Minority business owners face unique challenges that their majority counterparts often do not experience. For new minority business owners, small business funding challenges and societal biases come on top of the usual challenges of starting their own company.
As seen in the recent article, Small Business Tips: 20 Things Every New Owner Should Know, entrepreneurs need to find mentors, have a sound plan, and focus on core priorities. This article explores four things minority small business owners should know to help them thrive and excel in their new business ventures.
1. Discrimination Exists
The ugly reality is that minority business owners face overt and subtle discrimination on the part of potential employees, customers, suppliers, and funders. Of course, some of this activity is illegal and all of it is a difficult part of being a minority entrepreneur.
There are multiple opportunities for minority business owners to stem this tide by offering exceptional service, great products and services, and creating experiences for customers and employees. However, entrepreneurs also may need additional assistance to break through discrimination and thrive.
2. Finding a Network Matters
Minority small business owners, like any owners, need a network of peers to provide perspective, mentorship, collegiality, and inspiration. Finding those resources is not always easy, given the small numbers of similar professionals in certain areas, but finding them and relying on them can be essential for success.
3. Capital Access Lags
According to a study conducted by the U.S. Department of Commerce’s Minority Business Development Agency, there are great disparities in funding for minority- and non-minority-owned companies. Specifically, the report states:
- Seventeen-percent of minority-owned companies with gross receipts under $500,000 received loans compared to 23 percent for similar non-minority companies.
- A third of those under-$500,000-receipt company owners did not apply for loans for fear of rejection, compared to 17 percent of non-minority owners.
- Among high-sales companies receiving loans, minority-owned companies received an average of $149,000 compared to a $310,00 average loan for non-minority companies.
- Minority business owners pay a higher average interest rate (7.8 percent) compared to non-minority owners (6.4 percent).
4. Many Programs Are Available
The U.S. Small Business Administration offers several programs to help minority entrepreneurs with access to funds and support. Those programs include:
- The 8(a) Business Development Program that provides contractual, managerial, and technical assistance to what the SBA deems “small disadvantaged businesses.”
- HUBZone, a program that helps businesses in urban and rural locations secure access to federal agency procurement processes.
- Community Advantage loans for businesses needing $250,000 or less that are located in underserved communities.
- Microloans such as the Opportunity Fund that provides up to $50,000.
- The SCORE Association, formerly the Service Corps of Retired Executives, which partners retired business leaders with entrepreneurs for advice, feedback, and mentorship.
In addition, many federal and local government agencies and private companies offer grant programs that are designed to help minority business owners start and succeed at their businesses.
Benetrends has been helping small business owners find the right funding options and providing business support services for decades. Our unique funding model allows entrepreneurs to use existing IRA and 401(k) funds to accelerate access to penalty-free cash that allows businesses to start and grow. To learn more about how Benetrends can help your business, download Innovative Funding Strategies For Entrepreneurs.