A minority-owned business is defined as any enterprise that is 51% or more owned by someone of Asian, Hispanic, Native American, or African descent.1 Under this broad definition, the number of minority business owners was on the rise prior to COVID-19:
While these numbers seemed encouraging, minority businesses are disproportionately hurt by insufficient access to the capital they need to grow their operations. More specifically, minority-owned businesses are:
As a result, minorities are often forced to rely on alternative sources of funding, such as personal savings, family support, or credit cards. Not only does this place severe limitations on a minority-owned business’s long-term growth prospects, but insufficient access to capital also puts these ventures on more precarious footing when challenges arise. The number of black-owned businesses fell 41% as result of COVID-19 – from 1.1 million in February 2020 to 640,000 by April.4
Although racial and economic disparities exist, there is a growing movement to address these funding gaps to help minority-owned businesses thrive. There now exists a range of lending, grant, and scholarship opportunities for minority merchants looking to grow their operations and become more resilient.
Some state-sponsored options include:
This online portal features more than 1,000 federal grant programs. Visit this free resource for information on how to get a minority business grant.
FAST participants qualify for up to $125,000 in financial support. Although this program isn’t exclusively designed for minorities, it is meant to help underrepresented entrepreneurs in the business world – including women, rural inhabitants, and those from disadvantaged backgrounds.
This loan program is designed for those who might not qualify for traditional bank lending. Participants are eligible for up to $250,000 in small business loans – 85% of which are backed by the U.S. Small Business Administration.
There are also many financing opportunities from the private and nonprofit sectors, including:
This venture capital firm provides financial backing to immigrant-owned businesses that demonstrate the ability to generate substantial returns.
If you’re a minority business owner who has been in operation for at least 24 months (with annual revenues less than $20 million), you can apply for loan packages of up to $2.5 million under this special lending program.
The National Minority Supplier Development Council offers loans of up to $500,000 with repayment terms spread over seven years.
There are compelling reasons why Americans of every cultural and ethnic background should support minority-owned businesses, including:
In short, supporting minority-owned businesses helps to improve your community’s financial health and increase resiliency. The question is, how do you get started?
The first step involves sharing this free resource with minority business owners – especially those who might currently be looking for financing. Becoming a partner in microloan programs is another effective way to better ensure minority-owned businesses receive affordable funding to grow their operations.
In addition, there are other ways to support these businesses:
Start shopping at minority-owned businesses – particularly local ones in your community.
If you’re also a business owner, consider adding minority vendors, suppliers, and service providers to your supply chain.
Help train the minority entrepreneurs of tomorrow by providing them with employment opportunities today.
The above tips were applicable before COVID-19. In the pandemic’s wake and these times of civil unrest, supporting minority-owned businesses has become more important than ever.
Still have questions about funding for minority-owned businesses? Schedule a free consultation with Clover today to learn about our Back2Business program and our entire line of business solutions for entrepreneurs of every background.
This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.
1 “Survey of Business Owners (SBO),” United States Census Bureau
2 “Wow! African American Small Business Ownership Up 400% in a Year, Survey Reveals,” Small Business Trends, 10 March 2020
3 “American Minority Business Ownership: A Look at the Stats,” Benetrends Financial, 18 March 2019
4 “The Impact of COVID-19 on Small Business Owners: Evidence of Early Stage Losses from the April 2020 Current Population Survey,” National Bureau of Economic Research, June 2020
5 “COVID-19’s effect on minority-owned small businesses in the United States,” McKinsey & Company, 27 May 2020