There are currently four million minority-owned businesses in the U.S., with sales totaling close to $700 billion. If you fall into this category, you might consider getting your business certified as a Minority Business Enterprise (MBE).
An MBE certification allows you to benefit from the many public and private programs designed to help minority-owned businesses, like minority-owned business grants. In this guide, we’ll look at the advantages of certification and how you can get started.
What is a minority-owned business?
In the U.S., a minority business enterprise is defined as a company that is at least 51% owned and operated by an individual that is at least 25% African American, Asian, Hispanic, or Native American. If the company is publicly-traded, then the stock must be at least 51% minority-owned as well.
Benefits of getting certified as a minority-owned business
Here are some of the biggest advantages to getting certified as an MBE:
- Federal contracts: Many federal agencies are required to give a certain number of contracts to certified minority-owned businesses. So this certification could lead to new opportunities you wouldn’t have found otherwise.
- Federal tax incentives: The government provides federal tax incentives to businesses that choose to work with minority and women-owned businesses.
- State tax incentives: Some states, like Georgia and California, offer state tax incentives to companies that use minority-owned businesses. For instance, Georgia provides state income tax credits to companies that use minority subcontractors.
- Access to funding: Across the country, various programs are available to help minority-owned businesses receive access to funding. These programs may provide grants, loans, and business mentorship.
How to get certified as a minority-owned business
If you want to get certified as a minority-owned business, there are multiple ways you can go about it. The federal government, state, local agencies, and the private sector all provide their own form of certification.
Each agency has its own formal certification process and criteria. While there’s some overlap between them, it’s a good idea to understand the subtle difference between them.
Federal government certification
If you want to succeed in the public sector, you could benefit from the Small Business Administration’s 8(a) Business Development Program. This program is designed to help “socially and economically disadvantaged” businesses.
According to the Code of Federal Regulations of the United States of America, “economically disadvantaged” individuals have a harder time competing in the market due to fewer opportunities for capital and credit.
To be eligible for the 8(a) Business Development Program, a small business must meet the following requirements:
- Meet the SBA’s small business standards at the time of application and throughout the nine-year program. Click here to see if your business meets these standards.
- Your business hasn’t already participated in the 8(a) program.
- Your business is at least 51% directly owned and controlled by U.S. citizens who meet the criteria for socially and economically disadvantaged individuals.
- Have the necessary financial capacity to perform on federal contracts successfully.
- Demonstrate “good character.”
- Don’t owe any outstanding federal financial obligations.
- The business is owned by someone with a personal net worth of $250,000 or less.
- The business is owned by someone whose average adjusted gross income is $250,000 or less for three years.
- The business is owned by someone with $4 million or less in assets.
To get certified as an SBA minority-owned business, you can start by filling out a profile at SAM.gov. From there, you can certify your business information at certify.SBA.gov. If your business is accepted into the program, you’ll receive a letter from the SBA informing you that your application was approved.
Private sector certification
The National Minority Supplier Development Council (NMSDC) has programs for minority-owned businesses who want to connect with corporate companies.
If your application is approved, your business will be listed as an MBE in the regional and national Minority Supplier Databases. The NMSDC has a massive list of corporate members and private-sector companies your business can connect with and potentially receive contracts from.
To meet the NMSDC’s criteria for certification, minority businesses must meet the following requirements:
- Your business is at least 51% minority-owned, operated, and controlled. Click here to find out if your business meets the NMSCD’s requirements for a minority-owned business.
- Be a profitable enterprise that’s either located in the U.S. or its trust territories.
- Show that the minority owners exercise management and daily operations.
If you want to be a certified minority-owned business, you can apply for certification at the National Minority Supplier Development Council (NMSDC). The NMSDC has several regional councils.
Here are the steps you’ll take to get certified by the NMSDC:
- Ensure that your business meets the criteria and qualifies as a minority-owned business
- Gather together the required documentation:
- Your business history
- Certificate of Incorporation
- Articles of Incorporation
- Stock Certificates and Stock Ledger
- Minutes to Board of Director’s meetings as well as Shareholder’s meetings
- Bylaws (executed and attested) and Amendments (if applicable)
- All agreement(s) about ownership, operation, and control of the business
- Business cards that list appropriate corporate titles, copies of resumes, copy of driver’s licenses, and proof of U.S. Citizenship (Birth certificates or U.S. Passports only) for all Principals
- Corporate Bank Resolution Agreement(s) to include Bank Signature Card(s)
- Business Lease Agreement(s) (and Security Deeds if home-based)
- Proof of general liability insurance and, in some cases, bonding
- Copies of the businesses’ canceled checks
- Register on the NMSCD site and complete the online application
- Pay the application fee
- Upload your documentation via the online certification application
- Schedule your site visit and interview
The entire certification process can take up to 90 days to complete, and you’ll have to wait on final approval from both the board and committee members. If your application is approved, they’ll notify you by email and postal mail.
State and local agency certification
To participate in the MBE programs in your state, contact your state or local programs for further instructions. To get certified as an MBE in your state, you’ll need to apply at the regional office closest to your business headquarters.
Historically, minority business owners have faced challenges in getting access to business financing and winning large contracts. A 2016 survey conducted by Biz2Credit looked at over 1,500 minority business owners. Over a third of the surveyed business owners said that lack of adequate funding was their biggest challenge. The first round of the Paycheck Protection Program also presented issues with equitable distribution of PPP funds to minority small businesses.
Given these and the many other inherent challenges that come with running a small business, it’s worth taking advantage of any available opportunities.
As a certified MBE, you’ll have access to favorable contract opportunities, marketing assistance, and other valuable resources. Plus, you’ll have access to small business training on topics like how to start a minority woman-owned business.
And if you’re looking for more information on funding for minority-owned business owners, be sure to check out our guide to business funding for minorities as well as Funding Alternatives and Resources for Minority Entrepreneurs.
Ready for more?
Apply for funding and find out if you qualify today