You asked the following questions about state economic development programs for small minority- and women-owned businesses.

1. Do any states run programs that help these businesses after they grow to medium-size?

2. How do the states define “small” minority- and women-owned businesses? Do the definitions vary by the type of business?

3. How do these definitions compare with Connecticut's? When was the last time Connecticut changed its definitions?

SUMMARY

We sampled the Northeastern states and Illinois, Ohio, and Wisconsin to identify state agencies and programs providing financial, procurement, and technical assistance exclusively to minority- and women-owned businesses (Attachment 1). We found several loan programs that appear to assist established, medium-size businesses. Although businesses do not qualify for these loans based on employee or gross revenue limits, the loan limits and matching fund requirements seem more suited for established or expanding businesses.

Procurement assistance programs help businesses learn how to bid on and execute state contracts. Some are open to minority- or women-owned business regardless of the number of people they employ or the annual revenues they gross. Others impose employee or revenue limits. The revenue limits range from $ 10 million in Connecticut to $ 27 million in Illinois. Rhode Island bases eligibility on the federal Small Business Administration (SBA) size standards, which vary by industry sector. The standards include revenue and employee limits.

Technical assistance programs seem to focus on businesses in the early stages of the development cycle. They help minority and women entrepreneurs develop management, marketing, and accounting skills needed to start and grow a business. Illinois and Ohio appear to be the only states in our sample that run technical assistance programs, but our web searches found many regional and local nonprofit community development organizations that provide technical and other assistance to small minority- and women-owned firms.

Procurement assistance programs are more likely to use size limits as an eligibility criterion than the other programs. In Connecticut, minority- and women-owned businesses with 50 or fewer employees qualify for micro loans while those in Illinois with 500 or fewer employees qualify for larger loans. The technical assistance programs do not appear to impose size limits. The last time Connecticut changed the revenue limit for its procurement program was in 1993 when the legislature increased it from $ 3 million to $ 10 million.

Connecticut law defines small business for other purposes besides economic development. Attachment 2 is a 2006 OLR Report analyzing these definitions (2006-R-0392).

TYPES OF BUSINESS ASSISTANCE

Financial

Most of the financial assistance programs we found in our survey provide small loans for starting or expanding most types of businesses, including those that do not usually qualify for loans under traditional economic development programs. Traditional financial assistance programs typically provide larger loans to established manufacturing, biotechnology, financial service, and other businesses that pay relatively high wages, operate relatively large facilities, and bring wealth into the state by selling most of their products and services to customers in other states or nations.

As Table 1 shows, six states in our sample administer or fund loan programs exclusively for minority- or women-owned businesses, regardless of industry sector. Businesses qualify for these loans based on an owner's ethnicity or gender and whether he or she owns at least 51% of the business and manages and controls it daily operation. Businesses must meet size limits only in Connecticut (no more than 50 employees) and Illinois (i. e. , no more than 500 employees).

The programs seem to be geared toward specific stages of the business development cycle. Connecticut, New York, and Wisconsin's programs serve start-up and expanding businesses while Ohio's serves the latter. Illinois, New York, and Pennsylvania's programs appear to serve established firms.

Table 1: Selected State Minority- and Women-Owned Business Financial Assistance Programs

Procurement

Nine states in our sample run programs that help minority- and women-owned businesses obtain state contracts. Most help businesses identify and bid on state contracts or portions of contracts agencies must reserve for bidding exclusively by minority- or women-owned firms (i. e. , set-aside contracts). Pennsylvania's programs also certify minority- and women-owned businesses for bidding on federal and private contracts. Ohio's programs also guarantee payment on the bonds businesses must post when bidding on state contracts.

Table 2 lists the states running minority or women business procurement programs and identifies their size standards, if applicable. Connecticut and Illinois certify minority- and women-owned businesses for state procurement contracts based on annual gross revenues—under $ 10 million in Connecticut and under $ 27 million in Illinois. Ohio bases eligibility on a business owner's personal net worth (i. e. , no more than $ 250,000 when applying for the program. )

Pennsylvania operates three procurement programs, two which certify businesses for set-aside contracts. Small minority- and women-owned businesses qualify for small disadvantaged business subcontracts if they have fewer than 100 employees and revenues under $ 20 million for most businesses (under $ 25 million for information technology). Rhode Island certifies businesses owned by minorities, women, and people with disabilities based on SBA standards, which vary by industry sector. Attachment 2 includes an SBA table showing the size limits by industry sector.

Under all the programs, a business owner qualifies for assistance based on gender or membership in a specified minority group. The owner must also show that he owns at least 51% of the business and control of its daily operation.

Table 2: Select State Minority- and Women-Owned Business Procurement Assistance Programs

In some states, the agencies that certify businesses for participating in state procurement contracts also certify them for participating in federally funded contracts. These businesses must meet the SBA's size standards.

Technical

Illinois and Ohio are the only states in our sample with state agencies that provide technical assistance to entrepreneurs and small businesses owners. This assistance is in addition to that provided by federally or state-funded nonprofit small business development centers, which are also common in the other states we sampled. One example of these centers is Pennsylvania's Minority Business Development Center, which is funded by the U. S. Department of Commerce and operates out of the Wharton School of Business' The Enterprise Center.

Illinois' Department of Commerce and Community Opportunity provides similar assistance to minority- and women-owned businesses. Separate offices for minority and women business development help entrepreneurs start or expand businesses, solve problems, and access services provided by other state and nonprofit agencies (http: //business. illinois. gov/women_assistance. cfm). The offices do not appear to use size limits to screen businesses for their services, which address the needs and concerns of new, relatively small businesses.

Ohio's Minority Contractors and Business Assistance Program provides technical assistance, counseling, and information and referral services through eight regional offices (http: //www. odod. state. oh. us/ DMBA/MCBAP. htm). Technical assistance includes preparing loan packages and identifying procurement opportunities.

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Attachment 1: Selected State Administered or Funded Economic Development Programs Exclusively for Minority- and Women-Owned Businesses