TX 

Denver, CO 

Washington, DC 

San Diego, CA 

Richmond, VA 

Chicago, IL 

TOPIC 

Survey of Resources 

Access to Credit & Export 

Opportunities 

Procurement and Certification 

Access to Capital 

High Technology 

Telecommunications 

Access to Capital 

International Trade 

Access to Capital 

Equity Investments in Women Owned 

Businesses 

75
 
Council MenrlJers 

MARY ANN CAMPBELL, CFP, CHAIR 

President 

Money Magic, Inc. 

Little Rock, Arbnsas 

Mary Ann Campbell is a certified financial planner and president of Money Magic, Inc., in 

Little Rock, Arkansas. Her company provides financial education seminars as a corporate 

employee benefit. She is a.professional speaker who uses magic to deliver her messages. 

Mary Ann serves on the Arkansas Business and Education Alliance and was a member of 

Southwestern Bell's Small Business Advisory Panel. Listed as one of America's 200 best 

Certified Financial Planners, she has won national awards for her Money Magic ETV series. 

She has been a financial reporter for an NBC affIliate, has hosted a local Money Talk radio 

program and wrote a Money Magic column for a local newspaper. In 1991 Mrs. Campbell 

was awarded the SBA Women in Business Advocate for Arkansas. She was Adjunct 

Assistant Professor in the Economics department of the University of Arkansas at Little Rock 

for seven years. Mary Ann holds a master's degree from Texas Woman's University, and is 

an honor graduate of Ouachita University. 

RONALD H. BROWN, VICE CHAIR 

Secretary 

Department of CoIDlDel'Ce 

Washington, DC 

Ronald H. Brown is Secretary of Commerce. He also serves on the President's National 

Economic Council and the Domestic Policy Council. He is chairman of the Trade Promotion 

Coordinating Committee, the co-chair of the U.S. - Russia Business Development Committee 

and the U.S.-Israel Science and Technology Commission, and leads President Clinton's 

initiative of the revitalization of the California economy. He also serves on the Board of 

Trustees for Middlebury College and is chair of the Senior Advisory Committee of the 

Institute of Politics and the John F. Kennedy School of Government at Harvard University. 

He also is an elected member of the Council on Foreign Relations. 

76
 
ERSKINE BOWLES 

Administrator 

U.S. Small Business Administration 

Washington, DC 

As chief executive officer of the U.S. Small Business Administration (SBA), Erskine Bowles 

directs a comprehensive array of programs and services to promote and expand U.S. small 

businesses. Prior to his nomination to head the SBA in March 1993 and his confirmation by 

the U.s. Senate in May 1993, Mr. Bowles served for 18 years as chairman and chief 

executive officer of Bowles Hollowell Conner & Company, a Charlotte, N.C. investment 

banking firm. He also has served as president of the Juvenile Diabetes Foundation and a 

member of the Board of Visitors of the University on North Carolina, Davidson College and 

Johnson C. Smith University, as well as a number of private corporations. 

DR. SUSAN M. P}DI.T ,IPS 

Member, Board of Governors 

Federal Reserve System 

Washington, DC 

Dr. Susan M. Phillips was sworn in on December 2, 1991, as a member of the Board of 

Governors of the Federal Reserve System, to fill an unexpired term ending January 31, 

1998. Prior to becoming a member of the Board, Dr. Phillips served as Vice President for 

Finance and University Services and Professor of Finance at the College of Business 

Administration at the University of Iowa. PreviOUSly, she served on the faculty at Louisiana 

State University. She also has been a Brookings Economic Policy Fellow and an Economic 

Fellow with the Securities and Exchange Commission. In 1981, Dr. Phillips was appointed 

to the Commodity Futures Trading Commission and became its Chairman in 1983, serving 

until her resignation in 1987 to return to the University of Iowa. Her areas of specialization 

include options and commodity futures, financial management and economic theory of 

regulation. 

BARBARA AIEI.LO 

President 

Aiello & Company 

Kennebunkport, Maine 

Barbara Aiello, owner of Aiello & Company Real Estate, is the 1993 President of the Maine 

Association of Realtors, chairman of its Executive Committee and a member of its 

Government and Political Affairs and Political Action committees. She also serves on the 

board of directors of Ocean National Bank and the Kennebunk Rotary Club, and is an 

advisory board member of the Institute for Real Estate Research and Education at the 

University of Southern Maine. She is a member of the KennebunklKennebunkport Chamber 

of Commerce, Kennebunk Downtown Revitalization Committee and Kennebunkport Business 

Association. 

77 
PASTORA SAN mAN CAFFERTY 

Professor 

The University of Chicago 

Chicago, Dlinois 

Dr. Pastora San Juan cafferty joined the Council on May 22, 1992. She is a professor at the 

University of Chicago in The School of Social Service Administration and The School of 

Public Policy Studies. She has extensive background in public policy and has served on a 

number of public and private boards including the Kimberly-Clark Corporation and the Lyric 

Opera Association in Chicago. 

SAUNDRA R. HERRE 

President 

Herrewood Associates 

Racine, WlSCOIlSin 

Saundra Herre is President of Herrewood Associates in Racine, Wisconsin. Her company 

provides management consulting services to small business owners and non-profit 

organizations in the area of advertising, marketing and management practices. Ms. Herre is 

a board member of Wisconsin TCF Financial and was appointed by the Governor as a 

member of the Wisconsin Jobs Council. She also serves on the board of Big Brothers/Big 

Sisters and the Center for Community Concerns, and is an advisor and guest lecturer to the 

business schools of several universities. 

BARBARA LAUGHLIN 

Executive Vice President 

Manufacturers and Traders Trost Company 

Buffalo, New York 

Barbara Laughlin was appointed to the Council on May 22, 1992. She is an Executive Vice 

President of Manufacturers and Traders Trost Company in Buffalo, New York. As Director 

of Technology and Banking Operations, she is responsible for the provision of data 

processing, telecommunications and centralized services to support the $10 billion First 

Empire State Corporation. 

MARILU B. MEYER 

President and Owner 

Castle Construction Corporation 

Chicago, Dlinois 

Marilu Meyer is the president and owner of Castle Construction Corporation in Chicago, 

illinois. Castle Construction is a general contract which self-performs concrete, masonry, 

carpentry and decorating services. MBB Construction Group, a Castle subsidiary, serves the 

industry in the construction management field. The company has performed extensive work 

for the City of Chicago, O'Hare Development Projects, illinois Department of Transportation 

and the Washington Metropolitan Area Transit Authority. 

78 
NATIONAL WOMENS' BUSINESS COUNCIL 

STAFF liSTING 

WASHINGTON OFFICE 

Amy Millman 

Executive Director 

Juliette Tracey 

Deputy Director 

Gilda Washington 

Administrative Officer 

Tara Baten 

Legislative Assistant/Public Affairs 

409 Third Street, SW 

Suite 5850 

Washington, DC 20024 

202/205-3850 

202/205-6625 

UTILE ROCK OFFICE 

Karen Mahurin 

Special Assistant to the Chair 

10020 Rodney Parham 

Suite C 

Little Rock, AR 72207 

Phone 5011224-7272 

Fax 5011227-9513 

79