Financial program targets Hispanic businesses

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Over the years, many Hispanic-owned businesses have faced discrimination from business and community leaders and rejection from financial establishments. But that assessment has been slowly changing and, with help from a national chamber of commerce and banking institution, many of these business owners can now get a needed financial boost.

The USHCC Private Equity Fund L.P., a venture-capital alliance between the U.S. Hispanic Chamber of Commerce and Bank One Corp., was established last October as a means of provide funding to small and medium-sized Hispanic-owned businesses across the country. In exchange for funding, business owners give up part of the equity in their companies.

Small businesses are defined as those that generate $5 million or less in revenue each year. Medium-sized businesses would generate $10 million or more in revenue.

Bank One Corp. kicked off the program with a $5 million cash infusion, and Verizon Communications added $10 million to the coffer. The goal, said Maria Ibanez, vice president of communications for the U.S. Hispanic Chamber of Commerce, is to raise $150 million by the end of June 2001.

“It’s hard to measure (the effect the program will have on Hispanic businesses in the Colorado Springs community) right now,” said Colorado Springs Hispanic Chamber of Commerce President Roman Tafoya. “I’m not sure what the local impact will be.”

Although recent census data has not yet been released, the 1992 federal economic census showed that there were more than 1,100 Hispanic-owned businesses in this area, generating sales totaling nearly $44 million. Tafoya estimated that the number of businesses has doubled since then, with sales probably totaling about $100 million. There are presently 1.4 million Hispanic-owned businesses across the country and 200 local Hispanic chambers of commerce to assist them.

After accepting the funding applications, the USHCC will send them to a new division that has two fund managers, each of which handles requests for different size loans. An approval committee works with the fund managers, who then notify business owners about financing details if their loans are approved.

Although Bank One assisted in forming the program, it cannot be directly involved since the funding is a form of equity lending rather than debt lending.

The program kicks into full gear April 1 and is available only to Hispanic Chamber members. After the review process, accepted applicants must open a business account with Bank One through its Alianza program. A predetermined percentage of the business’ income is paid back over time. This provides Bank One with a growing customer base, revenue, and continued business.

Companies that contribute to the venture capital funding program, such as Bank One and Verizon, procure not only their original investment but also a return on capital. That amount will vary, said Tafoya, depending on the relative success of the businesses that receive funding.

A portion of the collected capital return will be forwarded to the U.S. Chamber of Commerce, which will disburse the money to local Hispanic chambers.

Qualifications to participate in the program are the same as in a standard loan process, said Tafoya. Financial statements, history of sales and cash flow, a working business plan, qualified management, and succession of management are parameters the fund managers will look at when determining approval.

The private equity fund is a part of an affinity-awards program offered to Hispanic chamber members. The program, known as Alianza, is designed for Hispanic business owners, and grants them reward dollars when they open a checking account, take out a loan or receive a USHCC branded credit card. The local Hispanic chambers receive funding filtered down from the U.S. Hispanic Chamber. The money is used for educational programs and the program is available to all Hispanic businesses.