How to Select the Right Minority Business Loans and Grants
For many entrepreneurs — minority or not — business financing is a top priority, but it can be difficult to attain. Due to this, we’ll explain how you can find minority business loans and grants that are the best fit for your company.
6 Tips for Selecting Minority Business Loans and Grants
1. Create a Business Plan and Assemble Business Documents
If you’re applying for minority loans or grants, you’re going to need a business plan. Of course, a business plan will improve your chances of getting approved, but it will also help you quickly narrow your search for financial assistance. For example, as you research grants, you’ll find that many of them have stringent requirements regarding how you can use the money, your business’s industry, and other factors.
With a comprehensive business plan, you’ll be able to quickly eliminate non-viable loan or grant options. Plus, you’ll force yourself to examine your business needs, which will help you determine the best financing option. If you need help with a business plan, consider visiting a Minority Business Development Agency (MBDA) business center near you.
Prior to applying, you should also have all your important documents prepared. Compile financial statements, tax returns, credit reports, business licenses, and legal documents. Even if you don’t need all these documents for every application, having them on- hand will prevent unnecessary hang ups during the process.
2. Conduct Research on Grants
Research is a critical step in finding the best minority business grants. To start your research process, visit Grants.gov. On this site, you can browse and apply for thousands of different grants from different government agencies.
When perusing grants.gov, be sure to use the search filters to get more specific about what type of grant you’re looking for. For example, if your business is in the agriculture industry, there are federal government grants specifically for businesses that operate in rural areas.
In addition, you should visit an MBDA business center. These offices provide expert advice for small business owners and may be helpful in recommending specific grants or loans for minorities.
3. Consider the 8(a) Business Development Program
According to the SBA, this program seeks to provide, “a level playing field for small businesses owned by socially and economically disadvantaged people or entities.”
Businesses in the 8(a) Business Development Program gain exclusive access to work on government contracts. Plus, they receive expert consultation on a wide variety of business functions. However, the certification process is lengthy, and you must be prepared to work on government contracts, so 8(a) isn’t for everyone.
4. Look for Local Options
While you shouldn’t overlook federal grants, they are generally very competitive. Local grants, however, will have fewer applicants, so you should check with your city and/or state’s chamber of commerce. Even if there aren’t currently any grants available, it’s worth checking periodically to see if new minority grants are added.
In addition, you can use the Internet to research local business groups that focus on minority-owned businesses. For example, in San Francisco, there’s a local business group called the San Francisco African American Chamber of Commerce. Groups like these may provide funding opportunities, so make sure to get involved with local groups that focus on minority entrepreneurs.
5. Enter Small Business Grant Contests
In addition to applying for government grants, you should consider entering grant contests for minority business owners.
One notable example of a grant contest is the FedEx Small Business Grant. For the past five years, FedEx has awarded small businesses with grants of up to $25,000. Each year, 10 recipients are chosen, based on how their business benefits their community. There’s also a voting portion of the competition, so if you decide to enter, make sure to spread the word!
6. Explore Alternative Financing Options
When you start considering business financing, you may not realize how many options are available. Invoice financing, equipment loans, working capital loans, lines of credit, merchant cash advances, microloans, and others are alternative forms of financing that may be a perfect fit for your business. When applying for financing, make sure you’re not overlooking these less-known financing methods for your company.
Conclusion: Be Thorough When Pursuing Minority Small Business Grants and Loans
Choosing a loan or grant program is one thing but finding the best option for your unique business is something else entirely. Before applying, you should understand all restrictions and contractual requirements a minority business loan or grant. Even benevolent charities may have strict restrictions on how and when you use the funds from their grants. In addition, they could have high interest rates, so be sure to fully understand rates before making a final decision.
However, if you understand your business needs, read the fine print, and follow the guidelines mentioned above, you can be confident in your financing decisions.
Editor’s Note: This post was updated for accuracy and comprehensiveness in May 2019.
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.