Best Government Resources For Minority-Owned Small Business
The SBA defines a “minority” as a U.S. citizen
who belongs to one or more of the following
ethnic groups: African American, Asian, Native
American, or Hispanic.
The federal government defines a
As an independently owned and operated, for-profit business, which
may be known in but does not dominate, its industry. Small
businesses have a tangible net worth that does not exceed $18
In order for a business to qualify as a
It must meet small business size standards with regard to the annual
receipts and number of employees. The SBA provides the following
industry size standards for determining if a firm qualifies as a small
ManufacturingMaximum number of employees may range from 500 to 1500,
depending on the type of product manufactured.
WholesalingMaximum number of employees may range from 100 to
500 depending on the particular product being provided.
ServicesAnnual receipts may not exceed $2.5 to $21.5 million,
depending on the particular service being provided.
RetailingAnnual receipts may not exceed $5 to $21 million,
depending on the particular product being provided.
General and Heavy
ConstructionGeneral construction annual receipts may not exceed $13.5
to $17 million, depending on the type of construction.
AgricultureAnnual receipts may not exceed $0.5 to $9 million,
depending on the agricultural product.
Have to be at least 51% owned by a member of a minority
group. Even publicly-owned businesses must have 51% of
the stock owned by one or more minorities.
Is definitely one reason small
businesses fail. But it’s not the only
reason. In fact, it’s not even the top
Is typically identified as the top reason a business failed.
•Lack of product demand, low sales
•Bad or nonexistent marketing plan
•Poor money management
•A declining market
•Inability to differentiate yourself in the market
•Not understanding the needs of your customer
Other culprits include:
As Minority-Owned Business
There are two primary methods for firms to obtain
minority business certification.
The First Method is by
programWhich provides business development assistance for
small businesses owned by “socially and economically
disadvantaged” individuals. Federal law defines socially
disadvantaged individuals as those who have suffered
“racial or ethnic prejudice or cultural bias in American
The second method is by
Which is a non-profit organization that encourages the success
of minority-owned small businesses by providing opportunities
for small businesses to sell goods and services to its corporate
members. NMSDC currently has a list of 3,500 corporate
In order to qualify for minority
certification, small businesses
must be 51% owned, controlled, and
managed by a member of a minority
The NMSDC considers a minority to be an
individual with at least 25% Hispanic, African
American, Asian-Indian, Asian-Pacific, or
Native American heritage.
The 8(a) Business
Its purpose is - to level the playing field between small businesses and
big businesses by providing smaller firms with access to human
resources, technical resources, contracting opportunities, and capital
they otherwise wouldn’t have.
Once accepted into the 9-year program,
participants work with the SBA and its
affiliates to develop the following:
•An SBA-approved business plan
•A profitable business model
•A unique business identity
•A marketing plan for landing contracts
The SBA encourages 8(a) participants to
maintain a healthy balance between
their public and private sector
Participants receive training, counseling,
marketing assistance, and the opportunity to
take part in a mentoring program. Participants
also get access to SBA-backed loan guarantees
and bonding, which can help them get access to
As part of the 8(a) Business Development Program, the SBA pairs
new program participants (protégés) with well-established,
successful businesses (mentors) in the private sector.
Get the benefit of having access to some of the mentor’s resources
including human resources, technical assistance, and even financial
support. Mentors can help protégés raise capital by investing in
protégé companies as long as the mentor acquires no more than a
40% ownership stake in the company.
SBA’s HubZone ProgramThe federal government sets aside 3% of all federal prime
contracting dollars for HubZone-certified companies.
Is a geographic area determined by the federal
government to have limited economic growth. These
areas are usually urban and rural communities.
Firms that are HubZone-certified maintain a principal
office in a HubZone and also hire employees who live in that HubZone.
If their business is located in one of these
designated areas by checking the HubZone maps.
The SBA’s HubZone hotline is available from 2PM to
3PM EST every Tuesday and Thursday afternoon. Call (888)
858-2144 and use access code 3061773.
Business owners can
The SBA’s Surety Bond Guaranty Program provides project
owners with the assurance that in the event a contractor fails to
deliver on a contract, a surety company will either compensate
the project owner for the financial loss incurred or obtain another
contractor to finish the job.
Surety Bonds Program
The SBA, through the Office of Surety
Guarantees, helps small businesses obtain
surety bonds by guaranteeing bonds for
contracts up to
According to the SBA, there are four types
of surety bonds:
1. Bid Bond: Ensures the bidder on a contract will enter
into the contract and furnish the required payment
and performance bonds if awarded the contract.
2. Payment Bond: Ensures suppliers and
subcontractors are properly paid for their services
under the terms of the contract.
3. Performance Bond: Ensures the contract will be
executed according to the terms and conditions of the
4. Ancillary Bond: Ensures contract requirements that
are not performance-related are met.
Often times it’s the case, both in the public sector and private
sector, that contractors must be licensed, bonded, and
insured in order to bid on and complete construction projects.
In fact, the federal government requires contractors, who bid on federal
construction projects valued at $150,000 or more, to have surety bonds
covering the bid, performance, and payment of contracts.
Small Business Investment
Company ProgramUses private investment funds from companies across the
nation and guaranteed SBA loans to provide growth capital
to small businesses.
independent For-profitcompanies that manage the investment of these public-private funds.
While they are regulated by the SBA, each investment company licensed
to use SBIC funds has its own criteria for choosing when, where, how,
and with whom to invest their funds.
keep in mind
SBICs are not allowed to invest in re-lenders,
re-investors, passive businesses, real estate
businesses, farmland, project financings, or
businesses that do not contribute to overall
One thing to
Currently, there are no SBIC licensees located in the
following states: Alaska, Colorado, Hawaii, Idaho, Mississippi,
Montana, New Mexico, Nevada, South Dakota, Washington,
Wisconsin, Virginia, and Wyoming.
The SBA has a directory of SBIC program licensees
who service small businesses in 37 states.
Most small business owners find it
rather difficult to obtain funding for
their businesses. This is particularly
true for minority-owned firms, which
often fall short of meeting the
requirements of a traditional lender.
While the government doesn’t
hand out free money, it does
provide small business owners
with other ways to access
SBA-backed 7(a) loans are small
business loans that provide minority-
owned businesses the chance to
obtain much-needed funding while
minimizing the risk third-party
lenders take by funding businesses
through the SBA.
Microloans are small, SBA-backed
loans from third-party lenders
directly to small businesses. Loan
amounts range anywhere from $500
to $50,000. The SBA allows
borrowers to use microloans for
working capital, inventory, supplies,
furniture, and equipment.
Borrowers cannot use microloans to
purchase real estate or pay off
debts. The average loan amount is
$13,000 and borrowers have up to
six years to repay microloans, usually
at an interest rate of 8 to 13%.
You can download a state-by-
state listing of program
(BCF) is a business development
program overseen by the National
Minority Development Council. BCF’s
mission is to connect certified
minority-owned suppliers with private
Fund’s Loan Guaranty/
BCF helps eligible certified minority-
owned firms to obtain loans from its
network of affiliate lenders when they
don’t qualify for financing through more
conventional programs. BCF facilitated
its first loan in 1987.
Fund’s Loan Guaranty/
Most of the time, minority-owned small
businesses in need of funding and technical
assistance, will seek support from non-profit
organizations like the NMSDC or from state and
local governmental agencies.
Federally–funded state and
local programs for
minority-owned small firms
Funds 27 MBDA Business Centers (MBCs) across the nation. Minority
business enterprises work directly with MBCs to take advantage of
consulting services that provide MBEs with insights on getting access to
capital, researching different markets, exporting goods, and acquiring
contracts in their industry.
The SBA’s Program for Investment in Micro-Entrepreneurs funds
organizations that help low-income entrepreneurs who are unable to gain
access to capital through conventional means to establish or expand their
small businesses. These community organizations make loans of $500 to
$50,000 directly to minority-owned small businesses.
These loans can be used for working capital, inventory and equipment,
real estate, and renovations. For a complete list of SBA PRIME grantees,
for fiscal years 2009, 2010 and 2011, you can download PDF reports
directly from the SBA’s website.
Most states in the Union have a specific state department that deals with
minority-owned small business concerns. Small business owners whose
businesses are within close proximity to major U.S. cities can also find
opportunities and resources at the local level.
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