20 Funding Sources For Black-Owned Businesses In 2023
This article was first published by Cheryl Lyn here.
Many African American small business owners face challenges with funding due to post-pandemic hardship, inflation, and fierce competition. Yet black-owned businesses have been integral to the U.S. economy in the past and present.
To help you out, we’ve rounded up a list of 20 places where you can seek grants and funding for your business in 2023.
What’s cool about Backstage Capital is that they intentionally back underrepresented founders, particularly those of color, female genders, and LGBTQ orientations. Founded in 2015, this private firm set out to support early-stage startups that traditional venture capitalists often overlook. It has since funded 200 startups, most of which are based in the United States.
One of the key initiatives of Backstage Capital is its interest in helping its portfolio companies grow. Rather than give out one-off grants, the firm sources for equity rounds, convertible notes, and Simple Agreements for Future Equity (SAFEs) from its accredited investors.
Since a Backstage Capital investment can be as huge as $100 000 or more, the company selectively chooses ventures to invest in. They must have the capacity to scale up and provide unique solutions to existing problems in their markets.
Besides investment, Backstage hosts events and provides opportunities to network with mentors, investors, and industry experts.
Community Development Financial Institutions (CDFI) Fund
The CDFI Fund is a public funding source designed to empower CDFIs servicing America’s underserved and distressed communities economically. This Fund provides various programs to support CDFIs, including the CDFI Bond Guarantee Program, which has guaranteed over $2 billion worth of bonds so far.
CDFIs are financial institutions such as banks, credit unions, loan funds, microloan funds, or venture capital providers that provide residents and businesses loans funded by the U.S. Treasury Department to create economic opportunities in low-income communities.
To become certified as a CDFI, a financial institution must apply to the CDFI Fund and meet certain criteria. These include having a primary mission of promoting community development and being a financing entity.
The CDFI Fund isn’t exclusively for black-owned CDFIs. But it does encourage CDFIs in low-income communities by helping them with grants, tax credits, and loan services. This empowers the CDFIs to give people in those communities loans to open businesses, buy homes and so on, improving their living standards.
Grants.gov is a federal website that provides a centralized location for grant seekers to find and apply for funding opportunities. While Grants.gov offers a wide range of funding opportunities for businesses of all types, they do not specifically target Black-owned businesses.
Some of these programs may focus on promoting economic development in historically underserved communities or supporting small businesses in certain industries.
Please remember that Grant.gov doesn’t disburse grants. Rather, grantors can advertise grant opportunities to potentially interested communities on Grant.gov, urging them to submit their applications.
Reign Ventures is a private venture capital fund that invests in startups led by women and minorities. They focus on companies in the tech industry that have high-potential founders.
Reign doesn’t stipulate specific periods during which interested business owners can pitch their ideas to the board of investors. You’re welcome to send your pitch to them at any time.
IFundWomen of Color (IFC)
IFC is the perfect platform for female coloured entrepreneurs to raise capital through crowdfunding, grants and coaching. If you choose IFC, you can access its exclusive Slack community, where you can share your business strategy and learn more about branding and marketing.
IFundWomen also provides opportunities for women to learn from expert workshops and enlist the services of coaches to assist them on their business growth journey.
To crowdfund your business, start by taking IFC’s crowdfunding course and supporting other campaigns. Then download the grant planner to map out exactly how you intend to get the capital you need from crowdfunding.
Raising capital can take a long time. So if you need to raise a lot of money fast, look into the loan options at IFundWomen. IFundWomen partners with Newity LLC, an American-based financial company that offers employee-retention tax credits and loans of up to $250 000 for businesses affected by COVID-19.
NBMBAA Scale-up Pitch Challenge
The NBMBAA Challenge is an exciting competition designed to give Black-owned businesses a chance to showcase their innovative ideas. Contestants pitch their business ideas to a panel of judges, including venture capitalists, angel investors, and successful entrepreneurs.
Then, the judges provide feedback and select the top contenders to advance to the next round. The final round takes place at the annual NBMBAA conference, where the top three finalists compete.
Winners receive $50 000, $10 000, and $7500 in order of position. There’s also a bonus people’s choice prize awarded to the participant whose pitch has the most votes from the audience.
What sets the NBMBAA Scale-up Pitch Challenge apart is that it’s not just about winning a cash prize. It’s also about building connections and relationships with potential investors and business partners, getting exposure, gaining valuable feedback, and potentially securing funding to grow.
Coalition to Back Black Businesses (CBBB)
The Coalition to Back Black Businesses (CBBB) has been giving grants to and mentoring black small-business owners to accelerate recovery from the COVID-19 pandemic from 2020 through 2024. Between 2022 and 2023, CBBB raised $1.6 million in grants for black entrepreneurs, bringing it closer to its $ 14 million mark.
To qualify for a grant (which could be as much as $5000), the business must have employed three to twenty workers, be located in a distressed US community, and not be a branch of a franchise.
However, the following organizations are excluded from this program: NGOs, government agencies, businesses promoting religious and sexual services, and those located near gas stations.
National Association for the Self-Employed Growth Grants
The National Association for the Self-Employed Growth Grants (NASE) is a non-profit organization. Through Growth Grants, NASE provides funding opportunities for Black-owned businesses to expand their operations by acquiring computers, training materials, launching advertising campaigns, etc.
NASE’s funding for all businesses, including those founded by Black entrepreneurs, is limited to $4000 per applicant. That’s not much money, but it’s enough to help some businesses get started. Since its inception in 2006, NASE has given away $650 000 in grants to enterprises that might otherwise have gone under.
However, only members of the NASE can apply for grants from the NASE Growth Grant program. Non-members must join the association and pay annual membership fees before applying for a grant. NASE accepts and reviews grant applications quarterly.
FedEx Small Business Grant Contest
FedEx, the world’s largest express shipping company, launched its 11th annual Small Business Grant Contest on January 31st, 2023. The contest gives $31,000 in grants and shipping services to 10 U.S.-based small businesses. Winners also receive 20% off monthly SEO plans, free digital consultation and packaging services, and other perks.
Besides the grants, there is a People’s Choice Award. Winners of People’s Choice Awards get one $1,000 cash gift card each. An entrant can win the People’s Choice Award only once. The voting period for this award ended on March 8, 2023.
Before entering the FedEx contest, ensure you have a FedEx account number and have been in business for at least six months. Your business must also need shipping and printing services.
Fast Break for Small Businesses
Fast Break for Small Businesses is a collaborative program between LegalZoom and Accion Opportunity Fund. It aims to address the disparities faced by black small business owners in the US, with a total budget of $6 million.
So far, the program is nearly halfway through its goal, having awarded $2 million in grants to 200 small businesses. Each grantee gets $10,000 in cash and up to $500 worth of LegalZoom products and services. In addition, 1950 selected applicants who don’t get a grant can benefit from LegalZoom products and services worth up to $500.
Fast Break receives applications from February 1 to 17 annually during the grant cycle. To be eligible for a Fast Break grant, a business’s annual revenue must be less than $100, and it must have evidence of incorporation or equivalent professional capacity and a business bank account.
The Minority Business Development Agency (MBDA) Business Centers serve as a resource for minority-owned businesses seeking to expand and grow in size and scale. These centers provide a variety of support services, including helping businesses to secure capital, compete for contracts, identify strategic partners, and become export-ready.
While the MBDA Business Centers do not provide direct funding to Black-owned businesses, they connect these businesses with potential funding sources. They help businesspersons prepare the necessary documentation to apply for loans or grants.
Operation Hope 1 Million Black Businesses (1MBB)
Operation HOPE, a financial organization, flagged off 1 Million Black Businesses (1MBB) to empower and support the creation of one million new black-owned businesses by 2030.
The program addresses the wealth gap and promotes economic stability in black communities by providing access to capital for aspiring black entrepreneurs.
Also, Operation HOPE partners with corporations, financial institutions, and community organizations. These offer mentorship, business training, and networking opportunities to help black entrepreneurs succeed.
Kinetic Business by Windstream Black Business Support Fund
Kinetic Business by Windstream is a cloud-based business phone service that gives you the freedom to work from anywhere—and stay connected.
It’s perfect for small businesses, and it comes with features like voicemail transcriptions, call forwarding, and unlimited nationwide calling that you can’t get with other providers.
Windstream Black Business Support Fund is intended to help black-owned businesses get back on their feet after the COVID-19 pandemic and other challenges. The grant is not as wide in coverage as other options, but it’s worth considering.
Windstream awards as much as $2500 in grants plus $250 worth of Kinetic internet services to beneficiaries of this grant program.
To be eligible for the grant, businesses must be founded by Black persons and located in Windstream’s service areas. They must also have started purchasing Windstream services.
Harlem Capital Partners (HCP)
Harlem Capital Partners is a Black-led venture capital firm that aims to invest in 1,000 diverse founders over 20 years. The firm has a team of six dedicated investors and has investments spanning 13 cities and three countries.
HCP invests up to $3 million in Black-owned businesses. To be eligible for an investment, a business must have at least one full-time founder, have a solid management team, be in a large market and be able to produce sufficient returns on HCP’s investment within 4 to 7 years.
Kapor Capital is a venture capital firm located in Oakland, California. Since its founding in 1999, the firm has invested in pre-seed and seed-stage companies operating in the information technology sector across the United States.
Kapor Capital gives startups a chance when the founder can prove that their business will positively impact underrepresented communities, especially communities of color. Such impacts include creating jobs and providing opportunities for investments and structures to help people of color enjoy a fair quality of life.
Kapor Capital has invested over 106 million in more than 170 companies, 62% owned by people of color and women.
Rebuildtheblock Bridge the Gap Fund
Rebuildtheblock (RTB) is a private organization that connects local Black entrepreneurs with capital providers to help them generate wealth. Among RTB’s strategies to achieve its mission is Bridge the Gap Fund.
Black-owned businesses must have been established on or after 1 January 2020 to be eligible to receive grant money from this program. Also, they must have suffered financial losses due to the COVID-19 pandemic or environmental looting.
RTB takes three months to review grant applications, but it doesn’t specify how much beneficiaries could receive. Applications for the Bridge the Gap Fund are closed for 2023.
Founders First Capital Partners
Founders First Capital Partners does not give grants or invest in businesses. It provides alternative funding sources such as revenue-based financing and medium to long-term loans, spreading their loan repayments over a reasonable period.
So is there any difference between Founders First services and traditional bank loans? Yes. While bank loans require personal credit scores for approval, Founders First is more concerned about how much revenue a business has grossed in its last two years.
The applicant’s business must be located in a low or moderate-income community, earn at least $500 000 annually, and operate on a B2B or B2B2C model. This means that it should sell goods or services to other businesses, not directly to consumers. Additionally, the business must have a high potential for earning very high profit.
This company will lend you between $50,000 and $1 million if your application for financing succeeds.
Small Business Administration (SBA) Loans
The Small Business Administration (SBA) guarantees small, medium, and long-term loans for small businesses looking to procure loans at low-interest rates. These loans are micro, 7(a), and 504 loans. SBA does not issue loans directly to businesses. Instead, it funds non-profit Community Development Companies (CDCs), which then disburse loans to borrowers on specified terms.
SBA microloans are for entrepreneurs who need to expand their inventories, and purchase supplies, furniture, fixtures and other business necessities. The microloan program also extends to non-profit childcare centers.
The 7(a) program provides business owners loans that can be repaid over 10 to 25 years. This longer repayment period allows founders to invest in projects like real estate and construction, which require more time and money than running a simple business.
The minimum amount borrowable is $500 000, and the maximum is $5 million.
Meanwhile, a 504 loan is a long-term loan that ranges from $5.5 million to $16.5 million. It can be used for purchasing land, long-term machinery and other items that cannot be financed with a conventional loan. Unlike microloans, 504 loans cannot be used for start-up or expansion capital.
All SBA loans are available to businesses in the United States without prejudice against race or color.
Small Business Investment Companies (SBICs)
Small Business Investment Companies (SBICs) are private companies funded by the SBA and private investors. In return for funding, the SBA regulates the activities of an SBIC to a certain degree.
Then, the SBIC invests in an eligible business, including those owned by blacks, in the form of equities, which are shares that the SBIC buys from business in return for investing money into it. An SBIC can also give loans, called debts, to businesses to be paid back at specified interest rates, usually between 10 and 14%.
SBIC investments are huge, between $250 000 and $10 million, and are open to most small businesses except those in the agricultural, financing, and real estate sectors.
SBIR and STTR
The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are two U.S. government initiatives aimed at supporting research and development activities carried out by small businesses.
The SBIR program provides funding to small businesses to conduct R&D projects that have the potential to meet federal research and development needs. The program is divided into three phases – Phase I involves proof of concept, Phase II focuses on prototype development, and Phase III is commercialization.
On the other hand, the STTR program is similar to SBIR. Still, it requires small businesses to collaborate with a research institution, such as a university or a non-profit research organization, to develop and commercialize innovative technologies. The program also has a three-phase structure.
Both programs are powered by the SBA and provide funding to small businesses through a competitive process and require the recipients to meet certain eligibility criteria.
Equities, grants, loans, and crowdfunding are cash flow generators for the black business community. With the number of platforms expanding on all fronts, it’s clear that despite the grim market outlook, Black entrepreneurs will be able to garner enough financial backing soon.
This article was first published by Cheryl Lyn here.