This may come as some surprise, but local, state, and federal governments offer great programs for small businesses. While programs for Women, Veteran, and Minority owned small businesses are the most well-known. There are several other programs available to you if you do not qualify for one of these programs. See how you might be able to benefit.
Let's start with the most well-known programs, aimed at women owned businesses specifically. There are two types of certification: Women Owned Small Business (WOSB) and Women Business Enterprise (WBENC). WOSB is managed by the SBA and deals with government contract set-asides. WBENC covers all other set asides. If you are woman owned business, you may want to get certified by both, as each has its own set of benefits. These mainly deal with local, state, and government contracts, but there are also educational, networking, and loan eligibility benefits as well.
This applies to Black, East Asian, Indian, Native, and Latinx Americans. There are several minorities who are notably absent, namely Arab Americans, LGBTQ Americans, and others. To certify, you need to follow a similar process to WOSB. These businesses have the same advantages as WOSB, so it is worth the time to get certified.
The SBA has its section 8(a) program for individuals, who can claim and qualify as economically disadvantaged. To qualify, your total assets must be valued at $4 million or less. This is, in essence, living paycheck to paycheck. The individual's net worth must be less than $250,000. This calculation excludes your home, IRA/retirement accounts, and equity in your business. Finally, your personal income must be $250,000 or less. While you might be thinking, well, that's not too bad. The rub is that if you are not a member of a presumed group (see above), you need to demonstrate you have experienced bias of a chronic and substantial nature, which is very hard to do.
There are good reasons for the programs above. There are significant and compelling data showing the bias in financing for all the above groups. That said, it can feel a bit unfair. Don't despair or get resentful. There are programs that might work for you.
An SBIC is a privately owned company that's licensed and regulated by the SBA. They invest their own funds, along with SBA-guaranteed funding, to invest in small businesses. These investments are either debt, equity, or a combination of both. According to the SBA, typical SBIC loan ranges from $250,000 to $10 million, with an interest rate between 9% and 16%. SBICs will invest in your business in exchange for a share of ownership in your company. Typical investments range from $100,000 to $5 million. Financing includes loans and ownership shares. Loan interest rates are typically between 10% and 14%. Investments range from $250,000 to $10 million. SBICs can be a good way to gain financing even if you are not one of the classes listed above.
If your small business is engaged in scientific research and development, you may qualify for federal grants under the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. These programs encourage small firms to undertake scientific research that helps meet federal research and development objectives and have high potential for commercialization if successful.
The Small Business Administration works with different organizations to provide federal financial assistance (grants) community resources for certain small businesses.
It is worth exploring your local and state-based programs. For example, in New York, we have the NY Small Business Development Center. We also have NYC Small Business Development Center as well. The list is too numerous to mention. But it is definitely worth the time to explore your options. Many like the NYC Small Business Development Center have very useful guides that help you identify the programs for which you might qualify
Running a small business is tough. That's why we encourage you to explore every opportunity available to you. You never know unless you look and/or try.
Brian Cairns, CEO of Prostrategix Consulting. Over 25 years of business experience as a corporate executive, entrepreneur, and small business owner. For more information, please visit my LinkedIn profile