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Getting government contracts

New state program gives small businesses a leg up on government contracts

Martin Desmarais
Getting government contracts
Larry Andrews is CEO of Massachusetts Growth Capital Corporation. (Photo: Photo courtesy of Massachusetts Growth Capital Corporation)

Large public contracts hold a potential lifeline for minority-, women- and veteran-owned small businesses in Massachusetts, thanks to state and federal preferences for historically disadvantaged businesses. But while the opportunities look great on paper, it isn’t always easy for small businesses to compete for these contracts.

A $5 million program launched recently by Massachusetts Growth Capital Corporation aims to make it easier.

With the Diversity Goal Support Program, Mass Growth Capital is addressing the reality that it takes money to make money. While this may be an old business cliché, it holds true when small businesses are vying for lucrative state and federal contracts.

Big bucks are at stake. As Massachusetts continues in a construction boom, many projects fall under state or federal regulations, meaning the amount of work that must go to small businesses is often over 20 percent, with varying percentages also mandated to go to minority-, women- and veteran-owned businesses.

These large projects do not begin and end with construction. They can include service contracts covering IT support, offices supplies and cleaning.

The firms leading the projects need small businesses to get it done. However, as noted frequently by the Banner and other media outlets, many small businesses — and minority- and women-owned businesses in particular — lack the capacity to successfully compete for and handle these contracts. Not only do the small businesses suffer, but contract leaders often find themselves scrambling to hit their required small business and diversity numbers.

Mass Growth Capital is offering to lend small businesses money up front to make these deals happen — up to 75 percent of the total amount of a contract, with financing available from $25,000 to $500,000.

Author: Photo courtesy of Massachusetts Growth Capital CorporationRob Williams is a loan officer with Massachusetts Growth Capital Corporation.

The small businesses have to pay the money back with interest, but Mass Growth Capital makes it easier by collecting the payout from the contract and paying the money out to the business doing the work. This keeps the cash flow going so the small business can operate while it does the work. Banks, on the other hand, typically want the loan to be paid off first, so small businesses are not able to use the cash for operations.

Having the money up front allows small businesses to get the work going before any contract payment is dished out.

Larry Andrews, chief executive officer of Mass Growth Capital, says the Diversity Goal Support Program will “give a jump start to corporations that want to grow and want to be able to compete for desirable contracts, because it gives them the capital to do so.”

In addition to financing, Mass Growth Capital will provide small businesses with technical assistance on finance or operational issues to help them compete for and fulfill contracts.

Projects that qualify for the Diversity Goal Support Program include municipal, state, federal, hospital or university projects, or projects such as casinos that are supervised by an agency or a governing body.

Businesses are already in the application process for the new program, and at least one has already been approved — Dorchester-based Design Construction & Consulting Services Inc., led by Cesar DaSilva.

Rob Williams, a Mass Growth Capital loan officer working directly with program applicants, said the small business owners he has spoken with so far see a great value not only in the financing, but also the support that gives them a shot at winning the kind of commercial contracts that can make or break their companies.

Established by Massachusetts legislation in 2010, Mass Growth Capital is charged with creating and preserving jobs at small businesses and promoting economic development in underserved cities and low- and moderate-income communities. It has assisted more than 260 companies, with more than 9,000 employees, to secure some $83 million in financing.

Andrews said the overall hope is that the small businesses that take part will continue to grow stronger so they can function successfully and handle large contracts without Mass Growth Capital’s support.

“The idea is that these companies do not stay with Mass Growth Capital again and again,” Andrews said. “The aim is to build the capacity of these businesses so they have the business discipline so they can get capital financing from another source.”

If the Diversity Goal Support Program proves successful, more funding may be added to the initial $5 million, Andrews noted.

“My thought is there will be more opportunity to increase it,” he said. “This could really level the playing field for many small businesses.”