Business Funding Website & Sources
The National Small Business Association reports that less than 60% of small businesses successfully obtain substantial funding. According to the Minority Business Development Agency, minority-owned firms are less likely to receive loans than non-minority-owned, especially when gross receipts are less than $500,000. Traditional loans have restricted their standards, and women and minorities must seek out more creative and alternative sources.
The AVITA Business Center, a consulting firm directed by Kedma S. Ough provides targeted funding and grants for minority businesses. “When working with its clients AVITA often examines non-traditional funding sources first,” says Ough. With the current economy, seeking non-traditional funding sources is crucial for women and minority owned enterprises.
1. Individual Development Accounts (IDAs)
IDAs are essentially savings accounts that will match deposits dollar for dollar. The account holder must agree to use the savings for asset-building purposes. Some IDAs have income requirements, so keep this in mind if you go down this path. One program in Oregon lets participants save $3,000 and the agency matched them three times that, allowing them to use $12,000 for their business without having to pay any interest or reimbursement. For more information, review the IDA directory.
2. Capital Assistance
The Minority Business Development Agency (MBDA) dedicated $7.8 million in funding for 27 MBDA Business Centers (MBCs). MBCs will help minority businesses with access to markets, contracts and capital as well as provide consulting services. Their purpose is to interact locally with businesses and managers. In 2010, MBCs helped clients receive over $800 million through various financial packages.
3. Forgivable Loans
Forgivable loans are essentially grants. This type of loan comes with an understanding that as long as certain conditions are met, the loan will not have to be repaid. These loans often come with certain requirements, which could include hiring and training more employees. However, if you are a new or growing business, meeting those requirements should not be a problem. Forgivable loans are the perfect opportunity to create jobs and increase the scope of your business while getting substantial funding.
4. Micro Loans
One of the main issues that new businesses run into in securing funding is their lack of credit history. Without reputable credit, they are unable to get proper funding from bank loans. Many banks rely on the business owner’s personal credit, which can be difficult for a brand new entrepreneur. Hundreds of microfinance nonprofit institutions such as ACCION USA are making micro loans (around $500-$35,000) to small businesses.
5. SBIR Grants
SBIR grants, or Small Business Innovation Research grants, are a particularly viable option for businesses focused around technology or innovative services and products. The SBIR program was established in 1982 by the national government in order to stimulate innovation. The annual budget is around $2.2 billion, and the initial phase of funding can be up to $100,000, and the SBIR program specifically targets socially and economically disadvantaged businesses. Check out Zny and SBIR.gov for more information.
6. New Market Tax Credit
The New Market Tax Credit program was established to provide funding for businesses in low-income communities. The program allows business owners to borrow against their federal income tax liability to make qualified equity investments in designated Community Development Entities. The credit will last over seven years. Many states have since implemented their own new tax credit programs.
You can also contact the National Women’s Chamber of Commerce, the Hispanic Chamber of Commerce, the National Black Chamber of Commerce and the Native American Chamber of Commerce. They will be able to provide more information and help you get connected to other funding programs. Networking with other minority businesses is key for finding success with your new business. Get connected with your community and learn how other minority business owners found their footing, so you can follow suit.