Small Business Success
White Paper Series
Access to Capital
Meets Business Opportunity
Supercharging California's Small Business
$12B Procurement Marketplace
Nor-Cal FDC – Marketplace Solutions and Platform Division © All Rights Reserved
Small Business Success - White Paper Series
1
Executive Summary
The recent launch of California's Small Business Procurement Marketplace (Cal
eProcure) – marks a new chapter in innovative, technology driven platforms now
a essi le to Califor ia’s 3.6M s all usi esses. The Cal ePro ure Marketpla e is
designed to enable more small businesses to find and win business opportunities
for providing products, goods and services to the State of California. With over
150 Departments and Agencies – Califor ia’s pro ure e t spe d ra ges et ee
$8B and $12B each year. A key component of the new Cal eProcure Marketplace
is to provide tools and resources to small businesses that win new business
opportunities. Providing a wide range of capital resources will ensure small
businesses have ready and available capital resources for working capital, project
mobilization, cash flow management and other operational needs.
From 2008 thru 2012, California maintained slow positive growth that lagged
ehi d the atio al a erage. Ho e er, o er the past se eral ears Califor ia’s
economy continues to grow at a rate surpassing the rest of the Country. The
state’s Gross “tate Produ t G“P ra ks it as the 8th largest e o o in the world.
I large part, this gro th as due to rapid e pa sio of Califor ia’s s all usi ess
seg e t, hi h o a ou ts for o er half of the state’s e plo ers. The largest
segment of this growth, and indeed of the small business market overall, is
comprised of firms with less than 20 employees.
Nor-Cal FDC – Marketplace Solutions and Platform Division © All Rights Reserved
Small Business Success - White Paper Series
2
In FY2015, over $2 billion was awarded to these small businesses through
Califor ia’s Pro ure e t Marketpla e. Califor ia gra ts prefere tial treat e t to
Small Businesses (SBEs) and Disabled Veteran-owned Businesses (DVBEs),
affording ample opportunities for companies to capitalize on this massive
marketplace for small business deal flow.
However, access to capital remains a significant obstacle in growing the pool of
small businesses offering their products, goods and services via the Cal eProcure
Marketplace. The need for new or expanded avenues of capitalization is urgent, if
California is to continue its economic recovery and growth in a sustainable
fashion.
As part of the Go er or’s Offi e of Business and Economic Development (GObiz)
and the California I-Ba k’s I-Bank) network of Financial Development
Corporations (FDCs); Nor-Cal FDC is meeting this challenge by aligning access to
capital with business opportunity. As part of the Small Business Success Series,
this White Paper explores how Nor-Cal – through its Engage Platform - is
partnering with the California Department of General Services (DGS), California
Department of Transportation (Caltrans) and other state-wide stakeholders. This
innovative approach and collaboration utilizes a range of tools and resources
designed to assist businesses that win or are awarded state contracts to acquire
the capital they need.
Nor-Cal FDC – Marketplace Solutions and Platform Division © All Rights Reserved
Small Business Success - White Paper Series
3
Introduction
California Small Business Statistical Analysis
Opportunities for small businesses abound in California. Although recent reports
indicate the gro th of Califor ia’s e o o
easured o l 2.0 percent,
compared to the national average of 2.2 percent, growth was in fact positive.
Over the past several years this trend has continued a d Califor ia’s gro th has
expanded to 2.8 percent1, as unemployment continued to decline. Moreover,
Califor ia’s gross state produ t, o para le to atio al GDP, ra ks 8th i the
world at $2.312 trillion2 surpassing both Italy and the Russian Federation.
Califor ia’s gross state produ t a ou ts for 12% of US GDP, exceeding the next
largest state economy, Texas, by approximately $700 billion. Half, or 6.5 million,
of the state’s pri ate orkfor e as ithi the s all usi ess sector in 2012.
Small firms make up 99.2 percent of all employers in the state (Source: SUSB). Small
businesses with fewer than 20 employees made up the single largest segment of
the small business sector, with 17%, as shown on the accompanying graph
(Source: SBA).
The state’s pri ate-sector employment growth increased by 2.6 percent over the
12-month period ending in October 2014; this was above the national average
growth rate of 2.3 percent. (Source: BLS)
1
2
"Widespread But Slower Growth in 2013". BEA, U.S. Department of Labor. June 2014
“We’re Number 8”, LA Times, Samantha Masunaga, July 2015.
Nor-Cal FDC – Marketplace Solutions and Platform Division © All Rights Reserved
Small Business Success - White Paper Series
4
Figure 1: California Employment
by Size of Firm
19%
50%
17%
14%
500 + employees
1-19 employees
20-99 employees
100-499 employees
Nor-Cal FDC – Marketplace Solutions and Platform Division © All Rights Reserved
Small Business Success - White Paper Series
5
The 12 Billion Dollar Machine:
California Small Business Procurement Marketplace
The Big 3 private sector employers in California are Professional Services,
Healthcare, and Real Estate (Source: SBA.gov). According to the US Census Bureau,
85% of new jobs have been in small businesses with 20 or fewer employees.
California has made a concerted effort to reach small
businesses by providing small businesses (particularly
those owned by Veterans) with preference in bidding
for pro ure e t o tra ts. But this effort as ’t just to
support Veterans and Small Business Owners – recent
studies have shown that engaging with Small
Businesses has in effect added over $4.2B to the State
of California.
The total net new economic
activity generated by the
State through contracting
with SBEs … is
approximately $4.243 billion
… The total net new jobs
created due to the State’s
contracting with SBEs and
DVBEs … [averages]
,
.
Califor ia’s e o o
a ot gro a d prosper u less s all businesses are
growing and prospering. Since small businesses generate much of the “tate’s
economic activity - purchasing and producing goods and services - almost all of
this activity is local and regional. Small businesses generate a large percentage of
the revenue received by State and local governments. They collect sales tax
revenue, pay taxes on their profits, and, even more importantly, create taxable
personal income for their owners and employees. Small businesses also pay
property taxes, permits, licenses, fees, assessments, etc. Unlike large businesses
whose stockholders and owners are spread out potentially all over the world, the
vast majority of small businesses are located in California, and their owners and
employees are California residents who pay State income taxes.
Nor-Cal FDC – Marketplace Solutions and Platform Division © All Rights Reserved
Small Business Success - White Paper Series
6
Based on economic data, small business growth, economic output, and job
development California will continue to place a high
priority on providing access to state procurement
contracts within the small business sector. With over
500,000 contracts awarded each year along with the
requirement to allocate 25% of annual procurement
spend on small businesses and another 3% on
Disabled Veteran Businesses – California continues
its commitment to ensuring a healthy and vibrant
small business community.
As a result - although competition will increase as
more small businesses are created - procurement
opportunities remains an effective and valuable
resource for those businesses that provide products, goods and services typically
required and purchased by the state.
The Small Business Procurement Act, administered through DGS, was implemented
more than 30 years ago to establish a small business preference within the state's
procurement process that would increase the number of contracts between the
state and small businesses. A DVBE component was added in 1989. Today,
approximately 90% of DVBEs have dual certification as small businesses.
Nor-Cal FDC – MSP Division © All Rights Reserved
Small Business White Paper Series
7
Under the streamlined procurement process which allows a contract to be awarded
directly to a certified small business at a contract price established by checking the
proposed rate with two other small businesses. Contracts offered under the
streamlined procurement process are currently limited to contracts between
$5,000 and $100,000.
With over $2.5 billion of state contracts that were awarded to small businesses
over 17,000 contracts were awarded through the streamlined procurement
process.
● In order to assist state entities reach the small business participation goals, contracting
entities are provided a number of specific tools, including a streamlined procurement
method, bid preferences, and lead small business procurement contacts at every agency.
● Access to working capital is one of the key requirements when pursuing procurement and
contract opportunities.
● Coordination with Small Business Advocates within each agency and the network of small
business liaisons are also critical resources.
● In the fiscal year 2012-13, the state awarded $9 billion in contract, with over $2 billion
dollars awarded to small businesses.
Nor-Cal FDC – MSP Division © All Rights Reserved
Small Business White Paper Series
8
A recent study published by the Assembly Committee on Jobs, Economic
Development, and the Economy – indicated that two key requirements for
businesses seeking procurement and contract opportunities with the State of
California is the easy and accessible use of technology
When attempting to win
as well as access to capital.
new business
These two components are critical in helping small
opportunities with the
businesses find, evaluate and participate in
State – small businesses
require easy and
procurement and contract based business
accessible use of
opportunities. Once acquired - gaining access to the
technology along with
capital needed to deliver the product or service is a
access to capital.
critical success factor.
Combining Access to Capital with Business Opportunity has proven to be an
effective strategy for the growth and development of small businesses. Nor-Cal has
utilized this same approach in a number of very successful programs including the
Fox Theatre Renovation in partnership with the County of Alameda and the City of
Oakland.
The most recent implementation of this model has been in partnership with the
City and County of San Francisco and master developer Lennar Corporation on the
$11B Candlestick Point Redevelopment Project.
Nor-Cal FDC – MSP Division © All Rights Reserved
Small Business White Paper Series
9
In its partnership with the San Francisco Foundation (SFF) – Nor-Cal provides up to
$150K in small business loans (with up to three $50K disbursements) for each small
business that is awarded a contract on the Candlestick Point project. In a recent
report by the Brookings Institute - The Candlestick Point project was recognized as
innovative on a number of fronts: social policy, technology, urban design, real
estate and finance. It stated in a recent report - By
All of San Francisco should be
transforming the Candlestick Point development
proud that the Hunters Point
into an urban research-and-development campus
Shipyard – Candlestick Point
project is being recognized as a
that anchors an entirely new community, the project
national model for new
creates a virtuous cycle of innovation that forms the
development, -- Mayor Ed Lee
basis for lasting economic growth. Yet equally
transformative is the proposed funding and finance package .
Building on the success of aligning Access to Capital with Business Opportunity; NorCal is partnering with a wide array of innovative lending partners and utilizing
technology to identify and match business opportunities with small businesses. The
Nor-Cal Engage Platform uses intelligent algorithms that match business
opportunities with small businesses that possess the required skills, core
competencies and operational capacity to successfully complete the contract. Once
these businesses acquire new contracts Nor-Cal and its Lending Partners are
available to provide capital solutions that best meet their needs.
Nor-Cal FDC – MSP Division © All Rights Reserved
Small Business White Paper Series
10
Supercharging the Marketplace
Access to Capital meets Business Opportunity
As part of the Go er or’s Offi e of Busi ess a d E o o i De elop e t GO iz
and the I-Ba k’s Califor ia’s Infrastructure Bank) network of Financial
Development Corporations (FDCs) Nor-Cal works closely with DGS as well as
Caltrans (California Department of Transportation) in providing businesses that win
procurement and contract opportunities with capital.
By ensuring that businesses that acquire contracts with the state have ready and
available resources for capital; small business owners can focus on the successful
and timely delivery of products, goods and services to California State Agencies and
Depart e ts. As part of the “tate of Califor ia’s pri ar delivery vehicle of capital
to small business – Nor-Cal continues to develop creative and innovative strategies
to support Califor ia’s 3.6M s all usi ess o
u it .
Super hargi g Califor ia’s Pro ure e t Marketplace by aligning access to capital
with business opportunity ensures that Califor ia’s s all usi ess o
u it
remains active, vibrant and growing.
Nor-Cal FDC – MSP Division © All Rights Reserved
Small Business White Paper Series
11