Diversity, equity and inclusion (DEI) initiatives have been top of mind for many businesses, especially in recent years. Despite the strides made over time, persistent and significant racial gaps remain in the wealth of white families versus that of non-white families.
Research by JPMorgan Chase shows that Black and Hispanic families earn approximately 70 cents in take-home income for every dollar earned by white families; this gap nearly doubles when it comes to liquid assets. With less income and liquid assets available, minority business owners may have more difficulty accessing the necessary capital and financial resources to grow their business.
Fortunately, programs exist to help reduce these racial gaps and to provide the necessary support to minority entrepreneurs. Oftentimes, these programs will require companies to become certified as a minority-owned business.
Here’s how to certify your minority-owned business, as well as the benefits it can provide.
[Read: 4 Things Every Minority Business Owner Can and Should Do Today]
Why should minority businesses get certified?
Programs exist at the federal, state and local levels to support entrepreneurs from traditionally underserved groups. Therefore, the primary advantage of getting certified as a minority-owned business is increased access to opportunity.
Perhaps most notably, certified minority enterprises have a competitive advantage when it comes to specific grants and contracts. Federal and state entities often have a percentage of set-aside contracts, meaning that the contract is “set aside” for only members of a certain group — in this case, a minority business. Additionally, organizations such as the Minority Development Business Agency (MDBA) offer grants and loans specifically for minority enterprises.
By certifying as a minority-owned business, entrepreneurs can also expand their business partnership opportunities. Many larger companies set a goal to do at least a portion of their work with minority-owned businesses and other traditionally disadvantaged groups. To get on these directories and in front of the eyes of other corporations, minority businesses will need to get registered.
Finally, owners of certified minority businesses can enjoy specific training workshops, networking opportunities and other programs and services. Entrepreneurs from these underrepresented groups can connect with other professionals who are in or have previously been in a similar position, which can offer valuable insights to support overall business growth.
In addition to the NMSDC certification, minority business owners may seek out additional certification from federal, state and local entities, as these organizations tend to have additional assistance programs, grants and services set aside for minority entrepreneurs.
How can I certify my minority-owned business?
To get certified as a minority-owned business, the first step is to apply through the National Minority Supplier Development Council (NMSDC). According to NMSDC's website, it is one of the nation's largest and most prominent certification body for minority-owned enterprises, with many companies in both the public and private sector accepting and recognizing this level of certification.
Here’s how to apply as a minority business enterprise (MBE) through NMSDC:
- Before applying, ensure the business meets the certification criteria. The business owner(s) must be U.S. citizens; the business must also be located in the U.S. and be at least 51% minority-owned, operated and controlled.
- Gather any required documentation, which varies by business type.
- Complete the online application for the business headquarters’ closest regional affiliate. This includes uploading any required documentation as well as paying the application fee online via credit card.
- Schedule a site visit and interview with an NMSDC Certification Specialist. Keep in mind that the certification process can take up to 90 days to complete.
In addition to the NMSDC certification, minority business owners may seek out additional certification from federal, state and local entities, as these organizations tend to have additional assistance programs, grants and services set aside for minority entrepreneurs.
At the federal level, the Small Business Administration (SBA) offers an 8(a) certification for “small disadvantaged businesses.” Though being MBE-certified is not a prerequisite for application, most minority-owned businesses will meet federal requirements for 8(a) designation based on the SBA’s designated eligible groups. The application website offers checklist tools, training and additional information.
Several states also offer their own minority enterprise certifications, making certified businesses eligible for contracts from state agencies, boards and commissions. These entities set aside a certain percentage of their funds for certified groups such as minority-owned businesses. For example, Connecticut has a set-aside mandate of 25% for small businesses, with 25% of that amount going specifically to certified MBEs. Larger cities such as Philadelphia also have similar minority business registration programs that come with their own opportunities.
[Read: A Guide to Business Certifications for Small Business Owners]
What banking resources are available to minority entrepreneurs?
To support the growth of minority-owned businesses, Chase is providing loans to small businesses in majority Black, Hispanic and Latino communities over the next five years. The firm also offers a mentorship program in 13 U.S. cities that gives entrepreneurs one-on-one coaching and ongoing assistance. Learn more about Chase’s $30 billion racial equity commitment.
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