Minority Owned Business Funding

Access to the funding needed to start a business is almost always an issue, especially with those owned by African, Hispanic (Latino), or Asian Americans, who are more likely to lack the financial resources necessary to achieve adequate capitalization. A 2000 report published by the U.S. Minority Business Development Agency concludes that the growth of Minority Business Enterprises (MBE or MWBE) has contributed to the strong growth of the U.S. economy, but that growth cannot continue without removing capital formation constraints.

There two basic ways to fund a business: debt and equity. Debt financing involves borrowing funds from a lender with the promise to repay. Loans can come from friends and family, or from lenders in the public or private sector.

By far, the most popular small business lending source in the public sector is the Small Business Administration. The SBA does not actually make loans - they merely guarantee that the borrower will repay the loan back to the lender, typically a bank. Therefore it makes sense to look first to a bank who is a certified or preferred SBA lender. Click here to see which banks do the most SBA lending. Most of the SBA's programs are oriented toward small businesses in general, however their Prequalification Pilot Loan Program is focused on MBE or MWBE firms.

Equity financing means funds are raised by selling a share in the business to investors. At the startup and infancy stages of a new venture, investors are typically friends and family of the founders. The next stage of financing often comes from "Angel" investors, who are individuals willing to invest their own money in new ventures, usually in the range of $20,000 to $100,000 per venture. If you are looking for Angel investors, check out Garage.com and ACE-Net.

The next stage of equity funding will typically come from "Venture Capital" firms, whose business it is to find high potential ventures to invest money raised from individuals, companies, or other financial institutions. As with Angel investors, VC firms vary greatly in terms of areas of interest and size of investment. In general, most VC's are looking for deals over $1,000,000. Click here for Yahoo's directory of venture capital resources.

For more information on starting and running a business, please see our sister site at Diverse Strategies.

Source: http://www.ethnicmajority.com/MBEfunding.htm