Minority-Owned Business Benefits and How to Get Certified
Business ownership comes with its fair share of obstacles. Minority entrepreneurs, however, face distinct challenges. Case in point: a minority business owner is three times more likely to be denied a loan than a white counterpart. Luckily, there are programs available to help you level the playing field and reach your goals.
These programs offer thousands of minority-owned businesses benefits every year. The assistance can be the difference between lagging behind competitors and becoming leaders in your industry. For qualified applicants, advantages include everything from increased networking opportunities to more favorable odds in obtaining lucrative government contracts.
What Are Minority-Owned Business Certifications?
As a small business owner, you’re aware that certain certifications and accreditations can help you achieve success. For example, the Better Business Bureau accreditation program has been helping customers find and vet companies for over a hundred years, leading to billions in transactions.
For minority-owned businesses, becoming certified in two main programs can lead to many tangible benefits.
The National Minority Supplier Development Council (NMSDC) has been helping minority-owned businesses realize these benefits for years. They’ve created the Minority Business Executive program to provide certification that can give you access to opportunities that you may not have had before.
The Small Business Administration (SBA) has its own initiative, the 8(a) program. Although there are multiple programs—the 7(a) and 504, namely—that provide loans, this one does not directly involve money. Instead, the SBA aims to assist socially- and economically-disadvantaged small businesses with winning government contracts. Participation only lasts for 9 years, so make sure it’s the right time to apply.
Once certified, you’ll be able to take advantage of all the benefits these programs have to offer.
General Benefits of Minority-Owned Business Certification
Whether you apply for just one or both, there are many great advantages of minority-owned business certification.
Both will recognize your company as a Disadvantaged Business Enterprise (DBE). The MBE and SBA 8(a) programs have distinct benefits, but both increase your exposure.
If, for example, you rely on vendors or B2B transactions, certification can help other businesses find you. Many companies prefer to work with minority-owned businesses. A lot of them actually go out of their way to make sure they work with disadvantaged entities, planning to devote a certain percentage of their contracts to such organizations each year.
The same goes for your customers. Some people don’t mind going out of their way—or even spending a little more—if it means they can support a minority business owner. For example, Hispanic members of a community might be more likely to visit a Hispanic-owned convenience store over other competitors. People want to have a sense of togetherness and will frequent a business they believe they’re helping or feel a kinship toward.
Without a certification, however, these same consumers and vendors may not be able to find you. With it, you can access databases of businesses and government entities looking to work with you. You’ll also be able to market your status to potential customers, opening up a new audience to your business.
Small Business Tip: At this time, there are no specific minority-owned business tax benefits. However, there are federal tax credits to those operating in underserved communities filled with socially- and economically-disadvantaged citizens. If you serve one of these areas, your minority-owned business may benefit from a tax break.
Minority Business Executive Certification Benefits
Run by the NMSDC, the MBE program aims to assist minority business executives through education and networking. They aim to do this in a few ways.
The NMSDC offers both personalized and group training courses to its members.
The following are some of the business development programs and seminars offered through the program:
- Minority Business Executive Program (MBEP) course: General management training
- Emerging Young Entrepreneurs (EYE): For young, high-potential business owners
- Advanced Management Education Program: Tailored for high-potential MBEs
- Program Managers Seminar: Conference for MBE suppliers at all experience levels
- Leadership Week: Weeklong series of educational workshops for program members
Attendance at these conferences and classes will give your business insight into modern management, marketing and other strategies to promote growth.
Business Opportunity Fairs
In addition to educational events, the NMSDC also brings you face-to-face with potential clients and customers. They aim to get your company in front of hundreds of prospects that want to work with minority-owned businesses in one place.
One of the most attractive parts of MBE membership is access to the NMSDC’s corporate partners. The list is filled with Fortune 500 companies, including giants such as Google, Apple, IBM and Johnson & Johnson.
These companies have minority-owned business initiatives. Being a member can get you to the front of the line when they’re searching for a company to do business with.
Another key advantage of MBE certification is that you get to meet and consult with other members. These mentors can provide invaluable insights into how your business can be successful.
In some cases, members even come together to form joint ventures.
SBA 8(a) Certification Benefits
The SBA 8(a) program is not intended specifically for minority businesses. Instead, it focuses on assisting all socially- and economically-disadvantaged owners with lucrative local, state and federal government contracts.
While it doesn’t provide the events and corporate partnerships that the NMSDC MBE program does, the government contracting opportunities and other benefits make the 8(a) program a great resource.
Access to government contracts is the main way the SBA 8(a) program benefits minority-owned businesses. While both provide an advantage over those without certification, they’re awarded in one of two ways:
Competitive Set-Aside Contracts
For projects under $150,000, government agencies will usually set a contract aside for small businesses. Most of these will be open to anyone that can fulfill them. Some, however, are specifically set aside for 8(a) members.
Either way, you’ll still need to bid on them. Preference may be given to minority-owned business if there are similar bids.
In some cases, your business may be the only eligible applicant that’s able to fulfill a contract. This means you’ll face no competition, eliminating the bidding process.
These are often lucrative contracts. They are worth up to $4 million for goods and services or $6.5 million for manufacturing projects.
Other than being 8(a) certified, you’ll need to register on the System for Award Management (SAM) website to be eligible for sole-source contracts.
One of the advantages minority business enterprises seek from the 8(a) program is the Mentor-Protege program. The SBA gives smaller, newly-certified businesses the opportunity to work with mentor companies. The goal of this relationship is to offer guidance that can be used during the 9 years in the 8(a) program and beyond.
Some of the ways mentors have helped their protege companies include:
- Helping businesses new to government contracting learn how to compete
- Providing financing through investments and/ or loans
- Giving technical/management advice
- Forming joint ventures
How to Get Certified
Now that you know the advantages of minority-owned-business certification, you might be convinced that it’s right for you. Whether you choose to apply for one or both of the NMSDC MBE or SBA 8(a) programs, the process is simple.
The SBA 8(a) program is meant for business owners of certain racial, ethnic, gender or military backgrounds. For now, we’ll focus on the first two.
For more information on programs that help veteran and women-owned businesses, keep up with our business management blog.
The SBA and NMSDC require that businesses wishing to be certified be at least 51-percent owned by one or more qualifying minority owners. The MBE program has a strict requirement that the owner(s) be of at least 25-percent minority heritage. Applicants must also be United States citizens at the time of certification.
Eligible racial and ethnic groups include:
- Asian Americans
- African Americans
- Hispanic Americans
- Native Americans
- Alaskan Natives
- Hawaiian Natives
- Those belonging to a state- or federally-recognized American Indian tribe
The way you run your business itself also determines eligibility. To qualify, you must:
- Run a for-profit company
- Be located within the territorial U.S.
- Be an active owner, having a hand in the daily operations and decision making of the company
The SBA 8(a) program also has some extra requirements for their applicants. You must:
- Be classified as a small business under government size standards
- Not be a former participant in the program
- Have a personal net worth under $250,000
- Not have an average adjusted gross income over $250,000 for 3 years
- Have less than $4 million in personal assets
Both institutions will verify your eligibility via screenings, interviews and site visits based on the information you provide in your application.
Applying for the NMSDC MBE Program
If you’ve decided to apply for the MBE program, your first step is to register on the NMSDC website. After that, you can get your documents together and begin to fill out the application.
Some of the things you need to have on hand include:
- Proof of citizenship
- Business history
- Agreements pertaining to ownership, operation and control of the business
- Certificate/ Article of Incorporation (if applicable)
- Bylaws and amendments (if applicable)
- Stock certificates and stock ledger (if applicable)
- Voided checks and bank statements
Once you complete the application and pay the fee, it takes up to 90 days to process. If the certification committee approves you, the application will be handed off to the board for final judgment. If they deny you, you’re able to file an appeal to be reconsidered.
Applying for SBA 8(a) Certification
First, make sure to register with the SAM. This registry is run by the General Services Administration and allows you to conduct business with the government.
To register, you’ll need:
Next, create an account on the SBA certification page. They’ll ask you to provide certain information about your business at this point.
Make sure to have the following on hand:
- Business plan
- Financial documents
- Bank statements
- Profit and loss statements
- Personal and business tax forms
Once you have your account set, you can follow the simple instructions for the application process.
Note: SBA 8(a) certification is contingent upon yearly reviews. You must ensure your business follows all guidelines or else your membership will be terminated.
Wrapping Up the Benefits of Being a Certified Minority-Owned Business
Whichever certification you apply for, it will open doors for your business that were previously closed or hard to break through. The NMSDC MBE program is a great resource for training and networking, giving you the tools you need to create and sustain success.
The SBA 8(a) program provides you with bidding priority for government contracting jobs that could change your business forever. If you’re not convinced, look at the numbers: In FY2017, 8(a) members were awarded over $8 billion each in set-aside and sole-source contracts.
No matter which minority-owned business benefits interest you the most, it’s worth looking into seeing if applying for certification is right for you. To learn more, contact your local SBA or NMSDC office for more info.