Passage 3
Federal efforts to aid minority businesses began in the
1960s when the Small Business Administration
began making federally guaranteed loans and govern-
ment-sponsored management and technical assistance
available to minority business enterprises. While this
program enabled many minority entrepreneurs to
form new businesses, the results were disappointing,
since managerial inexperience, unfavorable locations,
and capital shortages led to high failure rates. Even 15
years after the program was implemented1, minority
business receipts were not quite two percent of the national
economys total receipts.
Recently federal policymakers have adopted an
approach intended to accelerate development of the
minority business sector2 by moving away from directly
aiding small minority enterprises and toward supporting
larger, growth-oriented minority firms through interme-
diary companies. In this approach, large corporations
participate in the development of successful and stable
minority businesses by making use of government-
sponsored venture capital. The capital is used by a
participating company to establish a Minority Enterprise
Small Business Investment Company or MESBIC. The
MESBIC then provides capital and guidance to minority
businesses that have potential to become future suppliers
or customers of the sponsoring company.
MESBICs are the result of the belief that providing
established firms with easier access to relevant manage-
ment techniques and more job-specific experience, as
well as substantial amounts of capital, gives those firms
a greater opportunity to develop sound business founda-
tions than does simply making general management
experience and small amounts of capital available.
Further, since potential markets for the minority busi-
nesses already exist through the sponsoring companies,
the minority businesses face considerably3 less risk in
terms of location and market fluctuation4. Following
early financial and operating problems, sponsoring
corporations began to capitalize MESBICs far above
the legal minimum of $500,000 in order to generate
sufficient income and to sustain the quality of manage-
ment needed. MESBICc are now emerging as increas-
ingly important financing sources for minority enter-
prises.
Ironically, MESBIC staffs, which usually consist of
Hispanic and Black professionals, tend to approach
investments in minority firms more pragmatically than
do many MESBIC directors, who are usually senior
managers from sponsoring corporations. The latter
often still think mainly in terms of the social responsi-
bility approach and thus seem to prefer deals that are
riskier and less attractive than normal investment criteria
would warrant. Such differences in viewpoint have pro-
duced uneasiness among many minority staff members,
who feel that minority entrepreneurs and businesses
should be judged by established business considerations.
These staff members believe their point of view is closer
to the original philosophy of MESBICs and they are
concerned that, unless a more prudent5 course is fol-
lowed, MESBIC directors may revert6 to policies likely
to re-create the disappointing results of the original SBA
approach.
13. Which of the following best states the central idea of the passage?
The use of MESBICs for aiding minority entrepreneurs seems to have greater potential for success than does the original SBA approach.
There is a crucial difference in point of view between the staff and directors of some MESBICs.
After initial problems with management and marketing7, minority businesses have begun to expand at a steady rate.
Minority entrepreneurs wishing to form new businesses now have several equally successful federal programs on which to rely.（A）
For the first time since 1960, large corporations are making significant contributions to the development of minority businesses.
14. According to the passage, the MESBIC approach differs from the SBA approach in that MESBICs
seek federal contracts to provide marketsfor minority businesses
encourage minority businesses to provide markets for other minority businesses
attempt to maintain a specified8 rate of growth in the minority business sector
rely on the participation9 of large corporations to finance minority businesses（D）
select minority businesses on the basis of their location
15. Which of the following does the author cite to support the conclusion that the results of the SBA program were disappointing?
The small number of new minority enterprises formed as a result of the program
The small number of minority enterprises that took advantage of the management and technical assistance offiered under the program
The small percentage of the nations business receipts earned by minority enterprises following the programs, implementation10.
The small percentage of recipient11 minority enterprises that were able to repay federally guaranteed loans made under the program（C）
The small number of minority enterprises that chose to participate in the program
16. Which of the following statements about the SBA program can be inferred from the passage?
The maximum term for loans made to recipient businesses was 15 years.
Business loans were considered to be more useful to recipient businesses than was management and technical assistance.
The anticipated failure rate for recipient businesses was significantly lower than the rate that actually resulted.
Recipient businesses were encouraged to relocate to areas more favorable for business development.（C）
The capitalization needs of recipient businesses were assessed and then provided for adequately.
17. The author refers to the financial and operating problems encountered by MESBICs primarily in order to
broaden the scope of the discussion to include the legal considerations of funding MESBICS through sponsoring companies
call attention to the fact that MESBICs must receive adequate funding in order to function effectively
show that sponsoring companies were willing to invest only $500,000 of government-sponsored venture capital in the original MESBICs
compare SBA and MESBIC limits on minimum funding（B）
refute suggestions that MESBICs have been only marginally successful
18. The authors primary objective in the passage is to
disprove the view that federal efforts to aid minority businesses have been ineffective
explain how federal efforts to aid minority businesses have changed since the 1960s
establish a direct link between the federal efforts to aid minority businesses made before the 1960s and those made in the 1980s
analyze the basis for the belief that job-specific experience is more useful to minority businesses than is general management experience（B）
argue that the social responsibility approach to aiding minority businesses is superior to any other approach
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