According to U.S. Census Bureau minority owned business is defined as ownership having 51 percent or more of the stock or equity in the business and is categorized by:
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- Gender: Male; female; or equally male/female.
- Ethnicity: Hispanic; equally Hispanic/non-Hispanic; non-Hispanic.
- Race: White; Black or African American; American Indian or Alaska Native; Asian; Native Hawaiian or Other Pacific Islander; or some other race.
- Veteran status: Veteran; equally veteran/nonveteran; nonveteran.
- Publicly held and other firms not classifiable by gender, ethnicity, race, and veteran status
While minority owned businesses have been becoming more common at a rapid pace, they are still relatively small in size. With a 39% increase in the number of businesses between 2007 and 2012 minority owned businesses made a total of 18% of employer businesses in the US in 2018. Still, only 11% of the minority owned businesses have paid employees — and only 2% of minority owned businesses create a gross income higher than $1M.
The positive thing is that investors are also starting to see that minority owned businesses are becoming the majority of the workforce.
The disparity in the numbers can be explained through systemic issues to the most part. Minority owned businesses face problems with inequities at the market, lack of access to networks — and accessing capital. Black and Hispanic owned businesses struggle securing capital, especially through banks. The situation is further exaggerated by the current Covid- 19 pandemic – Black and Hispanic owned businesses are at a greater risk due to the underlying issues and economic vulnerability.
The governmental agencies, SBA and MDBA, are a great place to start when you are not sure what you or your business needs: they offer resources and alternatives as well as mentorship to get you started – or to keep you going. Many of the NGOs also offer resources and advice to some extent, sometimes in a specific field, such as technology. Get the most out of whatever funding option you choose by engaging with the organization and their community – it can sometimes help you as much as the capital. If the state funded loans and grants do not seem to suit your business, you can look for private ones. Many of the private grants might be behind different pitch competitions, but the purpose doesn’t really change. Besides the traditional sources, you can also look for venture capital firms or angel investors
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- sometimes the two work together. Crowd sourcing is another alternative that is gaining more interest, whether through social media or platforms such as Kiva listed below.
We have listed options from loans to grants to private equity firms to help you find the funding you are looking for to start or expand your business. Some of the options are general for small businesses, and some have a clear mission of trying to bridge the gap by specifically offering funding for minority business owners.
Loans
State Funded
Small Business Administration (SBA)
SBA offers loans supporting mission oriented small businesses who are in a disadvantaged position in the market. They offer both 7(a) loans up to $250,000 and a 8(a) Business Development Program, which, while not being a loan, is a government’s commitment to award a percentage of all contracting dollars to small businesses in a disadvantaged position. While the application process is a long one, the loan has good rates and a long repayment rate.
Minority Business Development Agency (MDBA)
The MBDA offers both state funded grants and loans through their Minority Business centers across the country. Besides access to funding, MBDA also offers consulting and financial assistance, such as helping with loan documentation. They provide resources and help accessing the market as well as finance management.
Private Loans
Accion International
The Accion Opportunity Fund offers small business owners loans from $5000 up to
$1,000,00 with interest rates starting from 5.99%. They work as a nonprofit with a goal to support small businesses in the US and provide programs and coaching, as well as support networks. Now called “small business loan” used to be directed to minority business owners, and they still focus on supporting business owners from a disadvantaged background. The only cons for Accion are expensive rates and possible additional fees.
Kiva
Kiva is the crowd sourced lending platform, offering loans from as small an amount as $25 upwards. It provides an opportunity for different situations of need, with a possibility for a 0% interest loan. Kiva is somewhat based on your ability to engage the community – whether the investors are individuals or entities. While crowd-sourced, it is still a loan and needs to be paid back.
Dream Spring
Dream Spring provides a wide variety of business loans ranging from the SBA PPP loan to Commercial Real Estate loans – up to $2,000,000. Dream Spring also offers a loan for reopening after the Covid-19 pandemic. Praised for their values and inclusiveness, Dream Spring provides loans for both start-ups and established businesses
Grants
Grants.gov
Grants.gov is a comprehensive database of the grants from over 20 different agencies. They offer a plethora of different grants with different focuses, so there is surely something that fits your individual situation.
National Black MBA Association Scale-Up Pitch Challenge
The NBMBAA Scale-Up Pitch Challenge provides an opportunity to win a $50,000 award for the first place, $10,000 for the second, $7,500 for the third and a $1,000 people’s choice award. The focus is on start-ups that have the potential to grow through their innovative ideas. The 2021 application period is yet to open.
National Association for the Self-Employed (NASE)
NASE provides growth grants up to $4,000 for its members (membership costs $120/year). While not directly focused on Black or minority owned businesses, it gives an opportunity for anyone who can motivate the use of the grant and its impact on growth. NASE provides a variety of different resources, and the membership benefits vary from business law to car rental discounts.
First Nations Development Institute Grant
An arts and culture focused initiative, the First Nations Development Institute offers grants for Native American projects in the majority of the states. They have no current applications open, but offer a knowledge centre and a community for support.
FedEx Opportunity Knocks Small Business Grant Contest
Probably the best known corporate grant, FedEx awards 10 businesses with a total of
$100,000. The applying businesses are judged by both a panel of experts and a public voting through social media. The 2021 awards have been given already, but with a unique opportunity for the future, this one is definitely worth staying up to date on.
Other Alternatives
Hello Alice
Hello Alice is a woman and minority owned business centre, providing a variety of different tools for entrepreneurs. They do offer grants, but have also compiled a database of active funding opportunities and resources for minority businesses.
Humble Ventures
Humble Ventures is a tech start-up focused private equity firm. They are specifically focused on entrepreneurs from diverse backgrounds and want to promote an inclusive culture and “change the status quo”.
Coalition To Back Black Businesses Fund
Coalition To Back Black Businesses reopens for applications in September 2021. They award grants of $5000 for over 300 applicants and work in coalition with American Express, ADP and U.S. Chamber of Commerce Foundation to name a few. Eligible businesses must employ between 3 and 20 people, be located in an economically vulnerable community and must have suffered financial loss due to Covid-19 pandemic.
Sephora Accelerate
Sephora Accelerate has a different focus from the previous one: the applicant’s brand must merchandise such as skincare, makeup, hair care or similar. The award is a very comprehensive package, including a 6-month program, a grant and eligibility for additional funding – and a place on the shelves of Sephora. Sephora Accelerate is specifically focused on entrepreneurs of colour.
Backstage Capital
Backstage Capital has a clear mission – to increase the amount of venture capital deals Women, POC and LGTBQ+ founders get. Belonging to an underrepresented group is the only requirement; businesses in all stages, locations and industries can apply – even if you are a solo entrepreneur. Besides financing, Backstage Capital offers mentorship, fundraising and community support.
Black Angel Tech Fund
Created by Black tech angels, the organization invests capital in Black tech start-ups and early-stage businesses – with experience from the field and a wide international network, they are a one-of-a-kind opportunity for connecting the field experts with high potential start- ups.
Gaingels
These angel investors are focusing on LGTBQ+ lead businesses, with the specific goal of investing in LGTBQ+ leadership, whether the business is a startup or in a growth stage. Besides investing in companies, Gaingels also provides scholarships for college students, tied to a mentorship program.
Are you a minority business enterprise owner interested in growing your mid/high 6-Figure or 7-Figure business in IT, business services, contracting or other services?
Are you looking for $100,000+ funding without running from pillar to post or waiting indefinitely for financiers to call you back?
Schedule a call with me here to see if we’re a fit:
(Harold’s 15-min calendly link) https://calendly.com/chestnutstreetconsulting/15min
References:
https://archive.mbda.gov/news/press-releases/2015/08/us-minority-owned-firms-continue-outpace-growth-nonminority-owned-firms.html#_ftn2
https://www.census.gov/newsroom/press-releases/2021/annual-business-survey.html
https://www.mbda.gov/page/minority-business-development-agency-vital-making-america-great
https://www.sec.gov/spotlight/sbcfac/federal-reserve-banks-small-business-credit-survey.pdf
https://www.mckinsey.com/industries/public-and-social-sector/our-insights/covid-19s-effect-on-minority-owned-small-businesses-in-the-united-states