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Last Update: Tuesday September 25, 2018

Key Idea: Find Cash On Capitol Hill

Albert Lee qualified for a loan to expand his dry cleaning business.  Homepage

Key Question:

A: 

Look for a "special" type of bank like a Small Business Investment Corporation.  Medallion formed a Specialized Small Business Investment Corporation (SSBIC) to increase the access to capital for its minority borrowers.

Q:  What's an SSBIC and how do they work?

A: In 1958, Congress created the Small Business Investment Corporation (SBIC) program because of the lack of venture capital available to small businesses. The U.S. Small Business Administration (SBA) was charged with the responsibility of overseeing the program. Under the program, profit-motivated companies make application to the SBA to be a regular small business investment corporation (SBIC) or a specialized SBIC (SSBIC), also known as 301(d) SBICs. Specialized SBICs invest in small businesses owned by entrepreneurs who are socially or economically disadvantaged, mainly members of minority groups. Not any lender can form an SBIC or an SSBIC.

The SBA has a rigorous pre-application screening process and, once approved for application, a $10,000 application fee to cover the costs of an extensive evaluation of the applicant.

Here's an excerpt from the U.S. Small Business Administration's website, providing a program overview: "Small business investment companies (SBICs) exist to supply equity capital, long-term loans and management assistance to qualifying small businesses. The privately owned and operated SBICs use their own capital and funds borrowed from the U.S. Small Business Administration (SBA) to provide financing to small businesses in the form of equity securities and long-term loans. SBICs are profit seeking organizations that select small businesses to be financed within rules and regulations set by SBA.

"Specialized SBICs (SSBIC) are a particular type of SBIC that provide assistance solely to small businesses owned by socially or economically disadvantaged persons. SBICs invest in a broad range of industries. Some SBICs seek out small businesses with new products or services because of the strong growth potential of such firms. Some SBICs specialize in the field in which their management has special competency. Most SBICs, however, consider a wide variety of investment opportunities. Only firms defined by SBA as small are eligible for SBIC financing.

"The SBA defines a company as small when its net worth is $18.0 million or less, and its average net (after tax) income for the preceding two years does not exceed $6.0 million. For businesses in industries for which the above standards are too low, alternative size standards are available. In determining whether a business qualifies, all of the business's parents, subsidiaries and affiliates are considered. Entrepreneurs have three sources to search for active SBICs. The first is our SBIC directory – a U.S. map on the SBIC homepage at SBA.gov/inv. Just click on the state or states where your company is located. (Coming soon - more search capabilities so entrepreneurs can look for SBICs according to investment stage, geographic or industry focus).

"The second source of SBIC information is under the member listing of the National Association of Small Business Investment Companies (NASBIC) at NASBIC.org. The third source is the National Association of Investment Companies (NAIC) website at www.NAICVC.com, which dedicates financial resources to investment in an ethnically diverse marketplace. We hope you, the entrepreneur; will take advantage of this area of our website and that you visit us frequently."

Although Medallion formed its SSBIC for the purpose of lending to, not investing in, small businesses, business owners should be aware that SBICs are one of the few sources of venture (equity) capital available to the small business. Talk to your local SBA office representative now to determine what SBICs are in your area and financing businesses like yours. Even if you have no need for capital at this point, it's a good idea to establish the relationship now in case you have an opportunity later to expand your business significantly with the right financing package.

Medallion Financial is the largest SBA lender in the US to women and minority-owned companies. It has been lending money to disadvantaged business owners for over 50 years. In the taxi industry it has lent over 1 billion dollars and with zero loses.

Think about it

Could you make good use money for growth?



Clip from: Medallion Financial

New York City:  Meet Andy Murstein.   He is the grandson of the founder of a taxi business.   Andy has transformed that business to be a bank for immigrants, minorities, and women.

Andy's grandfather began as an immigrant taxi driver.  By the time Andy's dad joined the firm, they had a fleet.  They then began financing the acquisition of taxi medallions for new immigrants.  They became a Small Business Investment Company (SBIC) and now, after an IPO and subsequent rounds, Andy is buying up finance companies.  Within just three generations, this family business will have become a billion dollar business!

Medallion Financial has become a large SBIC quickly because they were already  making loans to immigrants and minorities to buy their taxi's medallion.  Andy is doing exactly what his grandfather suggested: "Stick to your niche and you'll get rich."


National Association

You can find an SBIC near you.   Listings are within the website of the Small Business Investor Alliance.

Medallion Financial Corp.

Andy Murstein, CEO

437 Madison Avenue
New York, NY 10022
212-328-2100

Visit our web site: http://medallionfinancial.com/

Office: 212-328-2100

Business Classification:
Financial Services

Year Founded: 1937

Find Cash On Capitol Hill

HATTIE: You take a taxi every morning? (Voiceover) Medallion is a special small-business investment company, which allows it to receive matching funds from the government when it makes loans to women and minorities. We went to visit Albert Lee, a typical Medallion customer. When he came to this country he drove a taxi and delivered vegetables. In 1985, he purchased a Laundromat and this dry cleaning business.

ANDY: We provide more than just the loan, we'll provide small business assistance. We'll teach you about spreadsheet forecasting, we'll introduce you to insurance companies, to lawyers, to accountants, to suppliers, to vendors. Anything we can do to help your business. That's the benefit for both of us is a win/win situation.

ALBERT LEE: I was in a really bad situation one time and I had to borrow $30,000 and he said, 'Bring me all financial statement or tell me what money you owe.' I said, 'What do you need? If you're my friend, let me borrow $30,000. That's it.' He said, 'Listen, you don't understand. Bring me all the payment you have and your problem, and I will help you.'

HATTIE: I've never seen my shirt being ironed so I can see it being ironed. I think that's great. That's like the new restaurants you can see your food being cooked. You see it is being done exactly right.

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