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Small business owners are often at a disadvantage when it comes to getting funding. Even if they have an excellent product or idea, the lack of capital can be a major roadblock on the way to success. Historically, opportunities have been structured in such a way that it is even more of a challenge for minority and women-owned businesses to access capital than other small businesses.
Fortunately, there is help for underrepresented entrepreneurs looking for funding to grow their business. Nonprofits, corporations and government agencies offer resources specifically designed for groups that have had fewer opportunities in the past. Read on to learn about how to find and apply for funding opportunities and other types of resources to help your business grow.
What Resources Exist for Minority-Owned Businesses?
There are a lot of different types of resources out there for small minority-owned businesses—you just have to do a little legwork to find them.
Business Planning and Guidance
If you're just getting started, one of the most common resources for small businesses are organizations that provide business planning and guidance. This type of help might include helping you craft a business plan, connecting you to business mentors who provide advice for launching your company, and running financial projections.
Does your business have a product or service that can scale on a national or international level? If so, you might be eligible to apply for business and startup competitions, in which you pitch your unique ideas and defend your business concepts. Often these types of competitions come with cash prizes, a lineup of potential investors, chances to participate in business incubators, and opportunities for further mentoring by seasoned professionals.
If your business is already up and running, you might also be eligible for programs that offer technical assistance and other resources to help you grow your business. "Technical assistance" can mean a lot of things in the business world, but it often includes things like helping you with pitch decks, financial modeling, company profiles, legal support, market analyses, valuations, acquisitions, merger assistance, technology and e-commerce tools.
Small Business Grants
Less common are opportunities to apply for business grants. A business grant is money given to a company that doesn't need to be paid back. Minority small business grants are financial awards given to small businesses owned by a traditionally underrepresented person (or persons) that fit specific qualifications.
The process for getting a minority small business grant varies depending on where you apply, but it generally involves researching the best fit for your needs, getting your paperwork and documentation in order, applying, waiting to hear back and—if you're one of the lucky ones who get funded—following up with "grant reports" to update the funder on what's happening with the money and your business.
It sounds like a business owner's dream: Free money with no strings attached for a business that needs cash. But before you go down this road, it's important to remember that grants usually have a specific purpose. It's rare to get a grant that can be used for anything you want (like payroll or operating expenses); they often come with specific restrictions and guidelines for use. Often funders set goals for you to reach, and you'll likely have to follow a strict reporting schedule to show how you used the money and what impact it had.
The grant application process also usually takes a while. Once you find a grant you're eligible for, be prepared to go through a lengthy process to apply. Although there are emergency assistance programs for small businesses (especially COVID-19-related programs), if you're in a situation where your business needs funds right away, you'll probably need to look outside of grant programs.
Small Business Loans
More common types of financial assistance designed to support minority-owned small businesses are loan programs. There are many different types of loan programs, but the most appealing will probably be those that have favorable terms, meaning no or low down payments, little or no collateral required, lower interest rates and flexible repayment terms. A note of caution: Watch out for scams that promise "free money" or loans and grants that don't have to be paid back. The best places to look for legitimate small business loans are federal loan programs, reputable community organizations and nonprofits with a positive track record, and your local credit unions.
Where to Find Minority Small Business Resources
Here are some of the best places to find minority small business resources and financial assistance:
Your first stop should be a local SCORE office, a nonprofit partner of the U.S. Small Business Administration (SBA). SCORE offices are dedicated to helping small business owners start, grow and manage their companies. Most of the government grant money set aside to help small businesses—many of which are minority-owned—are awarded to local SCORE offices to support operations as they serve business owners through education, mentorship and coaching.
Minority Business Development Agency (MBDA)
The MBDA is an agency affiliated with the U.S. The Department of Commerce. Like most government agencies, it doesn't give grants to businesses directly but it connects minority business owners to financing like banks, private lenders, investors and other opportunities.
SBA Business Development Program
Qualified minority small business owners can apply to be certified through the SBA 8(a) program. It's not a grant program, but getting certified makes you eligible to apply for government no-bid or "sole source" contracts. The SBA also provides business development help, technical assistance, and general business training and mentoring to underrepresented business owners. You can also find specialized funding opportunities through this program, such as financial support for veteran-owned small businesses or businesses located in under-resourced communities.
Community Development Finance Institutions
Community Development Finance Institutions (CDFIs) are part of a national network focused on expanding access to financial services and economic opportunities in low-income communities. A CDFI could be a bank, a credit union or even a provider of loans, microloans or venture capital. There are over 1,000 CDFIs around the country, so chances are there's one close to you.
Many large national and international companies have departments dedicated to grantmaking, pitch competitions and other types of resources. Although many of them focus their efforts on nonprofit organizations, there are some who will give to small businesses, like the FedEx Small Business Grant Contest, the Visa Everywhere Initiative, Comcast Ris, and Nav's Small Business Grant competition. More, if you're a member of any type of trade organization, social club or business organization, there might be grant opportunities available too.
Chambers of Commerce
Chambers of commerce exist to promote interest in local businesses and often provide resources and education to small businesses to help them thrive. There are also chambers focused on serving specific segments of the population, such as African Americans, Asian Americans and more.
How to Apply for Minority Small Business Opportunities
When seeking minority small business funding or resources, the eligibility and application processes will differ depending on the type of program you're considering. For example, in the world of government funding, for a business to be defined as minority-owned, 51% of the company must be legally owned and controlled by someone who is part of an underrepresented group (Asian Americans, African Americans, Hasidic Jews, Hispanic Americans, Native Americans and Pacific Islanders). There are also programs aimed at women, people who are LGBTQ, veterans and rural residents.
Most small business programs have the same general process of how to apply:
- Figure out if you're eligible to apply
- Gather and submit documents or paperwork
- Fill out and submit the applications
- If chosen, submit any follow up documentation and follow the directions for how to move forward
You'll have different paperwork requirements depending on the program, but on a very basic level, expect to provide your experience, information about your business and its finances, and why you're applying for the program. Types of documentation you might have to submit include:
- Your business license
- Tax returns
- Photo identification
- Statements of need
- Articles of incorporation
- Your Employer Identification Number
- Financial statements
If you're interested in applying for federal grants on the Grants.gov website, you'll also need to have a D-U-N-S Number® number (a unique nine-digit identification number that represents your business location) and register for SAM, which provides opportunities and information for government contract work. When you're searching for grants on the Grants.gov website, don't forget to use the Eligibility filter on the left side of the page to narrow down results for small businesses.
To get started with the SBA 8(a) program, you'll need to create an account and start collecting the items on the documentation list, then follow the directions on the site to finish applying. To qualify you'll need to be a small business, not have previously been part of the 8(a) program, have a personal net worth of $750,000 or less, adjusted gross income of $350,000 or less, $6 million or less in assets, and demonstrate "good character and potential to perform on contracts."
To get connected to Minority Business Development Agency programs, you'll need to find a MBDA Business Center near you and reach out for more information.
Applications for corporate grants are usually found on the company's website, along with eligibility criteria.
The biggest thing to remember is to check your eligibility first. Applications for things like grants, pitch competitions, loans and other types of assistance are often long and in-depth, so you'll want to make sure you actually qualify for the program before spending time applying for it. If you have questions about whether you're eligible, reach out to the contact person listed for that opportunity.
No matter which route you take, all of the options often require time, research and preparation to apply, so make sure you get started as early as possible.
Additional Resources for Minority Business Owners
Finding and applying for grants can seem overwhelming but there are other types of funding sources and assistance for minority businesses too. For example, there are low-interest loans specifically geared toward women and minority business owners. Some additional organizations that focus on supporting minority business include:
- Operation Hope: Offers business workshops and entrepreneurial training.
- Accion Opportunity Fund: Helps small businesses get access to capital.
- The Working World: Helps to grow businesses in low-income communities.
- Black Girl Ventures (BGV): Provides funding opportunities, mentorship, an incubator, and connections to become corporate suppliers.
- New Voices Foundation: Helps provide equal access to capital, expertise, and networks for women of color-owned businesses.
- Digitalundivided: Holds a virtual training program, incubator and leadership coaching program for entrepreneurs.
- SoGal: An organization dedicated to diversifying entrepreneurship.
Sometimes you'll need to get creative to find funding for your business, especially if you're at an early stage. For example, there are specialized crowdfunding platforms for minority entrepreneurs and other alternatives dedicated to diversifying who gets access to startup money.
The Bottom Line
There are a lot of resources to help minority-owned small businesses. The best strategy is to research opportunities and find out if your business is eligible before you apply. Whether it's a loan program or a different type of support, these programs all bring opportunity to diverse communities and help companies thrive for the future.