Starting a small business is no walk in the park — no matter your age, race or gender. Every business owner will face challenges when first starting out, such as raising capital, registering a company and developing a business plan. Not to mention, after getting a business off the ground, maintaining it is another feat entirely. That’s why 15% of small businesses fail in the first year, and only 60% make it five years.
However, minority women-owned businesses tend to face additional uphill battles that non-minority business owners don’t. For example, discrimination can hinder minority and women business owners from obtaining proper funding to start operating a small business.
COVID-19 isn’t helping the situation either. Minority and women-owned businesses were already suffering through challenges before the pandemic. For example, according to information compiled by McKinsey & Company in 2019, 31% of Hispanic businesses were already at-risk before COVID-19, and another 18% were in distress. Now, 1.1 million minority-owned businesses in the U.S. (300,000 of which are owned by women) are disproportionately affected by the pandemic.
The impact disparity partly has to do with the industries many minority-owned small businesses fall under, such as retail and food services, which require proximity to customers and workers. Also, minority-owned small businesses tend to lack remote options for workers or for accommodating customers.
Thankfully, there are resources in place for minority women that can help secure small business loans and grants, and help with networking, mentorship and professional development.
- Minority small business resources
- Financing options
- Support options
- Tips from minority business owners
Minority small business resources
Minority small business owners have a harder time starting and running a successful business. The issues that arise have a lot to do with the discrimations they face with obtaining financing.
According to the Minority Business Development Agency (MBDA), minority-owned businesses that earn less than $500,000 annually have a harder time getting approved for loans. When they do receive financing, it tends to be much lower, comes tagged with higher interest rates and has shorter pay-back durations (compared to non-minority borrowers).
The MBDA study also revealed that some minority-owned business owners avoid applying for loans out of fear of rejection. But this shouldn’t stop women and minority business owners from trying to secure loans to start and run their companies.
Here are recommendations from the MDBA to help minority entrepreneurs get approved by lenders:
- Have a good record of financial performance showing profitability.
- Showcase financial statements that are audited and verifiable.
- Show a strong balance sheet that demonstrates positive net worth.
- Have a management team in place with expertise in finance, marketing and business operations and strategy.
- Prove you have a definite competitive edge within your industry.
Keeping a record of your profits and losses and demonstrating your ability to compete in the marketplace is vital if you want to gain the trust of lenders. So be sure to save all of your financial receipts, invoices and tax returns.
There are also other ways of getting funding outside of traditional loans. Specifically, there are other sources women and minorities can tap into to gain capital. This includes grant options that are ideal for women and minority small business owners.
This platform allows you to find and apply for federal funding opportunities. They have more than 1,000 grant programs across its 26 federal agencies.
This nonprofit trade association provides educational resources and grants of up to $4,000 for small businesses and entrepreneurs.
Each month, women are granted $4,000 to start an entrepreneurial venture. One of the 12 monthly winners also has a chance of being awarded another $25,000 before the year is over.
This agency offers grants to organizations across the U.S. with Minority Business Centers, which offer procurement matching, business consulting and financial assistance for minority business owners. MBDA also hosts grant competitions for minority entrepreneurs.
This program doesn’t offer grants but does help businesses owned by women and minorities to compete for set-aside and sole-source contracts. Minority-owned businesses can also get access to a mentor-protégé program for counseling, business training and executive development.
This program offers the opportunity for small business owners to win up to $25,000 in grants. To qualify, the small business has to be at least six months old.
This foundation is made up of “empowered women empowering other women” and offers grants to female entrepreneurs. During COVID-19, the organization donated $5 million to support women-owned businesses. Each year, it provides 1,000 grants of $5,000 to female entrepreneurs within the U.S.
This program is run by the U.S. Department of Transportation (DOT) and designed to help eliminate discrimination when competing for DOT-assisted contracts. The agency sometimes offers grant funding to minority firms that provide training to help small businesses compete for contracts.
The SBA provides resources to help small business owners find grants and other services via its Small Business Development Centers. These are available throughout the nation. Use their location tool to find one near you.
Finding the right mentors and professional development resources
Starting a business on your own can feel lonely, isolating and somewhat scary. Without having a partner with experience, it can also feel impossible to achieve your entrepreneurial goals.
This is one reason small business owners can and should seek a mentor’s guidance in the early stages — and even once the business is more established. Every business owner can benefit from having an advisor that helps them overcome challenges.
According to one report, 92% of small business owners agree that mentors directly impact their growth and survival, and 70% of mentored businesses survive over five years (double the rate of non-mentored small businesses).
The role of a mentor is to help you:
- Find and eliminate weaknesses in your business model
- Expand your network
- Reach your goals
- Grow your business
- Improve your financing knowledge
- Realize your vision by acting as an objective advisor
Finding a mentor and business certification program designed for minority-owned and women-owned businesses is possible. These programs can offer networking opportunities, grow your resources and provide additional funding.
With the right resources and mentorship, small business owners can weed themselves out of challenges and maintain their companies for the long term. Here’s a look at some organizations that can help you do just that.
This program (offered by Operation HOPE) is designed for entrepreneurs in low-income communities. It offers both training and financial counseling to participants in a 12-week long program. There are also workshops available on business financing and managing money and credit.
This organization helps promote the growth of minority-owned businesses by connecting owners with financing resources, market opportunities and federal contracts.
This organization offers certification to women business owners, facilitates business opportunities and fosters network growth. It also provides resources to address the challenges women business owners face.
This program is for new business owners and provides executive-level training that includes innovative strategies for growth, acquiring financing and leveraging networks.
This organization offers support to women entrepreneurs through its 100+ centers across the U.S. It provides mentoring, training, business development and financing opportunities to over 150,000 female entrepreneurs annually.
37 Angels provides financing to women entrepreneurs, as well as mentorship and professional network support.
NAWBO helps women-owned businesses to secure rounds of venture capital. Plus, it offers workshops and training to help women entrepreneurs succeed at any stage of development.
Now, what if you want to be mentored by a female advisor? If that’s the case, then finding one may be difficult. This is an issue that’s common among women business owners because there’s a lack of minority women business leaders in specific male-dominated industries. So we put together a list of tips from women minority business owners for you to check out.
1. Create your own opportunities.
Erica Tatum-Sheade, owner of Arizona Institute for Advanced Psychotherapy Training
I always think about one of my favorite sayings— “If they won’t give you a seat at the table, bring your own chair.” I tell other women don’t be distracted by the “no’s.” Don’t be distracted by the fact that you may not look like the others sitting at the table. You have earned your seat at the table, and your voice matters. Continue to push forward. Authenticity and hard work always pay off.
2. Prepare for some setbacks.
Dr. Jennifer Tsai O.D., owner of a Manhattan-based optometry practice
Dr. Tsai opened her optometry practice in May of 2020 and explained that the beginning of the COVID-19 pandemic was especially tough. How did she manage to launch her business amid a global pandemic? Dr. Tsai explains that “Part of it was me planning ahead, and some of it was luck. I’ve learned the importance of working capital—it’s never been more crucial to have savings in place for uncertainties like the one we’re going through now.” Dr. Tsai recommends looking into money-saving opportunities, such as refinancing your student loans for a lower rate.
3. Invest time in professional development.
Dr. Terika Haynes, owner of the travel consultancy, Dynamite Travel
I engaged in many professional development courses that allowed me to become certified in many different areas within the travel industry. I attended local and national conferences and networking events to build my brain trust and gain mentors. I also worked to become certified through NMSDC and FMSDC to become a nationally certified minority small business. There were also licenses and certifications at the state, city, and county level that I had to complete to operate the business. All of these tools have collectively helped me gain extensive knowledge of subject matter expertise, management and operational duties as a business owner.
4. Be intentional about networking.
Crystal McKinney LMT, owner of Massage Therapeutix LLC
Networking is not about passing out your cards; it’s about creating connections with likeminded people and learning about their business. When you learn how to help others grow, so will your business
5. It’s ok to juggle a full-time job and a business.
Dafra Sanou, owner of JoSaBi Mariées, a virtual custom wedding dress service
Launching a small business is not for the faint of heart, especially for 9-5 ers. Time management was a huge challenge, as well as a general lack of essential information. Inspirational content is available aplenty, but content that really gets down to brass tacks about financing, taxes, tactical social media management, crisis management, etc. is scarce. Just start, and stop overthinking it. It is ok to have a full-time career and a business at the same time. Be humble and open to learning, but find your “why” and stay true to your vision.
6. Don’t go at it alone.
Carolina Aponte, CEO of Caja Holdings, an accounting and bookkeeping firm
Do not try to do it all on your own. There are things in business that are more of an investment than an expense if you want to have a good foundation for success. Seek help from the various non-profit organizations in your city to help you with your business needs and develop much-needed relationships.
A demand to be seen
Between 1997 and 2017, women-owned businesses grew by an astounding 114%. The disparity gap between male-owned and female-owned businesses is far from closed. But this is a healthy start, especially considering women-owned businesses consistently outlast men-owned businesses in certain industries (27.1% of women-owned businesses outlast men-owned companies in 24 sectors).
In 2017, there were 11.6 million women-owned businesses in America, employing nine million workers and generating $1.7 trillion annually. Minority businesses also witnessed a 38% increase between 2007 and 2016. But even with the rise in minority- and women-owned businesses, being a woman minority entrepreneur can still feel overwhelming.
However, when equipped with the proper resources, training and mentorships, the journey of entrepreneurship can remain a rewarding experience.
The post How to Start a Successful, Minority Woman-Owned Small Business appeared first on The Simple Dollar.