Everyone knows how challenging securing ANY kind of capital can be for one starting a new business. However, African-Americans have always found it more difficult for various reasons: economic disparity and cultural bias, just to name a couple. So, if you are an up-and-coming minority entrepreneur, creator or small business owner, here are a few of our best tips to point you in the right direction – as far as collateral goes!
#1. Find Good Capital
According to a recent Stanford report, between February 2020 and April 2021 there was a 41% drop in the operation of Black-owned businesses due to fallout from the pandemic. With that said, there are many resources to not only prevent this from happening but also to help get you through tough times. Besides your typical SBA loan, organizations like Start Engine and Kiva are nonprofit online lending platforms designed to connect entrepreneurs to crowdsourced lending. Basically, “equity crowdfunding” allows your biggest fans to become your backers. Win-win!
Also, there are companies like the MBDA (Minority Business Development Agency), which primarily assist in awarding grants. MBDA is just one of the major agencies that specialize in promoting the growth of minority-owned businesses. Though they do not directly disburse funds, they can connect you to the right resources for capital.
#2. Create a Relationship with Your Bank
In short, when considering a new business venture, treat your bank like a potential client or business partner. For example, keep in touch regularly. Find an institution you can trust as opposed to one that’s close in proximity for instance. Then let them know what you are trying to do (your business plan, what your goals are), and keep your personal banker or whoever you’re working with up to date on any changes. That way they can recommend helpful products or services you may need. Basically, finding a bank that respects you as a customer, then building that networking relationship with them is key. Even if you have to drive a little further…it may end up being well worth it.
#3. Get Comfortable with Other People’s Money
If you’re in the business world, you’ve probably heard the term “OPM.” If not, all it means is “other people’s money.” And you can use OPM (rather than your own money) to help build your business. Often young Black entrepreneurs feel they have to pull themselves up by their “bootstraps,” so to speak — always having to use their own finances instead of anyone else’s. But this is just not true…you have to think BIGGER and outside the box. One way you can do this is to educate yourself. Learn from others how they built their empires. Because the reality is that every successful business owner has needed help at some point. So, get over your pride, and go get to the money!
#4. Build Your Village
Tapping into the assets of individuals around you could be your saving grace. To get financial funding you will need social capital, plain and simple. And your village is where you lay your foundation. Surround yourself with a diverse group of people who can support you in a multitude of ways. Your village can be comprised of social media influencers, managers, mentors, and bankers, for example, both in and outside your field. These folks can introduce you to new investors and help you explore other avenues for networking opportunities. After all, you never know who knows who!
With that said, we wish you the best of luck on your new business journey!