One, its intended eligibility will be maintained as I suggested with the substitution of "and" for "or" in the definition.

Two, a monitoring committee be established in the Senate to insure the carrying out of program objectives and methodology. Three, that training be provided SBA staff to insure their understanding of business and contracts.

Four, that the present Business Development Organization network be the program used to assist in carrying out the objectives and it be coordinated with the Office of Minority Business Enterprise.

Five, that minority professional firms be used, where possible, to carry out its objectives.

Six, that the Director be housed in SBA and have all the descriptive powers and duties mentioned along with monitoring implementation powers over 8(a) and be the independent representative of the President and not the Administrator of SBA.

Seven, the bill specifically mentions within its scope that it not only includes the SBA 8(a) but all SBA programs inclusive of minorities and therefore, creates a specific minority program for the support and development of minority enterprise.

Eight, as for the Office of Management and Budget, you know more about that than I.

Mr. Chairman, conceptionally this bill is heaven-sent and I wholeheartedly support its intent and powers. However, if it is left for interpretation and not specific enough, I believe it will not be productive enough to begin providing capital which, in turn, will ease and remove the blights in our cities caused by the absence of wealth.

Thank you for the opportunity to speak before you today.

Senator NUNN. Thank you, Mr. Hudson. I want to apologize to Mr. McCann and say that you will have an opportunity to testify next Monday, if you will. I will be reading your testimony. I know it is bad enough to have you sit here and wait such a long time. I apologize to you, but we have run into time problems this morning. Next, we will hear from Mr. Harvey Johnson.

Mr. JOHNSON. Mr. Chairman, I am pleased to have the opportunity to testify before this committee concerning the plight of minority and small business.

The strength of my knowledge is based on at least 5 years of banking experience and 7 years of direct involvement in the problems of minority economic development.

The Government has all kinds of statistics of negative substance on the failure rate of minority business and what meager contributions they have made. The same kind response is usually made by State and local governments.

Further, on examination of policy in Government-Federal, State, and local-you will find platforms, goals, and quotas about the efforts it wishes to make toward minority participation.

I beg to submit, that an examination of all levels of Government, you would not find any programs that would really guarantee full participation on the part of the minority business sector. If there were, then legislation would be available to prove the same. In fact, what you find are executive orders, platforms, goals, and quotas.

The problem is then, unless the Government legislates a program to guarantee results, all the rhetoric of support actually means nothing, the idea or philosophy about minority economic development gets to be a football kicked from one level of Government to the other.

There are numerous statistics by Dun & Bradstreet, Accounting Corp. of America, Robert Morris Associates, concerning the failure of monority business.

These research groups also have figures on growth sales, market trend, and so forth. The majority reports show negative trends about minority business.

You may find relief spasmodically, but the basic fact behind this is that you have to stay in business to grow, gain business acumen, develop plans, develop financial contact, et cetera.

Because of technology, competition, and innovation, small businesses do not have the wherewithal to withstand the pressure. So we lose the opportunity to gain the management skills.

My experience as a director of a local business development office-if it were not for our office, I wonder where would some of the business businesses be? To have been there, prepare a loan package, to interpret financial statements, investigate markets, run interference on contract procurement, have all met with success beyond imagination. But the problem here-we as an organization are hanging on by a wing and a prayer.

As an organization, we will never gain the necessary clout needed for the kind of impact the organization should make.

I contend that there should be legislative authority through some branch of Government to offer management services and technical assistance. This service can be through expanding departments or contracted through existing vehicles.

The Small Business Administration has been the source of our survival for financing. But the majority of the time they do not have any money. The EOL allocation is just about enough for one loan per district. They do what they can through guaranteed loans, but you know what the process is.

Equity requirements make loans almost prohibitive among banks. I believe that because of the M. & T.A. we have offered has caused the banks to do as much as they have.

In terms of financing, we find equity requirements and the terms of the loan agreement usually make it impossible to accept a loan. Because of the economic conditions a couple of years ago, banks are ultra conservative on new ventures and equity injection requirements are unreasonable. But we have to contend with it. Startup costs on today's market are so high because you must start off running if you intend to stay in the running. Consideration of establishment of some sort of equity fund should be made available to deal with this aspect.

Senator NUNN. Gentlemen, I am going to have to leave. You go ahead and complete your testimony. I am going to have to run to get to that vote. We will continue to work with you and continue to get your input.

Mr. JOHNSON. Concerning 8(a) contracts or procurements, I believe that such a program should be results oriented. Throughout

the Federal Government, agencies should be required to set aside x number of dollars for such programs.

It is now an established fact that to get guaranteed results, it must be enacted the same as the LPW programs. We have seen more participation under this program than any other program we have been involved with.

It is conceivable that the delivery approaches of these services mentioned in the bill could go under the 8(a) program, thereby creating additional majority business enterprises. Here again the seriousness of the intent will determine the interest of the Government.

Another point that I think is important for consideration is that as we provide MS/TA, there are other considerations that must be taken into account. These include but are not limited to, taxation, investment credits, subsidy on utilities and basic phone cost, inventory taxes, interest, et cetera.

This should be considered because these costs can choke a business at the outset. Such provisions should be done on the Federal level because it is unreal to believe the States would make such provisions.

In summation, small business is in a state of declining economic strength and should be the concern of every American, especially the national leaders of both majority business and all levels of Government.

The minority business person is not ready to give up despite the unfavorable Government climate.

I contend, Mr. Chairman, that the lack of managerial skills may not be as limited as opportunities. By this I mean opportunities bring a certain degree of resources with them. It is reasonable to say that as a small businessman, if you do not have the bare minimum to take advantage of an opportunity, then you really never had an opportunity.

With majority business and big corporations, opportunities are programed and it takes only a matter of time for the results to materialize.

As we further examine this Small Business and Capital Ownership Act, as it relates to minorities, every effort should be made for its passage.

We need the conditions that will enable us to acquire sufficient information about new and developing opportunities in order to have time to design a plan and development approach before affluent entrepreneurs corner the market.

By the time we are exposed to new opportunities it is too late. The market is already taken.

So I contend, unless we as minorities are included in the process, then we develop the feeling that our Goverment says "here is this and this is the amount we want you to have."

The struggle of minorities for self-determination and self-reliance has produced many positive results. There is a clearer understanding of the causes of impoverishment and powerlessness, a clearer undertanding of the need for stronger leadership in local communities, increased technical and management expertise, greater recognition of the need for cooperative activity and a more sophisticated use of political power.

These areas will be strengthened as we move toward guaranteeing the process of participation in our capitalistc economy.

Thank you.

Mr. YUSPEH. Thank all of you, very much.

This hearing is adjourned, by order of Senator Nunn, to reconvene in the same room on Monday, March 20, 1978, at 10 a.m. [Whereupon, at 12:50 p.m., the subcommittee adjourned, to reconvene at 10 a.m., Monday, March 20, 1978.]