How to Register a Minority-Owned Business
September 7, 2021 | Last Updated on: July 24, 2022
September 7, 2021 | Last Updated on: July 24, 2022
Across the United States, thousands of African Americans, Hispanics, Latinos, Native Americans, Asian Americans, and other minorities continue to open up successful and thriving businesses of all sizes. Certifying your small business as a minority-owned operation can open up wide-ranging opportunities for your company. These opportunities include access to certain loans and grants as well as certain federal, state, local, and corporate contracts.
Indeed, over the last decade, the number of programs designed to support minority-owned businesses has grown at an incredible pace. All across the country, there are organizations and certifications that minority business owners can utilize in their business development efforts. These minority business development agencies and organizations have played a critical role in providing much-needed assistance and resources to thousands of small business owners across the United States, opening the door to new economic opportunities for some of the United States’ disadvantaged groups. These efforts are expected to continue to grow and expand in the coming years.
If you qualify as a minority small business owner, odds are you won’t want to miss out on these various opportunities for helping grow and expand your business. In this post, we’ll cover the processes you can complete in order to make sure your business fulfills all the eligibility requirements for these business opportunities.
Many small business owners make the assumption that since they fulfill the eligibility requirements for being a minority-owned business they are automatically able to take advantage of the various business opportunities available for minority business enterprises. However, while not usually absolutely necessary, officially certifying your business as minority-owned can help set your business apart, establish its credibility, and signal that your business is prepared to take on contracting opportunities for minority-owned enterprises.
Being a certified minority-owned business can give you a leg up when competing for government contracts, such as federal contracts, state contracts, and even local contracts. It can also open up other resources, like free and low-cost business development programs and mentorship opportunities. Plus, it can make you eligible for certain types of business financing, such a business loans designed to support minority-owned businesses.
There are actually a series of official certifications and certification programs your business can complete in order to establish itself as an official minority-owned business. Each of these certifications can help in different situations and contexts, and it is often beneficial to have a series of certifications in order to maximize the opportunities and resources available to your business. In this next section, we’ll cover the big ones that every minority business owner should be aware of.
The most preeminent of minority-owned business certifications is the National Minority Supplier Development Council (NMSDC) certification. NMSDC certification makes you a member of a network of more than 12,000 certified minority-owned businesses. Further, it can help connect your business with more than 1,400 corporate members in the private sector that are continually seeking to work with minority-owned businesses.
These corporate members include, but are not limited to, Apple, Bank of America, Google, Facebook, Nike, Microsoft, Walmart, The Walt Disney Company, and Delta Airlines. Typically, these companies use the directory of NMSDC certified companies to help these research and allocate contracts to minority-owned businesses. Having an NMSDC certification will put you in a prime position for working with over 1,000 different large corporations.
Further, NMSDC certification plays an important role in helping businesses procure public-sector contracts. Many state agencies, cities, and townships recognize NMSDC certification in their contract allocation process.
The NMSDC certification process is relatively straightforward and seamless. First off, you will want to review the certification criteria listed by the NMSDC as being necessary for qualifying as a minority business enterprise (MBE). The baseline qualifications include that the business owners are U.S. citizens, located in the United States and that the business is at least 51% minority-owned.
Based on this, you will want to collect the required documentation needed for establishing your business as an MBE. This documentation is actually fairly extensive, so plan for the necessary procurement time accordingly. This typically includes but is not limited to your articles of incorporation, bylaws, proof of U.S. citizenship, proof of ethnicity for owners, partners, and shareholders (i.e. a birth certificate or other form of verification), current financial statements, stock certificates, and more.
Fortunately, the MBE certification application process can be completed entirely online. Plus, the online application can be saved and worked on for as long as you need.
The certification does include an application fee, so you will need to be prepared to pay for that as well.
Once the documentation is uploaded and the application is submitted, you will be able to schedule a site visit and an interview. These will be conducted by specialists from the NMSDC for work on certifying businesses across the country.
After all these steps are completed, your application will be reviewed in its entirety by the NMSDC Certification Committee, where a decision will be rendered. If your business is accepted, you are all set. Otherwise, there is an appeal process for businesses that are rejected.
Both the federal government, as well as state governments like California and Georgia, provide tax incentives for businesses that choose to work with minority-owned and women-owned businesses across the nation. As such, directories like that of the NMSDC are becoming increasingly important for minority-owned businesses as more and more corporations look to hand out more and more contracts to MBEs.
Another certification that minority-owned businesses can procure is through the United States Small Business Administration. The SBA provides small businesses with a certification referred to as 8(a). While the name isn’t very fancy, 8(a) certification can be powerful and open up a lot of doors for small businesses.
In particular, 8(a) certification makes small businesses eligible to win federal contracts which have been reserved for “small disadvantaged businesses.” Each year, the federal government makes it a goal to award at least 5% of all federal contracting dollars to small disadvantaged businesses across the nation.
Since the SBA certification is intended for small businesses that are economically – in addition to socially – disadvantaged, there are some financial qualifications that both you as an individual and your business must meet in order to qualify. In particular, to qualify for 8(a) certification, individuals must “have a personal net worth of $750k or less, adjusted gross income of $350k or less, and $6 million or less in assets.”
In addition to certifying MBEs, the SBA also certifies businesses located in historically underutilized business zones. These zones often coincide with areas of the United States that have a high percentage of minority residents in comparison to the rest of the nation. As such, it can pay to see if your business qualifies for HUBZone certification in addition to 8(a) certifications.
HUBZone-certified businesses are able to continue competing for contracts in other socio-economic programs being run by the SBA, so there is no issue with obtaining multiple SBA business certifications. Additionally, each year the federal government makes it a goal to award 3% of federal contract dollars to HUBZone certified companies specifically, and HUBZone certified businesses get a 10% price evaluation preference in full and open contract competitions. This can be a huge leg up for your business!
Further, in 2020 the SBA implemented a number of comprehensive changes to the HUBZone program that have made it easier for small businesses to participate and take part in the program. These changes implemented faster certification decisions (applications are now processed within 60 days of submission), a streamlined application process, and expanded early-engagement offerings that include a dedicated help desk, SBA district offices, and the training of select SBA partners to assists businesses in navigating the certification process. The SBA also expanded the number of HUBZone areas, making even more businesses eligible!
The key qualifications for HUBZone certification include being a small business, having the business’ principal office in a HUBZone, and having at least 35% of its employees be from a HUBZone (i.e. actively living in the HUBZone). This ensures that the HUBZone program benefits the entire community, not just the business owner.
Another great resource for MBEs is the former 8(a) SBA Mentor-Protégé. The program, which as of November 16, 2020, has been merged with the All Small Mentor-Protégé program to form the SBA Mentor-Protégé Program (MPP), connects small businesses with experienced government contractors.
Through the program, small business owners can learn the ins and outs of procuring government contracts, including receiving hands-on “assistance navigating federal contract bidding, acquisition, and the federal procurement process.” Small business owners can also learn about international trade, financial markets, equity investments, loans, strategic planning, accounting, marketing, manufacturing, and more!
Both the NMSDC certification and the SBA 8(a) certification are national-level certifications. However, there are also state and local certifications available that can make a difference for your business.
Many states have set goals for awarding a certain percentage of contracts every year to minority-owned enterprises. Ohio, for example, has made it a goal to award at least 15% of contracts to MBEs each year. New York, meanwhile, has set a state target of 30% for minority and women-owned businesses. Illinois has a goal of 20%. As part of this, many states have a certification process that makes MBEs eligible for certain contracts from state agencies and commissions.
Building on the prior example, Ohio has a special Minority Business Enterprise (MBE) Program that certifies Ohio businesses as MBEs. In order to be eligible for this program, businesses must have been in business for at least one year prior to applying and be at least 51% minority-owned. In addition to this, the business owner must also have control over the business and its day-to-day operations.
Once businesses are certified in Ohio, they are actually able to compete for set-aside contracts through a sheltered bidding process. This makes certification incredibly important since businesses that are not certified – even if they are minority-owned – are not eligible for these advantages.
There are also many local organizations and cities that provide certifications for minority-owned businesses.
The Southern California Minority Supplier Development Council is an example of a local organization that promotes MBEs. As an extension of the NMSDC, they serve just the businesses in Southern California, helping provide regional opportunities. The SCMSDC is just one of many regional councils operated in association with the NMSDC, so be sure to check out the resources offered by your regional council.
Meanwhile, the city of Chicago, for example, has its own certification program that businesses can use. Chicago’s Minority and Women-Owned Business (M/WBE) Certification Program focuses on providing city contracts to both MBEs and WBEs. Under this program, businesses that are either 51% owned or controlled by either one or more minority group members or women are eligible for certification.
The minority business development agency (MBDA) is a federal agency that has been tasked with the job of promoting the growth and competitiveness of minority-owned businesses across the United States.
Registering your business with the MBDA can give you access to a number of resources. In particular, the MBDA provides grants to minority-owned businesses and operates business centers across the United States designed to assist MBEs through business development resources. These resources include guidance on a variety of topics, such as how to win federal contracts. Indeed, the MBDA secures around $49 million worth of contracts for MBEs annually.
A few years ago, we completed a study at Biz2Credit that looked at the challenges faced by over 1,500 minority-owned businesses. While the study yielded a number of interesting insights, one thing that stood out is that over a third of the business owners surveyed noted that a lack of adequate funding was the biggest challenge they had faced as small business owners.
Becoming a certified MBE may not completely alleviate this issue, but it can go a long way in opening up new funding opportunities for MBEs. There are many different funding opportunities available these days that are designed to support MBEs in their efforts to obtain adequate funding to operate a successful small business.
If your business also qualifies as being a women-owned business, there are certifications for that as well. Many businesses are certified minority-owned businesses and certified women-owned businesses. This can only help expand the opportunities available for your business. The SBA, for example, oversees WOSB certification, while the Women Business Owners Corporation and the Women’s Business Enterprise National Council also provide certification of WBEs.
So, if you qualify as both a minority business owner and a woman business owner, be sure to check out certification options for both!
Registering your business as a minority-owned business can have a huge impact on its ability to succeed in the long run. With the renewed commitment to helping minority businesses throughout the United States thrive in the competitive business landscape, there are now more programs and opportunities for support than ever before. Registering your business is typically the first step in gaining access to many of these support networks. And the power of these networks should not be underestimated – they can open doors you may never have thought possible!
While the importance of registration often depends on the type of business you operate (for example, for a business that competes for government contracts it is an absolute must), there are benefits to being a minority-owned business that almost any small business can utilize.
So, if you think you might qualify for one of the above certifications, don’t hesitate to apply! There is no time like the present to start opening doors for your business!
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