Black entrepreneurs often face unique challenges when it comes to accessing capital and funding for their businesses. There is a huge disparity in access to financial capital between Black entrepreneurs and other businesses.
The Minority Business Development Agency attributes that disparity to unfair lending practices and the prevalent racial discrimination. As a result, Black business owners must get creative to access financial capital for their businesses. Here are some funding options available to them:
Platforms like Kickstarter, GoFundMe, and Indiegogo allow entrepreneurs to raise funds from a large number of individuals, often in exchange for rewards or equity. The iFundWomen of Color Program and Kiva are great examples of crowdfunding platforms that give grant access to Black business owners.
However, iFundWomen of Color is specifically for women of color trying to find their footing in the business world. The platform also offers other forms of support like fundraising coaching, debt-free crowdfunded capital, and networking opportunities.
Several grants and other financial awards are available to Black entrepreneurs, such as the Black Innovators Grant from the National Black Chamber of Commerce. There are other grant options for Black entrepreneurs like The Coalition to Back Black Businesses, Black Founder Startup Grants, Keep It Local Business Fund, and more.
However, each grant has its requirements and only the applicants that meet these requirements will receive the grants. Applying for additional grants is easier once you have successfully filled in the first one. Depending on the business you are in and the depth of your application, you can get $50,000 or more.
Some venture capital firms focus on investing in businesses owned by underrepresented groups, including Black entrepreneurs. Harlem Capital Partners is an example of a venture group providing financial aid to minority business owners.
If you have more than 10% ownership and your main focus is consumer technology and enterprise, this venture group could be your road to success. Reign Ventures and Kapor Capital also fall into this category and fund minority-led startups.
Angel investors are high-net-worth individuals who invest in early-stage companies. Black entrepreneurs can benefit from such investors. The main difference between angel investors and capital firms is that the latter use an investment fund while the former use their individual net worth.
This is a great financing option for Black businesses because you do not have to pay back the money you receive. However, angel investors finance your business in exchange for equity. Therefore, angel investors can offer more than just capital to help your business grow.
Incubators and Accelerators
Incubators and accelerators provide support, resources, and mentorship to entrepreneurs and may provide funding in exchange for equity. Some of the accelerators that offer support to minority-founded businesses are DivInc, Manos Accelerator, and NewMe.
This funding option works almost the same way as the angel investors. The only difference is that accelerators and incubators focus on startups rather than established businesses as the angel investors do.
It’s important for Black entrepreneurs to carefully consider all their options and to seek out resources and support to help them navigate the funding process. If your business struggles with the starting capital, the options above can help you get on your feet. Some of these funding options also cater to established businesses that want to expand their reach.