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For Your Small Business March 15, 2022

Five Ways Minority- and Women-Owned Businesses Can Get the Capital They Need

What Minority and Women Business Owners Should Know About Accessing the Capital They Need

The pandemic fueled a surge in new businesses, many helmed by minorities and women. In fact, a survey by Gusto and the National Association of Women Business Owners found that of 47% of the women who started new businesses are minorities.

As they aim to get to the next level, it could be time to access capital to help purchase new equipment, make new hires or expand their product or service line. And now is a fantastic time to seek that funding, says Jackie DeRosa, Program Director and Business Builders Loan Administrator with the NX Level Entrepreneurship Program, run by economic development nonprofit Hammond Development Corporation and sponsored by Old National Bank.

While being your own boss has always been appealing, DeRosa emphasizes that there is more funding than ever these days, thanks to new grants and programs spurred by the pandemic. Interested in taking the plunge? Here is her advice for accessing the money you need.

1. Get to know your banker.

Yes, even before you need capital, suggests DeRosa. That’s because the first thing any budding business owner needs is a business checking account in order to keep your business transactions separate from your personal. Choose a business bank that has all the resources you’ll need going forward, such as merchant services and fraud protection. 

And then lean on them for other sorts of business advice too, she recommends. “Your banker and branch manager provide a wealth of knowledge beyond basic financial transactions.”

After all, you don’t want the first time you show up at the bank and speak to someone to be because you need a $100,000 loan, De Rosa says. “It will be a lot more comfortable if you’ve had a relationship and they know about your business and have helped you prepare so you feel confident with your ask.”

Melissa Lagowski, executive director of NAWBO Chicago’s chapter, concurs. “Everybody tends to be timid when asking for a loan but it eases the journey when you are a friend with your banker. They understand your story and the peaks and valleys.”

2. Burnish your credit.

Believe it or not, your personal credit matters to your business. "Old National is always generous with their time and we have a banker come in and talk about credit as one of our very first topics," DeRosa says. "If your personal credit is not excellent, now is the time to start working on repairing it because you might need to personally guarantee a loan down the road if your startup doesn't have enough business credit built up."

In addition, she points out that if a business owner’s personal financial life is in disarray, now is the time to set it straight so you don't harm your business credit. "People are often shocked that the bank or the economic development agency pulls their personal credit for a business loan.”

Your banker can also offer insight into how to improve your credit. Common strategies include being sure to pay all your bills on time and watching your utilization rate on the credit you do have.

3. Create a strong business plan to support loan requests.

A business plan not only gives the business owner a wealth of knowledge that helps them in growing and managing their business, but it shows a potential lender the person has done their homework and has a solid sense of their goals, explains DeRosa. "It gives you a leg up as opposed to just walking in cold, saying, ‘I need a loan and I don't know what I need to give you to get it.’”

According to the Small Business Administration, a business plan should include sections such as:

  • Executive summary that explains what your company does or offers
  • Market analysis with competitive research
  • Your company’s structure and key leaders
  • Description of your service or product line, including details on research and development
  • Summary of your marketing strategy
  • Financial projections
  • Request for funding that explains how and when you’ll be using it

While DeRosa focuses on writing a business plan in the entrepreneurship class, she notes there are other resources you can access to create one of your own. The SBA website offers more information and examples, and another good resource is SCORE, a non-profit organization that mentors small businesses.

4. Seek access to various funding sources.

In addition to specific pandemic relief, DeRosa has seen many opportunities for loans and grants in the last two years that didn't exist before. Options might include cities, municipalities, corporations and financial institutions that may have special incentives for women and minority businesses owners to get started. “I’m very encouraged at how much capital is available and being targeted to these groups,” she says.

Other community-based organizations, like the Hammond Development Corporation, offer loans for local businesses. Or as your business grows, it might benefit from an SBA loan or a traditional bank loan, depending on how much money you need and other factors like the profitability of the business.

Lagowski says it’s common for many women to be self-funded, but she believes that to get to the next level, you often need to access more money via a loan or a line of credit. She recommends talking to a local business banker about the type of loan that’s right for you.

5. Consider pursuing diversity certification.

This status is conferred by third-party organizations after reviewing diversity-related qualifications. It frequently is needed for access to opportunities to do business with state and federal agencies or to participate in larger companies’ supplier diversity programs.

While diversity certification can be valuable, DeRosa cautions it isn’t for everyone because not every small business can fulfill large government contracts or offers the types of goods and services conducive to the certification. “Before you spend the time gathering the information you need to seek the certification, talk to your local SBA organization and find out more about it to see if it's right for you now or if it would be more appropriate in a year or two.”

Does Your Business Venture Await?

If you have been contemplating starting a business, DeRosa emphasizes that now is a great time. “There are so many free quality resources out there for women and minority business owners. I recommend people get some help and then not hesitate. Be prepared, then enjoy your success in business.”

Want more information about starting a business? Find out more about the NX Level Entrepreneurship Program or talk to a Old National banker today.

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