From financial services and health care to construction and transportation, minority and women-owned enterprises reach across all industries and account for a majority of the two million new start-ups here in the United States. This is good news, but this does not mean that there is no longer a need for public-private partnerships and laws and government programs because these firms still remain under-represented compared to their population and lack of access to financing on reasonable, or any terms, still remains an impediment.
Let me share some truly alarming figures with you. African Americans make up over 12 percent of our population, but under 6 percent of our businesses and 1 percent of profits; Hispanics are over 13 percent of the population, but only 7 percent of businesses and fewer than 3 percent of profits; and women make up a majority of our population, but account for less than 30 percent of our businesses and just over 10 percent of profits.
These statistics are disappointing and troubling. But they're certainly not due to any lack of motivation or determination on behalf of minorities and women. Instead, they're due to the tremendous hurdles women and minorities must face each day to gain fair and adequate access to venture capital, credit and business and technical training.
As an example, look at the Small Business Administration's numbers. While the Urban Institute has concluded that SBA's loan and venture capital programs do meet their mission by serving a greater percentage of women-, minority-owned, and start-up firms than conventional small business loan and venture capital, there is work to be done at the SBA — the share of SBA loans to minorities and women has not significantly increased since 2001, and the share of SBA venture capital financings to women and minorities has decreased significantly since 1998.
For example, in the SBA's two largest loan programs, the share of dollars of loans to African Americans has been about 5 percent and 2 percent. For women, they've remained about 22 percent. In the SBA's SBIC program, the share of financings to firms owned by all categories of minorities dropped 66 percent (from 26 percent to 8.81 percent).
The venture capital world is still 77 percent White and male. These men greatly owe their success to close networks of peers and mentors. Women and minorities lack such commanding networks. This shortfall is one of the reasons why they received less than 5 percent of the venture capital investments made over the past 40 years. Clearly, more must be done to get venture capital into the hands of women and minorities. Also problematic is a 2005 SBA report that found African-American and Hispanic firm owners faced higher loan denials.
Because of the hurdles faced by minority and women-owned small firms, we have attempted to incentivize investments for these firms in S.2920 the SBA Reauthorization Act. Two provisions within that bill would improve the business climate for these entrepreneurs. One provision creates additional leverage for venture capital firms that invest 51 percent of their portfolio with women or minorities. The other provision creates a grant program that would design entrepreneurship training programs to encourage the growth of small businesses among underserved populations.
The passage of these provisions is crucial because, as any small business owner knows, access to credit and venture capital can be the difference between success and failure. In today's troubled economy, their success means our success and an economic boost for all Americans.
But women and minorities aren't the only ones in the business world to face impediments to loans and venture capital and counseling. Businesses in urban and rural areas with high unemployment and high poverty need access to financing on reasonable terms.
The New Markets Venture Capital program targets the problem in low-income communities. Last June, we held a roundtable to discuss the importance of venture capital to our economy and the need for the SBA's venture capital programs – the SBIC program and the New Markets Venture Capital program. According to Dr. Jeffrey Sohl and Dr. Julia Rubin, who participated in the roundtable, there is a dramatic need for deals that range from $50,000 to $3 million, as well as for deals in low-and moderate-income rural and urban areas and equity for seed money and startups.
Sen. John Kerry is a member of the U.S. Senate Small Business Committee, where he delivered this address Sept. 11.