Written BY ALYSSA GREGORY
Re-Posted From The Balance Small Business
Small businesses are vital to economic prosperity for countless reasons, but often the journey to business ownership requires an influx of capital when you’re starting out, when you’re scaling up or when you’re simply weathering an economic shift.
Unfortunately, many entrepreneurs in minority communities may have trouble obtaining the investment capital to compete in a market where financial assistance isn’t always unbiased. This is where grants for minority-owned small businesses play an important role.
When angel investors aren’t plentiful and bank loans aren’t practical, grants offered by public, for-profit and nonprofit institutions to small business owners provide funding to sustain and expand companies with the added bonus of not having to be repaid. A bonus of receiving grant money is that you can enjoy the prestige of being chosen as a worthwhile business, and you can mention the receipt of grant funding in your marketing and promotional materials.
With minority-owned businesses growing at an accelerated rate, small business grants developed for underrepresented racial and ethnic communities in the U.S. have become a keystone to building a strong national economy that benefits us all.
Pros and Cons of Grant Money
It’s worth applying for grant money for your minority-owned business because the economy needs businesses like yours to succeed. However, there are a few downsides to keep in mind when considering grants, so make sure you have a realistic view of the opportunity.
- Free money that never needs to be repaid
- The prestige and validation of receiving funding for your business
- The ability to mention the grant award in publicity and promotional materials
- The time and effort required for the grant application process
- The detailed and strict compliance your minority-owned business must comply with to receive the grant
- The uncertainty of whether your business will receive future grant money
Who Qualifies as a Minority-Owned Small Business?
From tech innovators in rural areas to savvy military veterans in the disabled community, entrepreneurs of underrepresented populations are in no short supply. However, minority-owned businesses are typically defined as companies employing 50 persons or less, majority-owned by a minority group member, as it relates to race, ethnicity, gender, physical disability or other socioeconomic designation.
For now, let’s focus on racial and ethnic minorities in the U.S. small business community, but remember the programs mentioned below are by no means exhaustive as some are geared toward companies serving a specific need or industry, and new grant opportunities are launched every year.
Reviewing Grant Opportunities
Review all of the grants available to your business, and consider the amount of time and effort it will take to go through the application process. This can be resource and time-consuming and require a good deal of information. Getting money through a grant is not a quick-fix for financial issues, because the whole process takes time.
One of the downsides of relying on grant money is that your company may have to adhere to certain standards to maintain eligibility for the grant funds. This might mean that you need to locate your office in a certain economically-disadvantaged city, for example.
One other issue to consider is the nature of the grant funding. Once the money is spent, will you be able to receive more? Is the grant money paid out in installments? When doing your financial planning, factor in the details of how and when you’ll receive any potential grant money and don’t make financial decisions that rely too heavily on continuing to receive the funds into the future.
9 Grants for Minority-Owned Small Businesses
Government funding opportunities like those found on Grants.gov are a popular source for searching for small business capital for entrepreneurs from all cultures and backgrounds, but a good rule of thumb is to start locally before branching out your search on a national level.
If your city has a small business resource center or business development resource, search for grants for companies on a local level, as they typically have fewer applicants than a grant program available to entrepreneurs from all over the country. Often city- and state-specific grant programs prefer applicants that have the potential to hire from the surrounding community.
Organizations like Miami’s Mom and Pop Small Business Grant and Cleveland’s Green Technology Business Grant are great examples of city-specific programs that offer small business funding, as well as access to entrepreneurial advice and alternative capital solutions.
But if the city you call home doesn’t have a minority-focused initiative for small business grant opportunities, take a look at the selection below. The grant programs listed here aren’t limited to residents in a specific U.S. state or territory—and all aren’t necessarily minority-only grants—but all of the grants listed below are great for minority small business owners looking to start, sustain or improve their enterprises.
- Minority Business Development Agency (MBDA)
Despite the large pool of eligible applicants for the MBDA’s cooperative agreements (aka project grants), the agency awards average $300,000 prizes throughout the year to selected minority-owned businesses that can be renewed after the successful completion of the initial project.
- Native American Business Development Institute (NABDI) Grant
Although it is difficult to determine how much grant money is awarded for the NABDI program, funded by the U.S. Department of Indian Affairs, its primary goal is clearly to empower the economic growth of Native American and Alaskan Native business owners with a dedication to uplift their community and grow their financial security.
- Community Programs to Improve Minority Health Grant Program
The Department of Health and Human Services, in seeking to address health disparities of minority communities, awards $275,000 to $500,000 to businesses and organizations working to improve the health issues in historically disenfranchised populations.
- McInerny Foundation
If you’re searching for grants to bolster your business or organization in the state of Hawaii, then the McInerny Foundation is definitely worth your attention. The Foundation offers a wide variety of grants available to projects intended to improve the lives of Native Hawaiians and their families living in the 50th state.
- FedEx Small Business Grant Contest
More than 4,500 applicants entered this contest to win up to $25,000 for their businesses last year. That’s some stiff competition for the 10 lucky recipients, but many have gone on to see their lives—not just their companies—change for the better.
- Asian Women Giving Circle
Although not limited to businesses alone, the Asian Women Giving Circle grants are committed to supporting organizations and entrepreneurs with projects intended to promote progressive social change and address issues affecting Asian women and families.
- National Association for the Self-Employed (NASE) Growth Grants
NASE may not have funding opportunities specifically geared toward minority-owned businesses, but the Growth Grant program awards up to $4,000 to entrepreneurs of any cultural background seeking to grow their business to meet a specific need. One big plus with this grant opportunity is that a new winner is chosen each month.
- Native Language Immersion Initiative
The First Nations Development Institute will award 12 grants of up to $90,000 this year to teaching organizations or education-based businesses working to improve the preservation and proliferation of American Indian languages.
- LendingTree Guide Small Business Grant
Last year’s winners, Lavanya and Melissa Jawaharlal, were awarded $50,000 to expand their teaching initiative into a franchise that will encourage more women to pursue careers in STEM. That’s an impressive start for a small business grant program that only just began last year.
A True Rising Tide
Minority-owned enterprises constitute 29 percent of America’s businesses, and the numbers are projected to increase exponentially by 2044. Yet, minority entrepreneurs are denied loans at a rate almost 3x higher than their non-minority counterparts.
This is why grants are often one of the best ways to compensate for the very common challenge of acquiring capital investment that many minority-owned businesses face. Government grant programs are helpful, but it’s the work of private for-profit and nonprofit organizations that are truly instrumental in closing the gap.
By increasing entrepreneurship opportunities through financing to minority-owned businesses, the U.S. has the potential to see 9 million more jobs created and an increase in $300 billion of annual income introduced into the job market. And in that economic environment, all boats would rise with the tide.