By Angela Ogunjimi | AZCentral
There were close to 6 million minority-owned businesses in the U.S. as of 2013. All told, minorities own or operate more than 15 percent of all the businesses in the United States, making them an important contributor to the economy and a significant job-creation engine. Many businesses officially disclose the status of their owners to help them compete for contracts and clients. Therein lies the main advantage of minority businesses: They have the support of federal and local governments and private industry to help them start up, build and grow.
The minority business designation is founded on the notion that many barriers exist to being a member of a minority group running an enterprise and competing with large, fully networked businesses owned and operated by non-minorities. For example, minority businesses can be underfunded, have access to a smaller talent pool and sell to markets with lower spending power. In addition, when competing for clients and contracts, minority business owners can face bias, underbidding and other businesses using strategic hiring to put up a false minority front, according to the Urban Institute. In general, however, becoming certified as a legitimate minority-owned business — whether operated by a racial/ethnic minority, woman or a person with disabilities — positions your business for targeted opportunities that level the playing field.
Compete for Big Contracts
Obtaining a certification as a minority business can help you compete for government contracts at the federal, state and local levels. Law requires the federal government to set aside about 23 percent of its contracts for small businesses, among which minority-owned businesses are highly represented. Moreover, 5 of that 23 percent must go to minority-owned businesses. That 5 percent worked out to nearly $24 billion in 2011, according to the American Express OPEN Forum.
The U.S. Small Business Administration runs three loan programs that are beneficial to minority-owned businesses. Under the 7(a) program, the federal government provides a guarantee similar to a VA home loan that entices lenders to provide loans to small businesses. These loans can be up to $2 million for many purposes, including working capital. The guarantee means the government backs the business and protects the lender from default. The Microloan programs offer small, short-term loans up to $50,000 through community-based lenders. Microloans may be used for working capital, inventory and supplies, furniture and equipment. The 504 loan program is aimed at growth and job creation. It provides long-term funding to help businesses modernize and expand. In addition, minority businesses can access special funding from nonprofits and private financiers. These run the gamut from special venture capital to individual development accounts and forgivable loans.
The federal Minority Business Development Agency exists solely to provide help to small, medium and large businesses with minority owners and operators. Run under the U.S. Department of Commerce, the MBDA aims to protect and grow jobs in the United States through minority businesses. The MBDA helps minority businesses access capital, find new contract opportunities and reach new markets. In addition, the agency, through a series of business centers and partners, provides guidance on general business matters. These can range from record keeping to disaster recovery.
Knowing the Niche
Status as a minority business is also an important signal to other businesses that need help reaching certain markets. For example, a minority-owned business may help a food maker create products that appeal to the taste of a particular ethnic group. Minority-owned businesses can help supply big chain retailers with products for their specific markets. In essence, the advantage of being known as a minority business sets up your enterprise for lucrative business-to-business opportunities. Moreover, on their own, minority businesses that export goods to other countries are a significant driver of the U.S. economy, having done more than $1 trillion in revenue in 2007, according to the MBDA.
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