SURVEY SAYS LACK OF BACKING STALLS MINORITY FIRMS.

Byline: Staff Writer

Unless minority-owned businesses get the investment they need to develop or to expand, the tremendous economic growth enjoyed by the United States in recent years is at risk, a survey released Monday predicts.

The report by the Santa Monica-based Milken Institute found that minority-owned businesses suffer from a lack of funding on all levels.

Even though these businesses are the fastest-growing in the country in numbers and revenue, minorities account for 11.6 percent of the nation's businesses and generate only 6 percent of the economy's total sales.

Minority-owned firms grew by 17 percent from 1987 to 1997, six times the growth rate of all U.S. companies, yet they received only 2 percent of all private equity investment, the report said.

``The sustained economic growth experienced by the overall economy masks the chronic shortage of capital faced by minority businesses and the failure to invest in training minority workers,'' said Courtland Cox, director of the U.S. Minority Business Development Agency, who commissioned the report.

Cox warned that without more money flowing into minority businesses and upgrading the minority work force, ``the gap between the haves and the have-nots will continue to grow.''

To help close the gap, the survey says it's critical that minority businesses gain access to the equity markets.

The average venture-backed company employs nearly 100 workers within five years and creates almost twice as many jobs as their nonventure-backed peers. Venture-backed firms experience at least a 40 percent job growth rate each year as compared with a 2.5 percent decline in jobs for Fortune 500 companies.

Without proper financing, many of ``these companies are doing it with a personal line of credit or with a second mortgage on their homes,'' said Martha Diaz Aszkenazy, president of the San Fernando-based Pueblo Contracting Services and chairwoman of the Northeast San Fernando Valley Chamber of Commerce.

At 34 percent, California has the nation's greatest number of minority- owned companies. The only other states with more than 10 percent are Florida, 10.2 percent, and Texas, with 10.15 percent.

The report also emphasized that this lack of access to capital is not just a minority problem.

With the large baby boomer population set to begin retiring, investors must find new growth opportunities to pay for this group's elderly years, and that must come, in part, from the minority business community.

``Absent broad-based institutional investor participation in minority and immigrant business communities, continued growth in the American economy is impossible,'' wrote Glenn Yago, co-author of the report.