Minority Business Enterprises (MBEs) is a fast-growing and innovative sector in the United States. For over a decade, minority-owned businesses have created jobs and helped increase economic opportunities and wealth for marginalized communities. According to the 2021 Annual Business Survey (ABS):
Approximately 1.15 million, or 19.9% of employer businesses in 2020, were minority-owned.
320,864 (5.6%) were veteran-owned.
Women-owned around 1.24 million (21.4%).
If you are part of this tremendous economic force, the right certification can aid your growth and give you access to funding, networking opportunities, and educational resources. In the following sections, we will explain the meaning of being a minority-owned business, the general steps to becoming one, and other business funding opportunities.
What's a minority-owned business?
A minority-owned business is owned and controlled by an individual or group from a minority population. The first requisite Minority-Owned Business certification is that your business must be 51% owned and managed by a U.S. citizen that belongs to the following groups: African American, Hispanic, Asian, Native American, or other minority groups as defined by the government or industry standards.
The exact definition of a minority-owned business can vary depending on the context or organization using the term.
How to start a minority-owned business?
The process for certifying as a minority-owned business can vary depending on the specific program or organization to which you apply. Below are some general steps to consider when starting a minority-owned business.
Write a business plan
A successful business plan can help you attract investors, partners, and grants aimed at minority-owned businesses. What are the essential elements of a business plan? There's no standard fits-all template. It all depends on your type of business, the purpose of your project, and how much detail you're willing to provide. You can opt for a traditional business plan format or a streamlined "startup" format. But the following are some of the sections you could include:
Executive summary: A short overview of your business vision and mission. Leave this for last to highlight your best points.
Overview of your company: Describe what makes your business unique. Your background, list your executive team and include your location.
Market Analysis: Research your industry, growth potential, and competitors.
Business management: Key information about the members of the business and its legal structure.
Services or products: Describe what you offer and its value.
Financial plan and projections (A short or long-term revenue forecast).`
Appendix: Here, you can attach business permits, supplier contracts, licenses, and other relevant documents.
Once you start your business operations, remember to revisit your initial draft every quarter to check up on your business growth plan or make the needed adjustments.
Register and incorporate your business
Now, it's time to understand the different liabilities in the various legal structures. That means you'll have to decide whether to register your business as a sole proprietorship, partnership, LLC, or corporation. For example, when you register, you obtain a business license to operate in your area legally. When you incorporate your business, you separate yourself from the legal liabilities of your business entity.
Be mindful when you choose your business entity. You can get more information about these structures' different legal, tax, and financial implications in our article on types of business ownership and how to choose.
Get certified as a minority-owned business
Once you draft down your vision for long-term success and find the adequate entity for your business, it's time to jump into the step that will differentiate you as a minority-owned business. Certification!
Several government agencies provide minority-owned business certification at the local, state, and federal levels. Some alternatives to consider are the following:
The National Minority Supplier Development Council (NMSDC) Certification - This organization provides exclusive contract and networking opportunities. Once you gather the documentation, you can apply at your local affiliate council.
8(a) Business Development program - The SBA certifies minority-owned businesses that are economically and socially disadvantaged. You'll need to create a profile on their System for Award Management.
Department of Transportation (DOT) Disadvantaged Business Certification Program - The main requirement to qualify is getting a state DBE certification. Make sure you meet DOT Disadvantaged Business qualifications before you apply.
Minority Business Development Agency (MBDA) - This agency, part of the U.S. Department of Commerce, certifies minority-owned businesses and provides them with access to business development services.
SBA's Women-Owned Small Business program - This SBA program aims to award at least 5% of the annual contracting budget to women business owners.
Certification from the National Women's Business Council - If this council certifies you as a woman-owned small business owner (WOSB), you'll be able to access mentoring, funding, and network opportunities.
LGBTQ+ small business certification - The National Gay and Lesbian Chamber of Commerce gives business owners that belong to the LGBTQ+ community scholarships, special discounts from allied partners, and mentoring opportunities.
Veteran-owned business certification - If your business is 52% owned by one or more veterans, you might qualify for two federal programs. These are the Vets First Verification Program or the National Veteran-Owned Business Association's Certified Veteran's Business Enterprise (VBE) program. Both provide educational opportunities and grants.
To get more details about private minority-owned benefits and discover new opportunities for business owners, we recommend reading Benefits to Becoming Certified as a Minority-Owned Business.
Connect with financing opportunities
Several loan and financing programs are available to minority-owned businesses from government agencies and private funders. Some of the most common loan options include:
Small Business Administration (SBA) loans
Minority Business Development Agency (MBDA) loans
Community Development Financial Institutions (CDFI) loans
Community Advantage program
Ultimately, you'll have to select which financing is ideal for your minority-owned company. However, after you've applied for and obtained the funding you require, you'll be well on your way to managing your company successfully.
It is important to note that each loan program has requirements, such as credit score, business size, and type of industry. Researching and comparing the loan options available is essential to find the one that best fits your business needs and qualifications. We recommend that you consult a financial or business advisor or speak with different funders to understand the options available, interest rates, and the application process.
At One Park Financial, We have more than a decade of experience giving personalized funding access to minority-owned businesses and don't ask for official certification. If you're looking for a speedy and efficient way to get funding, we can help. You can check if you pre-qualify for one of our working capital programs through our quick and easy online form. Our funding specialists will be more than happy to walk you through the entire process and keep you informed.
Disclaimer: The content of this post has been prepared for informational purposes only. It is not intended to provide and should not be relied on for tax, legal, or accounting advice. Consult with your tax, legal, and accounting advisor before engaging in any transaction.