Starting a business is difficult for anyone. But minority business owners face unique challenges, including access to capital and opportunities to network with others in their field. According to the Minority Business Development Agency, minority business owners are less likely to receive loans than non-minority owned firms, especially if they have gross receipts $500,000 or less. And when a minority-owned business does get a loan, the amount is usually far less and the interest rate is considerably higher than for loans granted to non-minorities. In fact, this disparity alone discourages many minority business owners from seeking to funding, even when it makes good business sense.
But access to capital, especially in the post-Recession economy, is a complex matter. As in many other aspects of a business (and life), who you know can be as important as who you are. And a lack of what’s sometimes called “social capital” — mentors, role models and networking opportunities with others in their field, can be as damaging to an emerging minority-owned business as being turned down for a bank loan.
On the other hand, support and guidance from a mentor who understands the challenges minority business owners face can make a big difference in an MBE’s success. Just ask Lyneir Richardson, the Executive Director at the Center for Urban Entrepreneurship and Economic Development (CUEED) at Rutger’s University. After crashing and burning in his first business venture, he looked for a mentor and found no one who understood the unique obstacles minority businesses face. So he dedicated himself to making mentorship accessible to minority entrepreneurs through his work at CUEED.
“At CUEED, we developed effective programs to assist entrepreneurs in starting and growing new businesses,” Richardson said in a statement to Pete Bonnel of Dun & Bradstreet B2B. “Our award-winning flagship program, the Entrepreneurship Pioneers Initiative, has helped over 200 small businesses survive past the five-year mark, increase their revenues and profits, and create wealth and new jobs in urban communities,” he said.
Richardson, who is also the CEO of The Chicago Trend Corporation, a social enterprise that seeks to stimulate retail development in Chicago’s under-served neighborhoods offers emerging businesses this advice:
“Focus on being profitable, first. It is admirable that so many minority entrepreneurs want to make the world better, but the only way to have a business that survives and can scale is to be consistently profitable.”
Learning New Skills
In addition to mentors who understand their challenges, minority business owners need access to new skills. According to Alfred Edmond Jr., the Senior Vice President/Executive Editor at Large of Black Enterprise, “rugged individualism, intrepid determination and subject matter expertise” are no longer the only prerequisites to building a successful business. Writing for American Express Open Forum, he warns that minority business owners “must be students and ultimately masters of entrepreneurship itself, including developing a capacity for raising capital, financial management, strategic planning, brand positioning, mergers and acquisitions and other nuts and bolts of growth…”
But learning these complex skills can be difficult especially when there’s no one like yourself to turn to for help. Nevertheless, resources are available if you know where to look. The Small Business Administration, for example, offers two programs that help prepare new and emerging businesses for success.
- The Emerging Leaders Initiative: provides free entrepreneurship education and training for owners and executives of small businesses that are poised for growth and have the potential to create jobs. This seven-month training includes nearly 100 hours of classroom time and provides the opportunity to learn from experienced mentors and network with peers, local leaders, and the financial community. Qualified applicants are business owners who have:
- At least $400,000 in annual revenue
- At least one employee other than the business owner
- Been in business for at least three years
See the Emerging Leaders Initiative web page to learn more about the program and how to apply.
- The 8(a) Business Development Program is a business assistance program for small, disadvantaged businesses that are at least 51 percent owned and operated by women or minorities. The program helps disadvantaged business owners gain access to sole-source contracts of between $4 million (for goods and services) and $7 million (for manufacturing.) The SBA provides support and assistance for nine years — a four year development period and a 5 year transition period. During this time, minority business owners have access to specialized business training, counseling, marketing assistance, and high-level executive development. You may also be eligible for SBA-guaranteed loans and bonding assistance through the SBA.
At the Carmoon Group, we partner with our clients to help them navigate the challenges of the business world. We offer risk management guidance, a full suite of insurance products and a Small Business Capital Growth Program that matches qualified applicants with sources of capital throughout the United States. And, as a minority-owned business, we are intimately familiar with the challenges MBEs face. Just give us a call and set up an appointment to discuss your needs, or reach out to us online. We’re here to help in any way we can.