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Minority Businesses

What it Means to Be a Minority Business Owner in 2015

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This year we have continued to see a colorful mosaic represent the face of entrepreneurs in the United States. Likely due to an upswing in the economy and legislation that promotes business ownership among minorities, African Americans, Hispanics, Native Americans and Asian Americans are continually choosing the path of entrepreneurship over traditional careers.

The Numbers

The 2013 Census reported that minorities make up 37 percent of the U.S. population, which may explain the substantial growth in minority-owned businesses. As indicated in a previous Kabbage article, by the year 2017 the Hispanic population will total 59 million, the African American/Black population will total 41 million and the Asian population will reach 16 million. Furthermore, the data from the same census indicated that from 2002 to 2012 the number of minority-owned businesses rose from 11.5 percent to 14.6 percent.

According to The 2014 State of Women-Owned Business report commissioned by American Express OPEN, the specific numbers in minority-owned businesses were:

  • 8 million Hispanic-owned firms
  • 5 million African American-owned firms
  • 9 million Asian American-owned firms
  • 258,100 Native American/Alaska Native-owned firms

The number of minority-owned companies catapulted in part because of their minority-women entrepreneurial counterparts. As of 2014, women of color own one in three women-owned businesses. And in 2014 there were 9,087,200 firms owned by women, and women of color owned 2,934,500 of them.

Challenges for Minority Business Owners

As minority-owned businesses break into non-minority dominant industries, many are faced with significant challenges and hurdles. In 2014 Google’s workforce consisted of 61 percent white, non-minority individuals, while blacks represented 2 percent and Hispanics represented 3 percent. The figures tell a bigger story about the lack of diversity in the technology industry.

So, how can a minority-owned business not only succeed but also compete with its non minority-owned counterparts? Let’s take a deeper look at the challenges minorities in business often face.

Networking

You have to network with as many people as you can. One of the best ways to grow your business in 2015 is to connect with other business owners, develop and maintain relationships. A good place to start is your local Chamber of Commerce and business referral networking groups. Join as many networking groups as your schedule will allow. It’s a great way to get the word out about your business and the foundation of building awesome business relationships, referrals and strategic partners.

Access to Capital

Funding disparities continue to plague minority business owners. In comparison to their non-minority counterparts, minority business owners are faced with higher borrowing costs, receive smaller loans and more loan rejections. Unfortunately, this challenge is compounded by the tight loan restrictions that arose after the financial crisis of 2008.

However, the emergence of alternative online small business lenders such as Kabbage has created new opportunities for disadvantaged minority business owners to receive funding.

Investors

Historically minority-owned firms and, in particular, black-owned businesses are less likely to receive funding from investors. In 2014 only 8.5 percent of minority-owned businesses pitched to investors. And the minority business owners who are pitching to investors are continually being rejected or rebuffed. In an Elite Daily article, William Bradford, dean of the University of Washington Business School, stated that the reason he believes minorities continue to be underfunded and turned away by investors is that they do not have the same access to investors as their non-minority counterparts.

Luckily, the tide is turning. Investors are beginning to understand the value of investing in minority-owned businesses because of their projected spending power. The landscape for investors is also starting to change because more minorities are becoming investors. Take a look at a list of the Top 20 African American Investors.

Advantages for Minorities in Business

The future is bright if you are a minority entrepreneur in 2015. To foster a fair business environment, the federal government has mandated that certain contracts be set aside for minority, women and veteran-owned businesses.

In order for minority business owners to bid on certain contracts and projects, they must become certified as a minority-owned business. Two good places to start are the National Minority Supplier Development Council and the Minority Business Development Agency. After becoming certified, you will be matched with members in your network who need your products and services. To learn more, take a look at the Kabbage, “The Steps and Benefits to Becoming Certified as a Minority Business Owner.”

In 2015, minority business owners must take advantage of the numerous opportunities that are available. Whether it’s through strategic partnerships, investing in technology for innovation or obtaining funding, there a variety of resources to help spur growth and success for minority-owned businesses.

How has your minority-owned business succeeded? Share your story with us in the comment section.

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Kabbage Team

Kabbage is here not only to provide access to the small business funding you need, but to also help you grow your business through free marketing tips, webinars, tools and more. Is there something you'd like us to cover or want to get your small business featured on our blog? Send us a note at content@kabbage.com.