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Why is the Business Consortium Fund attempting to put Latino enterprises out of business?

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This article is a NiCLP Guest Commentary

Private companies donate to the Business Consortium Fund to finance minority entrepreneurs seeking to grow their business. Merrill Lynch gave a $1 Million grant in 2007.

The Business Consortium Fund, Inc., a non-profit business development program of the National Minority Supplier Development Council, is supposedly the nation’s most comprehensive financing and business support organization dedicated exclusively to the ethnic/racial minority-owned business sector. It was created to be a “difference maker” for minority-owned businesses that need capital and business support services to grow their business but are unable to obtain financing from conventional sources on reasonable terms. The BCF’s mission is to level the playing field for small minority businesses attempting to secure contracts from major corporation by working jointly with selected banking institutions to guarantee loans to provide capital so that these small businesses may have the funds to meet their contractual obligations, hire new employees and grow their businesses.

The BCF funding to accomplish this important mission is secured from a national network of strategic alliance partners that include the NMSDC and its 37 affiliated Regional Council’s major corporate members, including Microsoft, General Motors, Coca Cola, Pepsico, IBM, commercial lenders and financial institutions, and business support organizations. These funds are made to the BCF as grants and contributions with non-recourse or guarantee on the Principal or Interest to the Corporations. In other words, the BCF does not have to pay one penny back to these corporations. The corporations benefit from the tax deductions they are allowed for making such contributions.

Unfortunately, with the economic downturn and many corporations pulling back on new business opportunities, many of these minority owned businesses have been forced to cut back dramatically on production and the number of employees in an attempt to survive. This has also caused these small businesses to default on their loans to the BCF and partner banks.

In normal business situations over the past years, many major banks have settled loans with businesses for pennies on the dollar in order to keep companies in business and keep employees on the job.

So then why, if major banks are finding ways to settle loans to corporate partners, is the BCF playing hardball with minority companies that the BCF was created to assist and keep in business? This especially troubling because these funds that were lent to these small businesses were derived from corporate investors committed to fund non-for-profits such as the BCF to meet their mission of keeping small businesses in business and the the fact that the BCF has no responsibility to repay this money back.

The BCF today is headed by Serafin Mariel, a long time banker who was a driving force in founding New York National Bank in the Bronx. During his time at New York National Bank, Mariel along with funds from the BCF, assisted many companies and individuals to secure funding to invigorate the Bronx business community. Once New York National was forced to merge with a Westchester based bank, Hudson Valley Bank, (HVB) which has never truly understood the important role that New York National Bank played within it’s mostly Latino and African American minority client base, the bank’s mission changed dramatically. Even Mariel was discarded by HVB in his charge as President of New York National Bank and instead served as a consultant for major corporations and the NY Yankees Foundation in their diversity needs.

Now ,in a twist of fate, Serafin Mariel has been selected to head up the BCF and have the opportunity to work side by side with Hudson Valley Bank and other banking institutions to attempt to settle these outstanding loans from many of the companies that he helped to create during his time at New York National Bank.

But, unfortunately, Mariel seems to have forgotten the original mission of the BCF. Instead of finding ways to settle outstanding loans at reasonable rates, as other financial institutions have done, he has in turn taken a position that has made it impossible for these small businesses to meet. And the new BCF mission now has now become, “If you are unable to meet our terms, then go Bankrupt!”

Remembering that many of these loans were purchased by HVB at pennies on the dollar and many have already been written off, then why is the BCF taking such a stern position? This, at a time when the BCF is out in the marketplace looking for those same major corporations to continue funding them, but, we ask, to do what?? Put minority businesses out of business and into bankruptcy? Are they looking for new grants to cover their legal fees to push companies out of business?

Why should Microsoft, General Motors, Coca Cola, Pepsico, IBM and other NMSDC corporate members and other major financial institutions continue to support the BCF, if they in turn have forgotten what their original mission was . . . to find ways to keep small minority owned businesses in business.

Many of these small companies have offered the BCF and HVB settlement offers in an attempt to resolve their financial responsibilities, at similar rates that major banking institutions are currently settling outstanding debts with companies, consumers and even credit card debts, but the BCF with HVB and other banking partners seem to have made a decision that it is either their way or bankruptcy for these minority companies.

Why is the Business Consortium Fund attempting to put small minority businesses into bankruptcy?

by Hector Figueroa Vicenty

Hector Figueroa Vicenty is an Attorney at Law specializing in corporate bankruptcy. He can be reached at hector@elbufetedelpueblo.com.

Opinions expressed in this article are solely that of the author. The article is not intended to represent The Venture editorial policy and do not necessarily reflect the views of our staff, board of directors or supporters.

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