How to Get Certified as a Minority-Owned Business
Corporations, the federal government, and state agencies all want to do business with minority-owned companies. The Department of Transportation, for example, requires that recipients of its funding award a percentage of contracts to minority-owned businesses and many large companies have goals for buying from minority-owned suppliers.
The reason for such mandates is twofold. First, contracting with minority-owned businesses is important to customers: 'Corporate America understands that you cannot expect minorities to buy things when you haven't done business with minorities,' says Steven Sims, the vice president of the National Minority Supplier Development Council. Second, it's responsible: 'It's important because we have an obligation in government to ensure that all firms in our state have an opportunity to participate in contracts that are paid for with tax dollars,' says Luwanda Jenkins, the special secretary of minority affairs for Maryland.
To meet their objectives, private and public sector firms search for minority-owned suppliers through programs that have formal certification processes. If you're not certified, you can miss out on business ranging from a marketing opportunity to reduced-competition access to a public contract.
How to Become a Certified Minority-Owned Business: National Minority Supplier Development Council Certification
If your company wants to connect with private-sector buyers, the National Minority Supplier Development Council (NMSDC)'s certification can be a real asset. The organization has an impressive list of corporate members that includes IBM, Microsoft, and Marriott. The council helps these companies connect with the more than 17,000 minority-owned suppliers in its database. Seventeen states and 25 cities also accept NMSDC certification for programs designed to help minorities win public-sector contracts.
Who is eligible: For-profit enterprises of any size that are located in the United States and are owned, operated, and controlled by minority group members who are U.S. citizens. For the purposes of NMSDC's program, a minority group member is an individual who is a U.S. citizen with at least 25 percent Asian-Indian, Asian-Pacific, Black, Hispanic, or Native American heritage. Documentation to support the claim is required. Additionally, at least 51 percent of the business or the company's stock must be owned by such individuals, and the management and operations must also be controlled by such individuals.
How to apply: Start by contacting one of the NMSDC's 37 regional councils. Your council will provide you with a standardized application and request documents to support your minority status claim. Unlike most minority-owned certification programs, the organization will make a mandatory visit to your company to verify the information on your application. If your certification is denied, you can appeal within 30 days. If you lose the appeal, you can reapply after a year.
Perks: In addition to being listed in the Regional Council Minority Supplier Database and NMSDC's national database, NMSDC certified companies can participate in an advanced management training program, qualify for the Business Consortium Fund's working capital loan program, and attend NMSDC business opportunity fairs.
Cost of Certification: About $350-$1,200, depending on region.
How to Become a Certified Minority-Owned Business: SBA 8(a) Business Development Program
The Small Business Administration's 8(a) Business Development Program helps minority-owned companies win contracts in the public sector. In order to comply with the Small Business Act, certain government agencies need to complete their federal contracts with 8(a) participants. In some instances, contracts can be awarded to 8(a) participating companies without competition.
Who is eligible: Small businesses that are owned and controlled by U.S. citizens who are 'socially and economically disadvantaged'. Socially disadvantaged refers to individuals who are 'subjected to racial or ethnic prejudice' and includes, but is not necessarily limited to, Black, Hispanic, Native American, Asian-Pacific, and Subcontinent Asian.
Economically disadvantaged is defined by the SBA as 'socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not socially disadvantaged.'
The business must be at least 51 percent owned by economically and socially disadvantaged individuals. Ownership needs to be direct, which means that businesses owned by another business or trust that are in turn owned and controlled by a 'disadvantaged' individual don't qualify.
After meeting these qualifications, the applicant has to also demonstrate a 'potential for success.' The company must have been in business for at least two years prior to applying, and it must submit income tax returns for those two years that show operating revenue. Your company may be eligible to waive the two-year requirement if they meet the five criteria described here.
How to Apply: The SBA suggests that every company considering applying for the 8(a) program take an online self-evaluation course to determine whether it is eligible and appropriate for the program. To do business with the federal government, you also must register in the Central Contractor Registration database. You can then follow the SBA's instructions for completing an electronic application. Be prepared to provide financial statements, federal personal and business tax returns, and personal history statements.
The SBA provides free one-on-one counseling through a network of partners to assist in preparing application packages for certification in the 8(a) program. Contact your local district office for more information.
Perks: The 8(a) program offers specialized business training, counseling, and marketing assistance in addition to giving participants access to reduced competition and sole source contracts. Some 2008 training programs that were offered to 8(a) participants included 'Contract Law and the Legal Aspects of Owning an 8(a) firm'; 'Developing a Winning Cost Proposal'; 'Strategic Marketing'; and 'Government Contract Negotiations'.
Cost of certification: Free
Dig Deeper: 8(a) Program
How to Become a Certified Minority-Owned Business: State and Local Programs (MBE)
Many states and cities also have minority-owned business programs, which are often referred to as Minority Business Enterprise (MBE) programs. Maryland, for instance, has a legally mandated program that requires 25 percent of all government contracts to be filled by minority-owned businesses.
'It really is a gateway for Maryland businesses to access state and local contracting opportunities,' Special Secretary Jenkins says. About $1.65 billion in government contracts have been awarded through the Maryland MBE program, and Jenkins says that the state is poised to meet its ambitious 25 percent goal next year.
Even though only 15 states have formal targets in place for awarding contracts to minority-owned businesses, nearly all of them have some type of goal. 'It really is in the state's best interest to use all of our small businesses, including our minority- and woman-owned firms,' Jenkins says.
Who is eligible: For most programs, at least 51 percent of a business needs to be owned by a member of a minority group in order to qualify for certification.
How to apply: Contact your state or local program for instructions.
Perks: Many states offer programs in addition to favorable contract circumstances for minority-owned businesses. Maryland, for instance, hosts a traveling training conference in six different regions for minority-owned businesses.
Cost of certification: Varies
Dig Deeper: Rethinking Minority Business
How to Become a Certified Minority-Owned Business: Department of Transportation's Disadvantaged Business Enterprise Program
Since 1998, the Department of Transportation (DOT) has required that at least 10 percent of money spent on contracts for certain projects go to minority-owned businesses. Departments that receive DOT funding, such as state transportation agencies, need to develop Disadvantaged Business Enterprise (DBE) programs in order to assure that they are complying with this requirement.
Who is eligible: Small businesses that are at least 51 percent owned by a socially and economically disadvantaged individual, defined as someone who is a member of a minority group, a woman, or, in some cases, has a disability. Regardless of social disadvantage, a person with a net worth of more than $750,000 cannot qualify for a DBE program. The disadvantaged person must also be in control of their business and able to direct the management of the firm.
How to apply: Contact your state or local transportation entity for an application. Expect to provide documentary evidence of your company's size, independence, and ownership and control. There is often an on-site visit as part of the application process. If your state has more than one DBE program, you only need to apply for one certification that will be honored by all of that state's programs.
Perks: Some state Minority Business Enterprise programs accept DBE certification.
Cost of certification: Free
Dig Deeper: How to Become a Certified Woman-Owned Business
How to Become a Certified Minority-Owned Business: Additional Resources