With the current economic environment, it is becoming tougher and tougher for budding entrepreneurs to raise the capital needed to start or grow their businesses. This is even worse for minority-owned firms. The tightening of lending standards on loans means that minority businesses need to be more vigilant about their sources of funding. According to a recent survey, only 59 percent of small businesses are able to raise the funds adequate to get their businesses running. Most companies are required to have a solid business plan and a good financial track record. It is time that small business owners looked beyond the SBA and traditional lending sources for the funds they need in their businesses. For minority entrepreneurs, minority business grants present a very good opportunity to raise capital. It is always good to look for grants that are specific to a particular minority group, sector, industry or region. This way, you get to increase your chances for getting funded and getting your business up and running in no time. Let us take a look at some of the funding sources for minorities that are worth taking a look at.
These are usually grants but with a number of conditions. It is a savings account that matches the deposit of an individual who has modest financial means. For every dollar that you save in the individual development account, you receive a corresponding match. You also have to agree to undergo financial education training and use the savings in your account for asset-building purposes such as funding your business. In addition to the money, you get to learn more about budgeting as well as receiving additional training before you can make any investment with the money.
2. Capital Assistance
The US Minority Business Development Agency (MBDA) recently provided funding for MDBA Business Centers (MBCs) which help minority firms access things such as capital, markets, contracts and consultation services. The MBCs are in direct contact with minority business owners and managers at a local level thus helping you secure a funding purchase without much struggle. There are a lot of benefits that come with getting the assistance of and MBC in addition to the money and this goes a great deal to make your business much more successful.
3. Forgivable Loans
This is a type of loan that is provided with the condition that in case you meet certain set requirements, you will not be required to pay back the loan. In all sense, a forgivable loan is the same as a grant. So long as you do everything according to the agreement, you will not be asked to pay anything back in return and as a result, you are able to fund your business without paying back a single cent. For instance, you may be required as part of the forgivable loan agreement to hire and train employees for your business. As part of growing the business, you will be required to hire employees anyway so you will be benefiting the business in more ways than one.
4. Micro Loans
The main barrier for many entrepreneurs who are seeking traditional financing is usually poor credit history. In such a case, microfinance institutions are usually the best option for funding your business. These institutions usually provide micro loans even with poor credit history and when the larger financial institutions are unable to provide you with a loan, they are the next best alternative.
5. SBIR Grants
You can always consider the possibility of obtaining a Small Business Innovation Research (SBIR) grant. This comes in handy when you are not in a position to go for venture capital yet you still need funds for early stage research and development for your business. In case your business is based around a new invention or a product, you can always get grants from these institutions in addition to networking opportunities and exposure for your invention.
Knowing where to get funding as a minority business owner is very important especially with the current economic conditions. With the right information, you will be able to make a wise decision and also get the best financing opportunities for your business. Being a minority may limit you in some way but at the same time it opens a whole new world of opportunities.