How Minorities Can Receive Business Financing
It’s evident that stimulating the growth of minority entrepreneurship is good for our economy. Unfortunately, since minority entrepreneurs are underrepresented in the business community, we wanted to share these six tips for acquiring business financing.
If you’re a minority business owner, you may qualify for financial assistance. To start your research, visit grants.gov, which features more than 1,000 grant programs.
Connect with the Minority Business Development Agency
According to their website, at MBDA’s business centers, minority-owned firms who are pursuing growth can work with business experts. These individuals help business owners secure capital, compete for contracts, and develop strategic partnerships. Using the MBDA’s website, you can locate a business center near you.
Check if You’re Eligible for SBA 8(a) Loans
The SBA 8(a) program helps minority business owners acquire SBA-backed business loans. Additionally, as an 8(a) business, you are granted special access to certain government contracts that you can win without having to participate in a competitive bidding process. According to NerdWallet, obtaining the certification is a lengthy process, but it’s well worth it. They note, though, that you should be prepared to work on government contracts.
Understand All Financing Options
Even if you’re eligible for a grant or 8(a) loans, you should also be aware of other financing options. Remember, traditional loans can be difficult to qualify for if you don’t own an established business, or you have bad credit. Microloans, cash advances, lines of credit, or other SBA loans can also be worth researching, depending on your business’s situation.
Regardless, you should understand the eligibility requirements of the business financing you’re interested in before you spend too much time pursuing it.
Refine Your Business Plan
Having a solid business plan when you’re pursuing financing can improve your chances of getting approved. Even if you’re confident in your business plan, it can be beneficial to get a second opinion. For example, the SBA has various resources that help entrepreneurs learn the basics of writing a business plan. In addition, as a minority, you also have access to the MBDA business centers (mentioned earlier) where you can seek expert advice.
Build Your Credit
Unfortunately, there are times in which a business owner doesn’t qualify for a traditional loan. For example, you might not meet the lender’s credit score requirements. If this is the case, you should try to improve your business’s credit score prior to applying again. Going forward, track your personal and business credit score, and pay all bills early or on-time.
If you can’t operate without some additional capital, we suggest applying for a business credit card. This way, you can build your credit history while having access to short-term financing. Still, it’s important to be careful. If you charge too much to your business’s credit card, you could end up with significant interest fees. In addition, if you aren’t diligent about paying off your credit card debt, your credit score could be lowered.
According to U.S. News, “only 17.5 percent of businesses in operation in 2014 were minority-owned, even though the bureau estimates that African-Americans, Latinos, Asians and other ethnicities account for more than 38 percent of the country’s overall population.”
Yet, minority-owned businesses tend to provide jobs in the most impoverished areas of the country. So, while minority entrepreneurs are a relatively small group, they play a key role in the U.S. economy. Hopefully, these tips play a small role in continuing to push minority business owners to prominence.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.