Get in Touch: 1.800.701.7168

Resources for Minority-Owned Businesses

minority owned businessThere are about 8 million Minority Owned Businesses in the U.S., and according to the Minority Business Directory, minority owned firms employ 10% of all paid employees in the United States. Minority-owned businesses are also growing at a rate of almost 40%, according to the U.S. Small Business Administration (SBA), which makes it the fastest growing business sector in the United States. And, according to the Minority Business Development Agency, minority-owned firms generate almost $700 billion in annual sales. So, it should be no surprise that minority-owned businesses play an integral role in the American economy, and that they are becoming increasingly important.

What Defines a Minority-Owned Business?

The SBA has specific guidelines that must be met in order to be considered a minority-owned business enterprise (MBE). Aside from being part of a minority racial or ethnic group, the owner must also be a U.S. citizen who controls at least 51% of the business and is involved in day-to-day operations.

Challenges Faced by MBEs

There was a time in this country when minority business owners faced long odds of finding success. Starting one’s own business is difficult enough, but societal ills such as racism, discrimination, and bigotry unfairly placed additional hurdles in the paths of minority entrepreneurs who would reach for the American Dream.

While minority-owned businesses are growing rapidly in the U.S. today, they still face many hardships. To begin, minority entrepreneurs are having a much more difficult time raising capital than other business owners. Minority entrepreneurs generally rely on short-term debt to finance their businesses, such as revolving credit lines or personal credit cards. Minority business owners have a difficult time obtaining loans, and when they do, the the price of borrowing is often high.

Benefits of MBEs

The National Minority Supplier Development Council provides minority-owned businesses with status certification. Completing the NMSDC’s certification process allows these firms to connect with an impressive list of large businesses and government agencies looking to award contracts to or do business with minority-owned firms. Through a single certification process, minority-owned status is verified to a wide array of potential business partners interested in doing business with minority-owned small business concerns. Learn more about how getting certified can help grow your business, in the webinar below.

Access to Government and Corporate Contracts

Both government agencies and large corporations earmark a certain percentage of their supplier contracts specifically for minority-owned small businesses. But in order to qualify for the contracts, the business has to be certified by the government as a minority-owned business. As a result, simply by becoming certified, you may be able to prepare your company to compete for and win lucrative contracts it would otherwise never be privy to.

Improved Marketing and Sales Opportunities

If your business is located in an area with a large minority population, then having your business certified as a minority-owned business may make your company more attractive to local consumers, thus improving your marketing and sales opportunities.

Company Listing in National Supplier Databases

When your business is registered as a Certified MBE, it is listed in a national database of certified suppliers. This provides your business with excellent exposure to companies around the country who may be in need of your services or products.

Become Part of a Community

 

Some small-business owners are hesitant to certify their business as minority-owned, but in truth, doing so will make you part of a growing and supportive community. Certified MBEs tend to work with each other, network together, and support each other. Becoming part of this community may help you increase your business contacts and partnerships.

Set Your Business Apart

As a minority business owner, you may not want your business to be looked at differently, but the truth is, becoming certified as an MBE can help set your business apart, in a good way. Becoming certified informs the world that you are a serious business owner. And by becoming certified, you’ll immediately position your company to the forefront of those competing for contracts reserved for MBEs.

Tax Breaks For Minority-Owned Businesses

Some minority-owned businesses may find themselves eligible for certain tax breaks if they’re located in distressed areas, or if they are just getting started in business. Here are four often-missed tax breaks that some minority-owned businesses may be able to take advantage of.

New markets tax credits are not actually geared toward minority-owned businesses, but rather to those who invest in them. This program permits any taxpayer who invests in a designated community development entity (CDE) a credit against their federal income taxes.

The credit received is equal to 39% of the amount invested, and can be claimed over seven years. Investors who claim the tax credit must wait the full seven years before they can cash out or redeem their investment with the company.

The government offers certain tax breaks to companies that operate within economically distressed areas, with the hopes of attracting more businesses to those areas. It is important to note that these tax breaks are available to all businesses that relocate to those areas, not just MBEs. Such tax credits include: the Empowerment Zone Employment Credit ($3,000 per eligible new hire), Capital Gain Exclusions, and First-Year Expense Write-Offs.

In addition to federal tax breaks for operating in distressed areas, there are also tax breaks offered at the state level, as well. State tax credits similar to the New Markets Tax Credit are also available for investors who invest in minority-owned small businesses.

Businesses that employ workers who live on or near American Indian Reservations are eligible for the Indian Employment Tax Credit. This credit is equal to 20% of all qualified wages.

If you are a minority-owned business or you have invested in one over the course of the year, then you may be eligible for one or more of the above tax credits. Speak with your tax accountant to learn more details about the tax credits you qualify for, so you can take advantage of all the credits you’re due.

Contracting Opportunities for MBEs

The federal government has implemented measures that ensure minority business owners are awarded contracts. Federal law dictates that 23 percent of the United States government’s contracts be awarded to small businesses, and of that 23 percent, it has set a goal that five percent be awarded to socially or economically disadvantaged small-business concerns, classified by the SBA as 8(a). So how does the federal government define socially or economically disadvantaged businesses, and what types of businesses are allowed to bid on contracts set aside for those in this category?

Defining “Disadvantaged”

For the purpose of contract allocation, certain groups of people are automatically categorized as socially disadvantaged. These groups include Subcontinent Asian Americans, Native Americans, Asian Pacific Americans, Hispanic Americans, and African Americans.

Business owners who are not members of any of those groups may still qualify for 8(a) status, provided they can show disadvantage due to race, gender, ethnicity, physical handicap, or residence in an environment isolated from the mainstream of American society.

Economically disadvantaged status is reserved for those who are unable to compete in the business climate due to a lack of opportunities to obtain credit or capital.

8(a) Certification

Once disadvantaged status has been determined, businesses can become certified through the SBA’s Section 8(a) business development program. Certified businesses are eligible to bid on the previously mentioned set-aside contracts. In addition, they are eligible to participate in SBA business development programs, training initiatives, mentoring, business opportunity fairs, and more.

Who the Federal Government Wants to Work With

There are numerous opportunities for Competitive 8(a) minority-owned businesses to work with the federal government. A quick search for contracting opportunities on FedBizOpps.gov yields almost 200 pages of results. There are also countless postings for emerging, partial and very small businesses, among others. In short, there are a plethora of contracting opportunities that minority-owned businesses can take advantage of.

Alternative Funding Sources for MBEs

Banks don’t have anything against minority-owned small businesses. The truth is, they don’t particularly like lending to small businesses in general, especially if the business has fewer than two or three years under its belt, because the risks are high. As a result, the National Small Business Association (NSBA) reports that one out of every four small businesses is unable to obtain adequate funding.

So, what can you do when the bank says no to your funding request? Here are some alternative funding sources that may be attractive to minority-owned business owners.

The Minority Business Development Agency is a subsidy of the U.S. Department of Commerce and it is designed to offer minority-owned small businesses access to contracts, training and education, and other business-related services. It also helps minority entrepreneurs gain access to capital funding. Check with your local MBDA Business Center to learn more about the funding opportunities in your area and about the pros and cons of minority business loans. They’ll even help you prepare your funding package to help improve your odds of approval.

If your business has modest financial health, then you may be eligible to open an Individual Development Account in your area. This type of account is like a cross between a grant and a savings account. When you open an IDA savings account, every dollar you deposit into the account will be matched, as long as the business owner agrees to attend financial education classes. In addition, the funds must be used for asset-building purposes. The best thing about this type of program is that the funds don’t need to be paid back.

Microloans are fast becoming some of the most popular loan alternatives to traditional loans because they cater to those entrepreneurs with less-than-perfect personal credit. These are smaller loans, typically ranging from $500 to $35,000, issued from specialty lenders, some of which are funded directly by the Small Business Administration.

Forgivable loans are similar to grants because they so not have to be repaid as long as the borrower meets certain requirements. In most cases, the borrower will have to agree to certain terms, such as hiring a certain number of employees, in order to take advantage of the no-payback benefit.

The New Market Tax Credit Program is helmed by the U.S. Department of Treasury Development Financial Institutions Fund. This program is designed to provide funding assistance to small businesses in low-income communities, with a focus on minority-owned businesses. The way the program works is that taxpaying investors are granted credits against their federal income tax liabilities for making qualified equity investments in Community Development Entities (CDEs).

If your company is in the technology field, then it may qualify for financial assistance through the Small Business Innovation Research (SBIR) grant or Small Business Technology Transfer Program (STTR). These programs offer early-stage funding for research and development, especially for those companies that are economically disadvantaged.

Educational Support for MBEs

Where can minority-owned business owners turn for educational assistance when they need help?

Minority Business Development Agency

The Minority Business Development Agency is the only federal agency established for the sole purpose of fostering growth in the minority-owned business community. Through the MBDA website, minority business owners can access a wealth of educational resources, including blogs on exporting and bonding assistance, business planning tools, and essential reading on business partnerships, federal grants, and so much more.

SBA 8(a) Program

The United States Small Business Administration’s 8(a) program offers a number of services to disadvantaged small-business owners, a status which many minority business owners qualify for by default. In addition to federal contract procurement assistance, 8(a) certification grants access to individualized business counseling, management and technical guidance, and free or low-cost training workshops.

Small Business Development Centers

The SBA’s Small Business Development Centers are scattered throughout the U.S. and territories. There are more than 900 delivery points for SBDC services, so no matter where a business is located, there is likely to be one nearby. Through an extensive suite of services, SBDCs encourage local business growth. Some of the services offered through SBDCs include business advising, disaster recovery assistance, import-export support, and contracting and procurement aid.

Corporate Diversity Initiatives

Many large business organizations make supporting minority-owned businesses a point of pride, and some are excellent sources of educational assistance. Companies such as Ernst & Young, AT&T, Sodexho, and many others provide mentorship programs, training scholarship funds, and other resources that help minority business owners develop the business acumen they need to build successful firms.

State and Local Nonprofits

There are too many nonprofits designed to support the minority business community to list them all here. Still they bear mention, as they are located in every state and within an ever-increasing number of communities. They offer a host of useful services, from grant-writing assistance to business management seminars. A quick Internet search should turn up several results in any part of the country.

Advice from Successful Minority Business Owners

We interviewed successful minority business owners and asked them to share their stories, challenges and advice with us. These accomplished entrepreneurs all have unique backgrounds and inspiring business lessons.

Enterprising Perfect Tux Owner Challenges The Formal Wear Industry Online

Creating Value in the Small Business Payroll Industry

Social Media Habits to Expand Your MBE

The first social media habit is the habit of focus. Your ability to concentrate your company’s social media activity exclusively on business may be the best approach for reaching potential customers. Have all your company’s social profiles represent your brand clearly. Whether you upload a company logo or use a profile pic, make sure to keep it professional. Have all your descriptions, links, and contact information match.

One of the most important elements to success in social sharing is to always provide value. Be sure to share content that’s related to your business expertise. Share your own posts, links, or videos, as well as content by other experts related to your industry. Don’t fall into the self-promotion trap by only pushing your products, exclusive of anyone else’s.

It is important to respond to any direct messages you receive from followers, fans, or connections. These interactions are different within every social platform, with examples including Facebook messages or posts to your wall, or Twitter direct messages or @匝 replies. Remember, interactions are opportunities to connect with potential customers, so don’t overlook this habit.

Ideally, the followers you attract should be coming from people who love your products and those who have an interest in your company or industry. But it is also important to seek out and connect with profiles of authority in your industry. Some of them will automatically follow you back, which can help build your follower base.
There are quite a few social media platforms to choose from, and they are changing constantly too! Take the time to identify which platforms your target market uses, and connect with them there. Each platform has its own unique angle that you should consider. For example, in the B2B space, LinkedIn is considered the best social platform.

As a minority-owned business, it is vital to implement a social media strategy in order to reach and engage potential and existing customers. In today’s fast paced and interactive society, it is in the best interest of your business to have an active and engaging social media presence.

Using CreditBuilder to Grow Your MBE

CreditBuilder Keeps Business Owners on Track

CreditBuilder from Dun & Bradstreet Credibility Corp. gives business owners access to the same Dun & Bradstreet data that banks and investors use to make financial assessments. CreditBuilder helps you monitor and impact your business credit rating by adding unreported payments, but that is not the only benefit.

CreditBuilder Premium from Dun & Bradstreet Credibility Corp. is a complete credit solution for new and established firms that need to demonstrate a strong, consistent payment history. With CreditBuilder you can establish a new Dun & Bradstreet credit file in just 5 days. Once your file is established, add up to 25 credit references and benchmark your company’s score against the principal competitors in your industry.

CreditBuilder alerts you whenever a company or lender requests a copy of your credit history, and it gives you unlimited access to your D&B credit scores and rating for only a few dollars per day.

While minority-owned businesses are growing rapidly in the U.S. today, they still face many hardships. To begin, minority entrepreneurs are having a much more difficult time raising capital than other business owners. Minority entrepreneurs generally rely on short-term debt to finance their businesses, such as revolving credit lines or personal credit cards. Minority business owners have a difficult time obtaining loans, and when they do, the the price of borrowing is often high.

Photo Credit: gentsamongmen, Twenty20