Q: I want to start a "minority" business. Are there funding opportunities or loans for minority business?
A: Having a strong business plan is probably the most important thing when securing funding for a small-business, no matter your heritage. However, minority small-business owners sometimes need a little extra help to secure loans and investments, when compared with a non-minority pursuing the same business venture.
Agencies and institutions who are known for servicing minority businesses will offer the most help, since they will be experienced in best addressing your needs. Let's take a look at some of those now.
Minority Business Development Agency
If you're interested in starting a business as a minority, a good resource is the Minority Business Development Agency (MBDA). The MBDA does not offer direct financing; it maintains a neutral, national network of minority business development and business resource centers that maintain active relationships with local lenders.
Business is not just about running numbers, it's also about establishing relationships and networking. In that respect, the MBDA is an invaluable resource if you're searching for minority funding opportunities.
Small Business Administration
One of the largest, most well-known small-business loan providers is the Small Business Administration (SBA). With the SBA, small businesses can apply for loans that are backed by the U.S. government.
While the SBA does not offer loans specifically for minority businesses, many of their certified lenders are "sensitive" to minorities' needs when making loan decisions.
Wells Fargo is a good example. It has pledged to lend $9 billion to Latino, African American, and Asian businesses between 2009 and 2012. Despite the SBA's respectful "we're all the same" orientation, more than one-third of all SBA-backed loans in 2006 were issued to minority applicants.
Minority business owners should also take note of the SBA's 8(a) Business Development Program. It is not a funding program, but it is designed to give minority business entrepreneurs a leg up that they might not have otherwise had.
Socially and economically disadvantaged businesses who qualify for the program receive education, training, and access to government contracting opportunities. In 2005, companies in this SBA program earned $10.5 billion in government contract money, so it really is a great doorway to generating business for your company.
Other National Organizations
Aside from the Government, there are a number of national organizations dedicated to helping out minority businesses:
- Accion USA is the largest small-business lender of its kind in the U.S., making loans ranging from $500 to $25,000.
- The National Minority Business Council recently launched its "Emerging Enterprise Investment Committee," which makes equity investments from $250,000 to $5 million in qualified women-owned or minority-owned businesses.
- The National Urban League's "Urban Entrepreneur Partnership," has dedicated $127.5 million for qualified business owners who join the program and need loans.
- The National Minority Supplier Development Council matches more than 15,000 minority-owned businesses with 3,500 corporations who want to purchase goods and services from them. The council also offers loans to participating small businesses through its "Business Consortium Fund."
Minority entrepreneurs should also look into ethnic-specific lending. A couple of agencies I can think of are the U.S. Hispanic Chamber of Commerce, First Nations Oweesta Corporation (for Native Americans), The Brotherhood Business Development & Capital Fund (for under-served communities in South Central Los Angeles), and Harlem's Upper Manhattan Empowerment Zone.
All in all, you need to make sure you have a good understanding of your business' needs before you apply. Loans must be re-payed and if you over-borrow, you could be putting your entire enterprise in jeopardy. Hit your accounting records and make sure you perform an in-depth profit analysis before you borrow.
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