Funding opportunities for minority business owners
Monday, 8 February 2021
Minority business owners have been responsible for much of the entrepreneurial growth in our country over the past decade.
In fact, according to the U.S. Senate Committee on Small Business and Entrepreneurship, more than 50 percent of the new businesses opened in the past 10 years have been minority-owned. Those businesses added nearly ﬁve million jobs to the economy and generated annual sales of nearly $700 billion.
Yet despite their rapid growth and economic impact, minority-owned businesses still lag behind their white counterparts in their ability to access capital. A study from the Federal Reserve found that nearly 75 percent of white male business owners who applied for credit were approved, while 46 percent of African American business owners received approval and 60 percent of Hispanic business owners were granted credit.
The same survey found that while black business owners were the most likely to apply for ﬁnancing, only 47 percent of applications were fully funded — 10 percentage points lower than the approval rate of any other category of business owners.
While minority-owned businesses face substantial challenges in securing ﬁnancing for their enterprises, there are still opportunities — many of them speciﬁcally for minority-owned businesses.
1. U.S. Small Business Administration (SBA) Loans
The SBA oﬀers several loan programs designed to support minority-owned business, especially those located in underserved markets. These include SBA Community Advantage Loans, which fall under the SBA's 7(a) loan program (those with special requirements), are available to entrepreneurs in underserved communities and range between $50,000 and $250,000. Underserved markets include low- to moderate-income communities, businesses where more than 50 percent of the full-time workforce is low-income, veteran-owned businesses and rural areas.
The SBA also has a microloan program that oﬀers loans of up to $50,000 and is designed “to assist women, low-income, veteran and minority entrepreneurs and small business owners by providing them small-scale loans for working capital or the acquisition of materials, supplies or equipment." In 2018, minority-owned businesses received nearly half of all SBA microloans.
The SBA's 8(a) business development program also provides opportunities for minority-owned or disadvantaged businesses. The program doesn't oﬀer direct funding, but gives participating companies access to federal contracts and other business development programs. Participation could also increase a business' ability to secure SBA loan funding.
2. The National Minority Supplier Development Council Business Consortium Fund
The National Minority Supplier Development Council (NMSDC) is a corporate- member organization that works to promote and support minority-owned businesses. The lending arm of the NMSDC is the Business Consortium Fund, which oﬀers term loans and lines of credit to NMSDC-certiﬁed businesses. Since its founding in 1987, the Business Consortium Fund has made more than 1,000 loans and provided $225 million in ﬁnancing to minority business enterprises throughout the United States.
3. Minority Business Development Agency
An agency of the U.S. Chamber of Commerce, the Minority Business Development Agency (MBDA) is dedicated solely to the support and promotion of minority-owned businesses. It has a nationwide network of business development centers and its wide-ranging menu of programs includes several targeted grant funds. The organization also oﬀers assistance for minority business enterprises who are working to secure capital from other sources.
Accion is a non-proﬁt, community lender that oﬀers ﬂexible lending options to minority-owned enterprises and business owners with disabilities. According to the group's website, they work to assist businesses that have had diﬃculty securing ﬁnancing from more traditional sources and, when considering applicants, weigh more than just credit scores. In addition to providing direct funding, the organization helps businesses get certiﬁed, which gives them access to federal contracts and other opportunities.
5. Operation Hope
Operation Hope is another non-proﬁt organization that provides support, training technical assistance, and ﬁnancial counseling to minority-owned businesses. It oﬀers a 12-week Entrepreneurial Training Program designed to empower, educate and energize small business owners. And its 1MBB (One Million Black Businesses) initiative, which aims to create one million new black businesses by 2030, oﬀers a wide range of resources to help African-American entrepreneurs build their business and secure funding.
Grants.gov is a database of more than 1,000 grant programs from federal grant- making agencies and includes hundreds of opportunities intended for minority- owned enterprises. The database is searchable by keyword and oﬀers extensive resources for potential applicants.
When it comes to ﬁnancing, the playing ﬁeld for minority-owned businesses is far from level. But as minorities continue to lead the way in starting new businesses and the economic impact of these enterprises grows, hopefully more opportunities will become available to help entrepreneurial minorities establish and grow successful businesses.
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