We are seeing a rise in businesses owned by women, minorities and veterans in the United States, and whilst there are definite efforts to close the funding gap for these organizations there are still challenges and barriers that these demographics face.
Limited funding
Securing the funding you need is a huge step toward achieving success. However, raising capital can be even more difficult for women, minority or veteran-owned businesses.
According to the 2019 Annual Business Survey, and in reference to the year 2018, approximately 18.3% (1.0 million) of all U.S. businesses were minority-owned and about 19.9% (1.1 million) of all businesses were owned by women. Veteran-owned businesses made up about 5.9% (337,934) of all businesses.
However, despite a significant number of businesses being owned by people within these demographics, the amount of venture capital they are raising is disproportionate. Minority women particularly are being shut out with regards to accessing capital. The Small Business Administration Office of Advocacy found that women and minority business owners are denied loans and pay higher interest rates than white counterparts, even after controlling for factors such as credit score.
A lack of financial support can be a huge stumbling block, one which can prevent your business from reaching new heights, or from even getting off the floor. It isn’t atypical for women to be denied loans over gender bias, where some institutions prefer to back male-owned businesses because they perceive these to be safer investment options, despite statistics demonstrating the opposite. First Round, found that companies with a female founder performed 63% better than investments with all-male founding teams.
The New York Fed Small Business Credit Survey reviewed small businesses that were both veteran and non-veteran-owned. Their research demonstrated that even with a greater number of applications for financing coming from veteran-owned businesses, they typically obtained less financing and saw lower approval rates than their non-veteran-owned counterparts. This is the case even though multiple studies have shown that due to their training, veterans are naturally prepared for entrepreneurship.
Unfavorable Business Environment
A huge factor in building a successful business is having a strong support system and ecosystem within which your business can flourish, this is even more true for community-based businesses such as beauty salons.
However, unfortunately women, minorities and veterans all face struggles when it comes to accessing successful and supportive business networks.
According to Inc, 48% of female-founders say that they have found a lack of available mentors or advisors has held them back in business. Even though women-owned businesses are on the rise, the high-level business environment is still heavily dominated by men, meaning it can be challenging for a woman to penetrate these elite networks and gain beneficial connections.
Research from McKinsey also supports similar findings when it comes to minorities and their access to a favorable business environment. Black entrepreneurs are less likely to be introduced to helpful networks that can advise and promote their brands and provide information about promising opportunities.
Due to veterans typically being abroad and relocated often during their service, they tend to have fewer social connections than non-veterans. When veterans then come to build their business, they also often suffer from a lack of strong personal and business networks.
Combatting the barriers
Official certification can provide benefits to women, minorities and veterans, however the process and requirements can often be complex and intimidating. This is why it is important to properly research and consult with professionals who understand the system.
Small business owners can often become overwhelmed when trying to handle the certification process alone, especially when they are also trying to manage their own enterprise. By consulting with someone who has previous experience with the process, business owners can increase their chances of successful certification whilst also working to a shorter time frame.
Reaching out for consultation regarding certification can not only lead to you gaining increased access to capital, but it will also introduce you to a supportive business network that can provide further opportunities for your brand to flourish. If you are looking for guidance with regards to the business certification process, Gayle Newcomb provides a range of business consulting services that focus on those at the beginning of their business journey.