Desire to clock out of your current job for the last time and become your own boss? Then starting your own business is the first step.
It can seem like a daunting prospect if you’ve never tried it before.
You’re at an advantage when you’re in the know. That’s why we put together this guide to help you learn how to start a minority-owned small business (MOSMB) successfully.
- What constitutes a minority-owned business
- How to get certified as a minority-owned small business
- How to apply for grants or loans for your MOSMB
- Steps to take to start a MOSMB
- Valuable resources for small business owners
Find What You’re Looking For
What Is a Minority-Owned Business?
A minority-owned business is 51% owned, operated, and controlled by at least one U.S. citizen with at least 25% heritage in one of the minority groups.
Minority groups include:
- African/Black American: From any black racial group in Africa
- Hispanic Americans: From Mexico, South or Central America, the Caribbean basin, or any Spanish-speaking areas of Latin America
- Native Americans: American Indian, Native Hawaiian, Aleut, or Eskimo, and regarded by the community of which they claim to be a part.
- Asian Pacific Americans: From China, Japan, Korea, Taiwan, Cambodia, Laos, the Philippines, Guam, Samoa, the U.S. Trust Territories of the Pacific, or the Northern Marianas.
- Asian-Indian Americans: From India, Sri Lanka, Bangladesh, Pakistan, and other subcontinental Asian countries.
If you meet all these qualifications, you’re halfway through the process of starting a minority-owned business. The next step is to get certified and then look for funding to start your MOSMB.
Get Certified as a Minority-Owned Small Business
Tasks like naming your business, finding the perfect spot to set it up, and creating a log are obvious.
But how about the less-heralded, equally critical steps like certification?
If your MOSMB meets the criteria, certification could unlock the door to growth. You can expand your revenue streams and extend into a business-to-business (B2B) model so you can do business with corporations and the government.
Benefits of MOSMB Certification
Certification isn’t a requirement to start a business. However, it immediately increases your business’s appeal and provides access to:
- Private and government contracts
- Government grants
- Networking opportunities
- Training, technical guidance, and other valuable resources
Access to Private and Government Contracts
Your MOSMB can compete for set-aside and sole-source contracts if it has the SBA 8(a) designation. In such cases, the government will “set aside” contracts under $150,000 for small businesses.
Some contracts are available only to small businesses participating in SBA contracting-assistance programs – not just any small business.
Although most contracts require competitive bids, some sole-source contracts are awarded without a bidding process when the business fulfills the contract requirements without a bidding process.
Many corporations also have policies for doing business with disadvantaged business enterprises.
Access to Government Grants
MOSMBs prefer access to government grants through the Minority Development Business Agency (MDBA). This agency offers over 1,000 grant programs and access to about $500 billion in annual awards.
To apply for MDBA grants, you’ll need to:
- Register your business to apply. Get a unique DUNS identifier number and register with SAM.gov using your employee identification number (EIN).
- Visit the specific grant page on the MDBA website to understand the grant announcement and then go to Grants.gov to download the grant package
- Attend a pre-application teleconference to know more about the grant and its requirements
- Review the key sections of the grant announcement plus the selection process, and include all the eligibility and deadline requirements in your application
- Prepare and submit a fully completed application through Grants.gov
Access to Networking Opportunities
Several bodies like the Small Business Administration (SBA) agency and the National Minority Supplier Development Council (NMSDC) offer various networking opportunities for certified businesses.
Such opportunities help you connect with other certified MOSMBs to share best practices and support and learn from one another.
For instance, SBA’s Emerging Leaders Initiative supports high-potential small businesses in America’s underserved cities. Through the program, you can access:
- Peers for marketing and networking opportunities
- Mentors for guided growth
- Specialized workshops
- Access to peers, civic leaders, and the financial community
The NMSDC also offers various networking events and business fairs where you can interact, inspire, and share ideas and best practices with other MOSMB owners. Plus, they offer the chance to apply for exclusive grants and scholarships.
Access to Training, Technical Guidance, And Other Valuable Resources
When your MOSMB is certified, you also get access to:
- Marketing assistance
- Advanced management education programs
- Technical guidance
- Training and seminars
- Business opportunity fairs
- Access to working capital loans and specialized financing
- Mentorship possibilities like the Mentor-Protégé program
How to Get Certified as a MOSMB
Assuming you have the required business licenses and permits, the next step is to get your MOSMB certified.
There are multiple ways to get your MOSMB certification: the federal government, state, local agencies, or private sector.
The first step is to meet all the qualifications for a minority-owned business as stipulated by the U.S. Chamber of Commerce. The business must be:
- At least 51% owned by at least one minority group member who is a U.S. citizen
- Managed and operated by the minority ownership member(s)
- For-profit and physically located in the U.S. or its trust territories
It’s not enough to be a U.S. citizen and a member of a minority group. You’ll need to show documentation that includes proof of citizenship, financial statements, or a driver’s license, and these vary based on the type of business you want to be certified.
Federal MOSMB Certification
If you’re seeking NMSDC certification, the application process is relatively easy:
- Review the certification criteria to ensure your business qualifies
- Get a certificate of incorporation, articles of incorporation, stock ledger and stock certificates, bylaws, amendments, and other required documentation
- Complete the online application on your nearest NMSDC’s regional affiliate
- Pay the application fee online using your credit card
- Upload the required documentation
- Schedule a visit and interview with an NMSDC Certification Specialist
Once you send all application materials, the NMSDC Certification Committee will review your application. The whole process can take anywhere from 45 to 90 days to complete.
If approved, the Committee will submit your application to the NMSDC Board, who will also review and give their final approval or reject your application.
If the Board accepts your application, you’ll get a notice via email. However, if they reject it, you can submit a letter of appeal with your concerns.
State & City-Level MOSMB Certification
On top of the federal certification, you can seek out certification from the SBA or individual states and cities in which you’re located.
The SBA offers an 8(a) certification, which means your business is eligible to win federal contracts reserved for small disadvantaged businesses.
At the state level, you can find certification processes in place. For example, businesses certified through the MBE certification process can win contracts from state boards, agencies, and commissions in Ohio.
You can also apply for MOSMB certification at the city level. For instance, there’s a Minority and Women-Owned Business Certification (M/WBE) Program in Chicago, which is valid for five years and gives approved businesses access to bid on large city contracts.
You may also check your local city business or state agency for more avenues for you to get certified.
Now that you know how to get certified let’s see how to access financing to run your business.
Apply for Grants
Despite the growing importance of MOSMBs, they face several obstacles, especially in getting financing for their businesses.
In fact, MOSMBs are much less likely to get loans than their non-minority counterparts, especially for ventures with gross receipts below $500,000. In addition, the loans small businesses get from lenders are usually $150,000 or smaller on average.
Fortunately, various resources offer MOSMBs access to business loans at federal and state levels. Here are a few options to consider:
- SBA funding and special COVID-19 relief options
- SBA-approved lenders
- Grants.gov distributes over 1,000 small business grants
- The Coalition to Back Black Businesses Fund awards 300 grants of $5,000 each.
- The U.S. Department of Agriculture (USDA) offers grants to minority small businesses from $10,000 to $50,000.
- Rebuild the Block (RTB) awards 15 grants monthly to Black business owners affected by the pandemic.
- First Nations Development Institute (FNDI) provides financial and technical support to Native American organizations
- The National Black MBA Association awards grants ranging from $1,000 to $50,000 to Black business owners through the Scale-Up Pitch Competition
- Asian Women Giving Circle (AWGC) awards Asian American women-owned businesses grants of up to$15,000.
- SoGal Foundation awards Black women founders and Black nonbinary entrepreneurs between $5,000 and $10,000.
- FedEx gives grants ranging from $15,000 to $50,000 to winners of its nationwide Small Business Grant Contest.
Apply for Loans
While minority founders have historically struggled to secure business loans because of credit discrimination and inequality, there are still reasonable loan options you can apply to:
- Accompany Capital offers immigrants, refugees, and women entrepreneurs microloans of $500 to $50,000
- SBA’s Microloan Program: offers loans of up to $50,000 averaging $13,000 each, or the Community Advantage Loan Program, which encourages nonprofit financial entities and other community lenders to make loans up to $250,000
- Business Consortium Fund: offers loans and credit lines from $250,000 to $750,000
- USDA offers up to $1 billion in loan guarantees to local banks and direct lenders operating in rural areas. You can also apply directly for a USDA loan from $200,000 to $5 million with a maximum cap of $10 million.
- Business Center for New Americans offers microloans of $500 to $50,000
- Union Bank offers up to $2.5 million through their small business loan program
Ultimately, you get to decide on the financing you need for your MOSMB. Once you apply for and get the grant or loan, you’ll get closer to running and managing your business successfully.
However, there are still some business basics to cover before you’re fully set up and functional. We’ve covered those basics in brief below.
Develop a Business Plan
Brian Tracy, a motivational public speaker, and self-development author, said, “A goal without a plan is only a dream.” The same goes for a business without a plan – you can’t move forward without ironing out the details.
Specifically, you need to:
- Choose your idea
- Write your plan
- Register your business
Choose Your Idea
Coming up with a business idea isn’t a quick or easy process. But you can start by finding out about your experience, resources, interests, and the problem you can solve.
You can look around your locality and identify a problem you can solve, and see if you have an opportunity to set up a MOSMB that can work with and benefit people.
Alternatively, you can start your MOSMB through a franchise and go from there.
Write Your Plan
With a solid idea in hand, the next step is to iron out the details with a plan of action. A business plan is crucial because it outlines your course of action and can help you access financing.
There’s no one-kind-fits-all business plan template because they vary based on the business you want to start or what you’ll use the plan for.
Write everything you need and the actions you’ll take. Draft a few different versions of the plan based on the end goal, for example, applying for a loan.
Your business plan should include fundamental sections such as:
- Executive summary: A statement of your business’s unique value proposition
- Company overview: History, leadership or management team, and location
- Market analysis: The industry you’re in and how you differentiate yourself from the competition
- Business organization: Legal business structure and key executives
- Products and services: What you’re selling and your pricing plan
- Marketing and sales plan: How you’ll get and retain customers
- Financial plan and projections: Your revenue forecast and other projections for three or more years
- Appendix: Additional information that’s not covered in the plan, for example, your CV
You can also include information relevant to your MOSMB, like certification, which potential business partners, lenders, or other stakeholders need to know.
Register Your Business
Once you’ve checked off the legal requirements for your MOSMB, the next step is to register the business. Here, you want to think about things like:
- Business name registration with the proper agencies
- The business entity type or legal structure
- Tax registration – federal, state, and local
- Business licenses or permits needed based on location and business type
That’s about it. With the above information, you should at least be able to set off the process of registering and certifying your MOSMB.
Other Resources for Small Businesses Owners
Need help during your MOSMB startup process, here are some business resources you can consult:
- National Minority Business Council: Offers programs that provide education and growth opportunities to MOSMB owners
- Black Founders: Offer programs that connect Black tech MOSMBs to funding sources, networking opportunities, and educational resources
- Change Catalyst: Provides education and funding for MOSMB owners who want to get their business up and running
- U.S. Minority Chamber of Commerce: Offers programs, growth resources, networking opportunities, and advocacy groups that support favorable legislation for MOSMB entrepreneurs
- SCORE: An SBA resource partner that provides invaluable help through mentorship, coaching, or advisory
- U.S. Department of the Interior Native American Business Development: Offers technical assistance in starting businesses and accessing private and government procurement opportunities
- DigitalUndivided: Guides Latina and Black women founders through the startup pipeline to success
- Visible Hands: Provides company-building services and investments up to $200,000
- Operation HOPE: Offers entrepreneurial training programs to help entrepreneurs in low-income communities.
- Black American Startup Resource List: Offers 742 resources with a list of accelerators, investors, or events
Learning how to start a minority-owned business is much like starting any other business. However, you need to consider the certifications you can get and the unique opportunities they bring to help foster growth and success for your business.