How to Get a Minority Owned Business Certification
While the business landscape continues to improve for minority entrepreneurs, the many challenges in access to capital, unfortunately, still exist.
In order to help bridge the existing gap, both the government and public corporations have programs that allot a certain percentage of contracts to minority-owned businesses.
As a certified minority-owned business, you have direct access to these contracts in online directories – often with no or little competition. Besides access to new sales, many of these programs offer technical assistance, mentorship services and networking opportunities to help you connect with others in your industry – all vital for business growth.
Like everything else in business, the certification process doesn’t come without a few headaches. However, we’re here to help, so don’t get discouraged.
Who is considered a minority?
First things first: to get a minority-owned business certificate, you have to prove your minority status. Most of these programs define a “minority” as an individual having at least 25 percent African-American, Hispanic Americans, those of Native American origin, Asian Pacific Americans and subcontinent Asian Americans. Applicants must be prepared to provide documentation to support their minority claims. You must also be a U.S. citizen or legal resident.
For the business to be eligible, a majority of the business – at least 51 percent – must be owned by the minority individual, and the business must be managed and run on a daily basis by that individual.
Below is a guide to three nationally recognized minority-owned certificates that give you access to corporate and federal contracts.
Minority Business Enterprise
With a Minority Business Enterprise (MBE) Certification, business owners have access to corporate and public-sector contracts.
One of the largest providers of the MBE is the National Minority Supplier Development Council (NMSDC) whose impressive list of corporate partners includes IBM, Microsoft, Nike, L’Oreal, Inc. and Macy’s.
With a certificate, business owners are invited to take part in exclusive networking events, mentoring services, advanced management training programs, loan programs and business opportunity fairs in NMSDC’s 23 regional affiliates across the country. Certificate holders become a part of a network of over 12,000 fellow minority-owned businesses, which can prove to be beneficial for relationship-building.
To begin the certification process, contact your NMSDC regional affiliate to begin an application. Once approved, the program will connect your business to suppliers in the region. Be aware that someone from NMSDC will visit your business to verify the information provided on your application. Visit the website for full details on the certification process.
Cost: Varies by region
Check out 11 minority business loan options here.
SBA 8(a) Business Development
According to the Small Business Administration, the 8(a) Program is “an essential instrument for helping socially and economically disadvantaged entrepreneurs gain access to the economic mainstream of American society.” The program’s goal is to “award at least 5 percent of all federal contracting dollars to small disadvantaged businesses each year.”
As you can imagine, the application process can prove to be cumbersome, but the benefits are definitely worth it. Due to the rigorous application, the SBA offers free one-on-one counseling and other support in its local offices to assist applicants.
Those who qualify must be a small business that is 51 percent minority-owned, but separate eligibility requirements exist if the business is owned by American Indians, native Alaskans, native Hawaiians, community development corporations, or “small agricultural cooperatives.”
Since 8(a) is a business assistance program aimed at helping socially and economically disadvantaged individuals, you must prove your social and economic “disadvantage,” which the SBA defines as individuals “whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not socially disadvantaged.”
As a result, to qualify, the business cannot be owned by someone whose personal net worth exceeds $250,000 and whose average adjusted gross income for three years must be no more than $250,000. Be prepared to submit tax information and sometimes submit spousal financial records to prove your current financial situation. The SBA also requires certificate holders to demonstrate “reasonable prospects for success” by being in business in its “primary industry classification for at least two full years immediately prior” to applying. Applicants can waive the two year requirement if they meet the five criteria described here.
The applicant must also show good character and is required to submit a statement of personal history through SBA Form 912, which will ask about past criminal offenses.
If you’re not disenchanted yet, consider the benefits of getting a certificate through the 8(a) Program:
- Minority-owned businesses gain access to contracts in the public sector and certain government agencies as the Small Business Act requires these agencies to complete a portion of their federal contracts with 8(a) certificate holders.
- Businesses in the 8(a) program can also form teams to bid on contracts, which makes it possible for small businesses to win larger contracts and sales.
Since the application process can be stringent, the SBA suggests prospective applicants first take an online self-evaluation course to determine whether they’re eligible before starting the electronic application. You’ll need to create a profile at SAM.gov before you can get certified through the SBA website. Applicants must also register in the Central Contractor Registration database in order to do business with the federal government. Again, be prepared to provide financial statements, tax returns and personal history statements.
During the nine-year certification (with annual reviews), minority-owned businesses receive four years of developmental support, followed by five years of transitional support, which includes specialized business training (like negotiations tactics), mentorship services and marketing assistance.
Need business funding? Learn more about small business loan options here.
Disadvantaged Business Enterprise (DBE) certificate
Since 1983, the Department of Transportation (DOT) mandates that at least “10 percent of the funds authorized for the highway and transit financial assistance programs” go to minority-owned businesses. That means that all departments that receive funding from DOT, such as state transportation agencies, must abide by DBE program terms in order to comply with the DOT’s requirement.
Aside from general eligibility requirements, minority business owners hoping to get a DBE certificate must have direct control of the management and day-to-day operations of their business and must not have a net worth that exceeds $750,000.
For an application, contact your state or local transportation entity. Be prepared to provide evidence of company’s size, independence, ownership and control. As part of the application process, a state representative will typically visit the business. If your state has multiple DBE programs, apply for one makes you eligible for all of them. Some MBE programs also accept DBE certificates, so there’s no need to apply multiple times.
The bottom line
The saying “it takes money to make money” is a powerful idea. With the many challenges that make it harder for minorities to access capital for their business, it’s all the more uphill to achieve success. The application process for the certificates above may be arduous, but being a certified minority-owned business can help give you a leg up in the most competitive of times.