Threat to Minority Firms

Some segments of the minority small-business community would be seriously hurt if the Gramm-Rudman balanced-budget plan cuts Small Business Administration programs, according to a study by two Caltech professors and a panel of business leaders that reviewed the report.

"I'm still convinced that Horatio Alger would not have made it if his name was Horatio Garcia," said David Lizarraga, president of the East Los Angeles Community Union, or TELACU.

"I would argue that we still need to keep these (SBA) programs," said Lizarraga, who was one of the panel members at a recent symposium on "Minorities in California," during which the findings of a two-year study by Caltech professors Bruce E. Cain and D. Roderick Kiewiet were discussed. who sponsored the symposium? "To dismantle them (the programs) would be premature and would have a devastating effect on minority business development in this country," Lizarraga said.

The study, which was funded by the Seaver Institute, concluded that any reduction in SBA programs would particularly damage small, unprofitable minority-owned businesses and young, better-educated minority entrepreneurs that have used SBA money to start firms.

"I think that the termination of these programs would seriously affect the minority business community," said Elbert Hudson, chairman and chief executive of Broadway Federal Savings & Loan, one of the largest black-owned S&Ls; in the nation.

"I don't think it's necessary to save the marginal businesses, though," Hudson said. "I think they should just die" and more successful businesses should be encouraged instead.

While not addressing whether SBA programs should be cut, David Horn, president of South Bay College, the largest privately owned business college in Southern California, complained that "well-intentioned government programs have just provided funds to people who are not prepared to receive them." Horn recommended changing the community college system to make it more vocationally oriented.

The Caltech study concluded that better business skills and education "are crucial to the success of minority businesses."

"When minority business owners are well trained," the study stated, "they tend to perform as well, or better, than their non-minority counterparts."

Minority businesses tend to be sole proprietorships "scratching a marginal existence in the retail and service areas from a highly vulnerable financial position," the report said. The study also pointed out several important differences in the various minority business communities to which government and private assistance programs should be sensitive.

Asian-owned businesses are more evenly split between the retail and service sectors than are Latino businesses (which are more concentrated in retailing) and black businesses (which lean more toward services), the report said.

Unlike the black business community, Latinos and Asian-Americans have large, stable families that can provide a cheap source of labor and capital, the report said. Latinos and some Asians also share language difficulties that limit their markets and the growth of their businesses.

Asians tend to be better educated and have a higher family income than blacks or Latinos. Black business owners seem to face more discrimination than do Latinos or Asians, the study found.

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