Minority-owned businesses make up about half of all the new businesses created in the last decade. They’ve helped create nearly five million new jobs and generate close to $700 billion but still face significant financial challenges.
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Small business grants for minorities provide funds to minority business owners — groups that have historically lacked fair access to business capital. Unlike small business loans, these grants don’t have to be paid back, though you will likely face a lot of competition for these funds.
Here’s a look at the best small business grants for minorities and additional resources that could help you secure financing for your business.
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Bankrate insight
The Federal Reserve’s 2021 Report on Firms Owned by People of Color highlights the financial challenges faced by minority small business owners. In 2020, minority-owned small businesses:
- Faced more significant financial stress.
- Reported more difficulties paying their operating expenses.
- Were more likely to tap into personal funds.
- Were less likely to have their financing needs met even with good credit.
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Federal small business grants for minorities
1. Grants.gov
Grants.gov is a federally operated website that hosts more than 1,000 funding opportunities — including those for small and minority-owned businesses.
These grants are offered by federal agencies like the Department of Commerce and the U.S. Small Business Administration. Once you sign up, you can search the available grants and find the options that best match your business.
Application process
Businesses applying for grants through Grants.gov must have a DUNS number, a nine-digit identification number provided by Dun & Bradstreet. Once that number has been obtained, the business owner can register through the government’s System Award Management (SAM) site and apply for grants as they’re made available on Grants.gov.
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2. The USDA Rural Business Development Grant Program
Rural Business Development Grants can be used for technical assistance, training and other projects that benefit rural communities. While not specific to minority-owned businesses, the USDA Rural Business Development Grant Program is a valuable resource for rural regions where minority populations are leading sources of economic growth.
The USDA offers two types of grants: Opportunity and Enterprise grants. Both can be used for projects like community improvement, feasibility studies, strategic planning and leadership training. But Enterprises grants go further to also include projects like training and technical assistance, rural distance learning and land acquisition.
Businesses that would like to apply for the USDA Rural Business Development Grant Program must have 50 or fewer employees and less than $1 million in gross revenue. Also, they must operate in an eligible rural area.
The USDA Rural Development’s application process takes place through its local or state offices.
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3. Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs
The SBIR and STTR programs provide early-stage, high-risk funding to small businesses that conduct Federal Research/Research and Development (R/R&D). Grants come from eleven federal agencies that currently participate in the programs, including the Department of Health and Human Services (HHS).
As part of the HHS, The National Institute on Minority Health and Health Disparities (NIMHD) allocates grant funding to small businesses from all backgrounds that provide research and development specific to the health equity challenges faced by underserved communities.
Both the SBIR and STTR programs have three phases: Phase I awards can be worth up to $250,000, while Phase II awards are usually $750,000 for two years. Phase III funding isn’t provided by these programs, but there may be funding and production contracts that come from non-SBIR/STTR sources.
Application process
You’ll need to determine your eligibility before you can apply for SBIR and STTR grants, which is typically reserved for U.S-based, for-profit businesses with 500 employees or less. Eligible businesses will have to research current opportunities and register with multiple web-based systems, including the System for Award Management (SAM) and Electronic Research Administration (eRA) Commons before continuing on with the application process.
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Additional federal resources
Direct grants alone won’t be enough to overcome social and economic disadvantages faced by minority small business owners. Here’s a look at some additional federal resources to look into:
- SBA 8(a) Business Development Program. The SBA 8(a) program doesn’t award grants to small business owners. Instead, it’s a federal contracting assistance program that provides training and assistance to socially and economically disadvantaged small business owners so they have fair access to contracting opportunities in the future. Business Development Program.
- National Minority Supplier Development Council (NMSDC). The NMSDC is a business growth engine for minority business owners. The resources it provides can help people of color gain access to contracts and create new business opportunities that can help close the wealth gap.
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Bankrate insight
Minority business owners are just one group that continues to face an uphill battle for equal access to capital. Women-owned businesses, veterans, and LGBTQ+ business owners have also historically lacked support and funding opportunities. That’s why the Small Business Association sets aside federal contracting dollars each year. Check out the SBAs contracting assistance programs for more information.
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Private small business grants for minorities
4. The Coalition to Back Black Businesses
The Coalition to Back Black Businesses is a joint effort among several corporations to fund minority-owned businesses. The coalition includes American Express, ADP, AIG Foundation, Altice USA, Dow and the S&P Global Foundation.
Qualifying businesses receive $5,000 grants, along with mentorship and training. A few promising businesses also receive $25,000 enhancement grants.
The Coalition to Back Black Businesses Grant is available to Black-owned small businesses located in economically vulnerable communities and employing between three and 20 people.
Application process
Applicants can express their interest by providing their business name, zip code, industry and contact information. Grant finalists will be contacted and must complete a full application, submitting a W-9 form, Employee Identification Number and other supporting information about their business. The 2022 application period has passed, so check back in 2023.
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5. National Association for the Self-Employed Growth Grants
Four times each year, the National Association for the Self-Employed (NASE) offers business grants of up to $4,000 to small business owners through its Growth Grants program. Funds can be used for marketing, advertising, hiring employees, expanding facilities and other specific business needs.
While these grants are open to small business owners in general, they can be a great resource for people who operate their own organizations and are looking to grow — which includes a growing population of business owners of color.
Application process
To apply for a Growth Grant from the NASE, you must become a member of the organization and be in good standing for three months before applying. You will have to provide the organization with details on how you will use the grant and its potential impact on your business and its success. Applications must be submitted during open application periods, which are held throughout the year.
6. FedEx Small Business Grant Contest
FedEx launched its annual Small Business Grant Contest in 2012. In that time, the company has given away $1.5 million in cash prizes to more than 100 small businesses.
For 2023, Grants are available to 10 winners for up to $30,000 in funds to grow and develop the business. There’s also a print credit at a FedEx Office worth $1,000 and mentor matching. One of the grand prize winners who is also a U.S. veteran will win an additional $20,000.
The contest is open to small businesses that have been open for at least six months, have fewer than 99 employees, use shipping services and have a FedEx account.
Application process
Applicants must provide details about their business and how they would intend to use the grant money if they received it. Details about the business, including revenue and industry information, will also need to be submitted. You can sign up to be notified when applications reopen.
7. Fast Break for Small Business
The Fast Break for Small Business is a grant opportunity launched by LegalZoom in partnership with the NBA, WNBA and NBA G League. It currently awards Black-owned businesses grants worth $10,000 along with an additional $500 worth of legal services provided by LegalZoom.
The program is managed by the Accion Opportunity Fund, a nonprofit that supports small business owners who belong to groups that have historically faced limited access to business financing. This includes women, people of color, business owners of low-to-moderate income and immigrants.
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Application process
Applications open during the NBA season. The application process requires the submission of tax returns, identification of the business owner, bank statements and a completed W9.
8. The Entrepreneurial Spirit Fund
Since 2021, the Entrepreneurial Spirit Fund by SIA Scotch Whisky has provided $10,000 grants to entrepreneurs of color who work in the food and beverage industry. This grant program is inspired by Sia Scotch Whisky’s founder Carin Luna-Ostaseskia, one of the first Hispanic founders of a scotch whisky. It’s run in collaboration with Hello Alice, a free online platform that provides grants and small business resources to entrepreneurs across the U.S.
The grant cycle typically begins in the summer, though no word yet about the 2023 grant cycle.
Application process
Applicants must be small business owners of color who are at least 25 years old, have less than $5 million in annual revenue and have a business in one of the following states: CA, CO, CT, FL, GA, IL, MA, MN, NJ, NV, NY, RI, TX. Businesses that make alcohol or hold an alcohol beverage retail license are excluded.
9. Small Business Growth Fund
The Small Business Growth Fund is a partnership between Hello Alice and the Global Entrepreneurship Network (GEN). It awards $25,000 grants to four small business owners of any background. The most recent round closed in January, and there is no word on when the next cycle will open.
Application process
Applicants must be small business owners who earn less than $1 million per year in revenue and who have a clear plan for how the funds will be used.
10. Democratizing the Friends & Family Round
The Democratizing the Friends & Family Round program awards $25,000 to 20 female founders of color in New York City. Its goal is to help them overcome the early-stage funding gap that many women and women of color face. This is a joint program run by Hello Alice and Project Entrepreneur, a UBS initiative.
Even though this initiative is only for entrepreneurs of color in New York City, Hello Alice offers numerous resources and grant opportunities for small business owners all over the U.S.
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Application process
Applications must be submitted by March 3, 2023. Applicants must be female founders of color, operating a business based in New York City. To enter, you’ll need to create a Hello Alice account and complete an online application.
11. Sage Invest in Progress Grant Program
The Sage Invest in Progress grant program awards 25 Black female entrepreneurs with $10,000 in funding along with training, mentorship and networking opportunities. It’s a collaboration between The Boss Network, an online community that helps to advance the career development of women of color, and Sage Foundation.
Application process
Applications must be submitted for this round by February 25. To Apply, visit Hello Alice and create an account or log in and complete an online application.
Additional private resources
Here’s a look at just a few of the private-sector resources available to minority business owners:
- SCORE. This network of volunteers has been providing education and mentorship to small business owners since 1964.
- Community Development Finance Institutions (CDFI) Fund. The CDFI fund provides financing to CDFI-certified lenders that serve low-income communities. These lenders then provide services, education and low-cost loans that can be used in many ways, including to help fund a business.
- Chambers of Commerce. These organizations offer training and resources that help promote the interests of local businesses.
- Farm Aid. This nonprofit organization has an annual grant program that funds family farm and rural service organizations. In 2022, it provided grants that assisted Black and other minority farmers and groups that worked for racial justice and social equity.
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Bankrate insight
There are many chambers of commerce, even for historically underserved communities. These include:
Alternatives to small business grants
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Small business grants may not be the best solution for everyone. Grants are typically available for specific purposes and may have narrow eligibility restrictions. The application process is often competitive.
If you are looking for more flexible options, consider alternatives to small business grants. These are typically more widely available, easier to apply for, and have fewer restrictions. But unlike grants, most of these alternatives must be repaid.
- SBA microloans. The Small Business Association offers microloans of up to $50,000. Outside organizations or nonprofits typically service microloans.
- Business credit cards. Opening a business credit card offers your business a line of credit that can be used to pay for expenses related to your business.
- Business line of credit. Similar to a credit card, small businesses can seek a line of credit through a bank or other financial institution, providing flexibility to access funds when large expenses arise.
- Friends and family. While it can be difficult to ask, seeking financial support from friends and family can help. Formalize the agreement in writing and plan to repay the funds.
- Crowdfunding. Crowdfunding platforms can help you connect with potential customers enthusiastic about your product.
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The bottom line
Seeking out grants is a great way for minorities to seek support in developing and growing their businesses. These grants may help businesses in underserved communities and support business owners who may not have ready access to other resources.
