Minority businesses to get federal aid starting July 1.

Center offers help with business plans, loan proposals

Gloria Castillo, a national award-winning minority entrepreneur and president of Chicago-based Monarch Marketing Group, was already a successful business owner when she walked through the newly opened doors of the nation's first Minority Enterprise Growth Assistance Center in October 1992.

"We used them to help us get our business plan in order so we could move ahead in the next three years," Castillo recalled. She is now turning to the Chicago MEGA Center again for help in positioning her $2.5 million advertising specialties firm for federal contracts procurement.

Los Angeles minority-owned businesses, beginning this week, will be able to get similar assistance and more, as the second MEGA Center opens its doors at 355 S. Grand Ave. in downtown Los Angeles July 1. Only businesses that are 100-percent minority owned are eligible to receive assistance from the MEGA Centers.

The MEGA Centers operate under a program of the U.S. Department of Commerce. A third MEGA Center is targeted to open in Dallas in 1995. No further center openings have yet been publicly announced.

Government funding for each center is separately approved by the Commerce Department, which has allocated $3.1 million to the L.A. MEGA Center. In addition, the center's private-sector operator, Cordoba Corp., has committed about $550,000 in funding.

"This will be a one-stop shop," noted Jaime Telles, the center's project director and vice president of Cordoba. "We have the critical mass to speak to most of a client's business needs." The L.A. center is expected to have 36 to 40 staff members and is required by the U.S. Department of Commerce to provide at least 35,000 staff hours of assistance to minority businesses per year.

That minority client could be an aspiring entrepreneur with an idea, a would-be franchisee or, like Castillo, an established business owner wanting to expand an existing success story. That client will be able to speak to bilingual MEGA Center representatives in English, Spanish, Tagalog, Chinese or Japanese.

"We're looking to reflect the diversity of Los Angeles," Telles said, noting that the center is currently seeking a Korean-speaking consultant as well.

What will the center actually do for clients -- and at what cost?

An initial visit with a center consultant, which can be arranged within a day or two after phoning the center (213-613-1300), is free. At that time, clients would discuss their ideas, needs and objectives with a consultant. The consultant would then assess the feasibility of a client's plans.

"We may tell someone, 'Your idea won't fly. Come back when you've rethought this,'" Telles said.

If the plan is deemed workable, the consultant would help the client determine how much it would cost to implement.

The client truly ready to open his own Starbucks coffee franchise, launch a new silk screen studio, add a web press to his printing empire, or go after those fat federal contracts, can expect the following scenario upon seeking assistance from the center.

The center consultant gives the client a "letter of engagement" to sign, explains what documents are needed and sets up a second appointment several weeks later, often at the client's place of business.

The letter of engagement contains an estimate of the number of staff hours needed to provide the requested service, and the client signs that letter. The center charges $10 an hour to companies with gross sales of less than $500,000 a year, and up to $17.50 an hour to firms with higher gross sales, the L.A. MEGA Center director explained, contrasting that with private consultants' typical rates of $100 to $150 an hour.

Clients must pay up front, based on the number of estimated hours cited in the letter of engagement. If the actual staff hours spent exceeds the estimate, the client must pay the difference. And if the actual staff hours spent falls short of the estimate, the client is refunded the difference.

"You're arguably paying more for parking than consultation," Telles quipped, then noted that he's even working on securing parking validations, too.

"Our most-requested services are business plan development, loan proposal preparation and Minority Business Entrepreneur certification for getting minority government contracts," related George Herrera, president of Chicago's MEGA Center. Although run by a different contractor, Chicago's center offers virtually the same services, follows the same U.S. Department of Commerce procedures and charges the same rates as the L.A. center will when it opens this week.

MBE certification, estimated Herrera of the Chicago MEGA Center, takes between 25 to 70 hours for his staff to prepare, depending on the government agency for which certification is being sought. A loan package or business plan averages 80 hours for the staff to prepare. A client is allowed a maximum of 200 hours of center service a year, with no cap on the number of years, Telles said.

Castillo recalled her business plan and loan development experience with the Chicago MEGA Center this way: "They were able to help us go to the bank from a position of strength. They went with us side-by-side as our consultants, helping us decide on the best debt structure. I would not have been in the same advantageous position without their expertise."

Castillo added that, while Monarch could have handled these and other matters in-house, she found it far more cost-effective to use the center.

Herrera recommended the following strategy to new center applicants: "When you set up your initial interview, bring as many documents as you can. This could cut down the time we'd need to get started afterward."

The documents needed for most services, he noted, are company financial statements, corporate tax returns, personal tax returns if the person is a sole proprietor, cost estimates if the business is seeking equipment financing, and documents proving the individual is an eligible minority (e.g. birth certificate) if he or she is pursuing certification.

After all the paperwork is in order, and the center has done its development work, there comes the inevitable wait for a reply. MBE certifications take from two to 10 months to be processed and delivered, depending upon the agency, Herrera explained. "The Feds (are) taking the longest," he said.

While it only takes the Chicago MEGA Center about two weeks to hammer out a loan package or business plan, Herrera noted, it can take from three weeks to three months for a lender to respond. The U.S. Small Business Administration is one of the slowest lenders to respond.

"We're not disbursing grants or loans ourselves," Telles pointed out. But the MEGA Center can help clients secure financing by "forming alliances with commercial banks and the SBA."

In fact, the new Los Angeles MEGA Center's mandate is to procure a minimum of $64 million in financing for qualified minority businesses and to serve at least 889 L.A.-area clients each year. "The object is to see as many minority businesses as possible," Telles said.

By the fall, Telles hopes the center will also have its plan room open, allowing clients to review bid specifications for construction-related projects, and government and private-sector procurements needs.

"We're not only a business development center, but an information clearinghouse," the director explained.

While the Los Angeles MEGA Center will primarily focus on boosting the competitiveness and job growth of Southern California minority-owned businesses, its official service area encompasses the entire Western U.S., including Alaska, Arizona, Hawaii, Nevada, Oregon, Washington and the rest of California. Throughout that area, the center is charged with delivering services not already provided by local minority business development centers.

The pre-existing local centers offer a narrower range of services, and more general services, whereas the MEGA Centers services are more specialized. The MEGA Centers are also funded on a much higher level, and have more highly trained staffs than the local centers.

How could one center possibly service such a far-flung area? "That's the weakest link in the chain right now," Telles conceded. "Information technology is a partial solution. We're working to put networking and video-conferencing in place. But we're not there yet."

That could mean that, at least until distant locales are electronically linked to the downtown L.A. center, L.A.-area businesses would likely have much greater access to the center's 35,000 staff hours.