Posted at 10:13 AM
Created on June 1, 2015
On May 6th, NerdWallet hosted a Google Hangout with U.S. Department of Commerce representatives from the Minority Business Development Agency (MBDA). On behalf of the agency, Carmen West and Nick Perkins, of MBDA’s Access to Capital team, spoke with Cindy Yang, a small business expert at NerdWallet about how MBDA helps minority-owned businesses to grow in size and capacity.
San Francisco-based NerdWallet hosted the conversation as part of a mission to provide clarity on all of life’s financial decisions. To that end, NerdWallet provides various educational materials and tools for small businesses to use when tackling financial, legal and tax challenges.
What MBDA offers
MBDA provides programs and services for African American, American Indian, Asian, Hispanic and Hasidic Jewish-owned businesses.
As a minority business owner, you can access one of 44 business centers across the country. If there’s not one nearby, you can seek help at the closest location. Some business centers focus on specific industries, such as exports or advanced manufacturing.
At each center, business advisors will evaluate your business and find the appropriate resources to support your growth. For instance, if you come in with a new technology, you may need help accessing Small Business Innovation Research (SBIR) funds for conducting federal research that has the potential to go to market.
“It’s critical, especially when you have so many businesses and new businesses entering the ecosystem, that they need to be matched with the right type of business advice,” says West.
On its web site, MBDA also provides information and resources on topics like building your business credit.
A big part of MBDA’s focus is helping minority-owned businesses find funding.
Accessing capital is hard enough for any small business. But, because of disparities in capital between minority- and non-minority-owned businesses, it can be especially difficult for minority-owned businesses. According to a 2010 report commissioned by MBDA, minority-owned businesses with revenue under $500k are only 79% as likely to receive loans compared with their nonminority counterparts.
“Our biggest focus is really pushing forward the idea that minority-owned companies on average are higher performing than nonminority companies,” Perkins says. “…so they offer unique investment opportunities and unique lending opportunities that should be recognized nationwide. That hasn’t happened yet. So we’re speaking with the right people and making the right partnerships to get that message out.”
MBDA helps businesses to connect with a wide array of funding sources, ranging from traditional bank loans to construction bonding to private equity investment. During the fiscal year 2014, MBDA helped clients secure $2.1 billion in capital and financing.
As the country gets more diverse -- with minorities projected to become the majority in the U.S. by 2044 -- it’s even more important to get equal access and opportunity for minority-owned businesses, Perkins says.
“As we prepare our agency to fulfill our role as the Minority Business Development Agency, it becomes a story about preparing America for a transitioning economy and transitioning demographics,” he says.
Prepare your company for a loan or investment
It’s important for you to have a strong business plan and financial performance when seeking capital, West says.
It also helps to educate yourself on the funding options that are out there. Do your research on sites like NerdWallet before applying for a loan.
You can also seek help from a MBDA Business Center, which can help you to determine your capital need.
To gain better access to capital, West recommends minority-owned businesses maintain a strong balance sheet and financial statements and demonstrate they have a solid management team in place with operational and marketing expertise. Having a business strategy and a competitive advantage also helps, West says.
Perkins suggests that business owners develop a relationship with local banks before they need a loan. Likewise, you should get to know your accountant and focus on understanding your businesses finances, Perkins said.