Boosting the Underrepresented: The Many Resources Available that Encourage Business Ownership for Minorities and Veterans
Minority-owned and Veteran-owned Businesses are Essential to U.S. Economy, But are these Small Business Buyers Leveraging all Their Available Resources?
In October 2021, the U.S. Census Bureau reported that an estimated 18.7% (1.1 million) of U.S. employer businesses were minority-owned, veteran-owned businesses made up about 5.7% (331,151) of all businesses. About 20.9% (1.2 million) of businesses were owned by women.
While minority-owned and veteran-owned businesses make up only a fraction of all businesses, each of these sectors are growing rapidly and are making a significant impact on the growth of the U.S. economy.
In the last few years, minority-owned and veteran-owned businesses have generated billions in revenue and jobs. Here are a few stats supporting this as provided by the Census Bureau 2020 Annual Business Survey:
- Veteran-owned businesses had an estimated $963.4 billion in receipts, 4 million employees and about $191.6 billion in annual payroll.
- The number of Hispanic-owned businesses had a growth of about 4.6% from 2018. In 2019, Hispanic-owned businesses made up about 6% (346,836) of all businesses, with an estimated $463.3 billion in annual receipts, 2.9 million employees and about $108.4 billion in annual payroll.
- There were an estimated 581,200 Asian-owned businesses with about 23.8% (138,043) in the Accommodation and Food Services sector. Asian-owned businesses had the largest estimated receipts ($874.6 billion) among minority race groups across all sectors.
- There were an estimated 134,567 Black- or African American-owned businesses with $133.7 billion in annual receipts, 1.3 million employees and about $40.5 billion in annual payroll. About 29.5% (39,705) of these businesses were in the Health Care and Social Assistance sector.
As the above numbers show, there is extreme opportunity for entrepreneurs in these communities to find success in "becoming their own boss". This article will detail a list of resources available to help you get started.
Resources available for Minority and Veteran Business Owners
Market research shows that many of the financing initiatives to minority and veteran demographic segments have a heavy emphasis on non-recourse lending to startups. However, many (including this author) believe that a lower risk opportunity for the SBA to create jobs in underserved segments and long-term value is by executing operating business acquisitions as an alternative to startups that are promoted by so called "Accelerators" and "Business Incubators". These are commonly found in major urban areas nationwide. The key is getting these acquisitions financed. Fortunately, the SBA offers several programs to assist with financing and other aspects of successfully owning a business.
The SBA: Financing and Business Development Programs
The Small Business Administration offers many programs to assist operating business acquisitions by minorities, LGBT, Veterans, rural, and women owned business and to then support their growth including the following:
- SBA Financing Programs
Please see Minority-owned businesses (sba.gov)for details on SBA minority business lending programs. The Federal Government does not provide financing to start a business but provides credit enhancement to participating SBA lenders.
Perhaps the most widely utilized SBA loan program for minority business owners is the "SBA Community Advantage Loans". This loan program supports the financing needs of businesses in underserved markets. It encourages lenders to make loans of up to $250,000 to women entrepreneurs and other minority entrepreneurs.
There is no SBA loan that is specific for veterans. However, the SBA Veterans Advantage Program waives the guarantee fee on SBA Express loans—which typically saves you about 3% on loans over $150,000. - SBA Business Development Programs
Federal contracting through the SBA 8 (a) program.
The U.S. Department of Commerce operates the Minority Business Development Agency, which is dedicated to the growth and global competitiveness of business enterprises owned and operated by African Americans, Asian Americans, Hasidic Jews, Hispanic Americans, Native Americans, and Pacific Islanders.
The 8(a) Business Development program helps socially and economically disadvantaged small businesses grow by limiting competition for certain contracts to participating businesses, allowing them to become solid competitors in the federal marketplace.
However, before you can participate in the 8(a) Business Development program, you must meet certain criteria and be certified.
HUBZone Program
The government limits competition for certain contracts to businesses in historically underutilized business zones. It also gives preferential consideration to those businesses in full and open competition.
Joining the HUBZone program makes your business eligible to compete for the program’s set-aside contracts. HUBZone-certified businesses also get a 10% price evaluation preference in full and open contract competitions. - SBA Trainings Programs
The Emerging Leaders Initiative is an intensive executive-level series intended to accelerate the growth of high-potential small businesses in America’s underserved cities. The program provides customized training for C-level executives with demonstrated business sustainability. Participants create a three-year strategic growth action plan with benchmarks and performance targets to help them emerge as self-sustaining businesses creating jobs and building communities.
Alternative Financing Programs
As an alternative to startup-based financing programs and the SBA, there are funds and organizations that focus on financing acquisitions within minority and veteran communities. One such group is "New Majority Capital" of Providence, RI .Their target deals have 4X EBITDA or lower and all loan applicants must attend a five-week business management course that they manage. New Majority Capital’s mission is to offer an alternative "non-extractive funding source" to the SBA for their clients, without the need for personal guarantees.
"Acquiring a business from a retiring owner and running it while maintaining the past owner's legacy is one of the ways that can help close the wealth gap in this country. That is what drives our work at New Majority Capital," said Havell Rodriguez, Founding Partner of New Majority Capital.
Another example of non-traditional lending to underserved communities is the RSF fund RSF Social Finance | Integrated Capital for Catalytic Impact, an established fund that provides financing to social entrepreneurs since 1984.
Reach Out and Learn More
Many programs exist to help minority and veteran business buyers achieve their entrepreneurial goals; you just need to know where to look. Start your journey by contacting the traditional and non-traditional lenders in your community that emphasize acquiring an operating business. You should also seek a detailed understanding of SBA programs available for business acquisitions, business development, and other resources to help you succeed.