How to Get Your Minority-Owned Business Certification
If you're an ethnic minority business owner, certifying your company as minority-owned can open up new opportunities for contracts. These opportunities are greatest for those who've already built relationships with the government or applicable private-sector organizations. Savvy business owners can leverage a strong record of performance and build a book of business faster with the right minority-owned business certification.
Types of certifications
There's a range of different certifications available for minority business owners to consider. Some of the most common include:
A federal program administered by the Small Business Administration (SBA), this is a 3-year certification that recipients can renew twice for a maximum certification period of nine years. Under 8(a), companies must be minority-owned or at a social disadvantage, have been in business at least two years and meet small business size standards.
Small Disadvantaged Business, or SDB
This federal program is run by the SBA on behalf of the Department of Defense, which awards the contracts. To qualify, you must be a small business that's at least 51% owned by individuals from socially or economically disadvantaged backgrounds.
Disadvantaged Business Enterprise, or DBE
Each state's Department of Transportation administers this certification program. To obtain a DBE certification, your company must be at least 51% minority-owned and controlled and a small business by SBA standards.
Minority Business Enterprise, or MBE
This certification is administered by your state chapter of the National Minority Supplier Development Council, or NMSDC. A firm must be 51% minority-owned and controlled and also be a small business by North American Industry Classification System standards. The firm must also have no significant ties to a majority-owned firm, such as a major strategic partnership or partial ownership.
Owners must have contributed capital into the company on par with their ownership rate, and the highest-ranking person at the company must be an ethnic minority.
Many cities and counties also offer certification programs to make it easier for small, minority-owned businesses to gain access to city and county contracts. These programs go by many different names, from minority business certification to DBE to MBE and more. Often, these jurisdictions will allow you to use a federal, state or private enterprise certification to qualify for their program. This simplifies the process and paperwork on both sides.
The application process
Although federal and state governments offer certifications, more than 400 large corporations use the MBE certification. Outside the construction industry, the average small business is more likely to work with the private sector than with government agencies, so the NMSDC's certification tends to carry greater weight. Their requirements also tend to be slightly broader than those of the government programs because they're not federally defined.
Although the application process for the MBE certification is straightforward, the required documentation can be quite involved. Having a longer corporate lifespan, multiple owners and affiliated entities will mean even more documentation. To apply, contact your regional or state NMSDC affiliate. Some affiliates may require you to attend an orientation.
To complete the application, you'll need a range of documentation, including:
- Business history
- Formation and related documents, including Secretary of State certificates of good standing, article of incorporation or organization, and stock ledger
- Ongoing corporate maintenance documents, including board of directors and shareholders' meeting minutes, corporate bylaws or operating agreement, as well as any amendments
- All agreements pertaining to ownership, control and operation of the business
- Financial agreements, such as loan documents, leases and purchase agreements
- Business card, resumes, driver license and proof of US citizenship for all owners and the highest-ranking executive
- Corporate resolution for banking, bank signature forms and copies of cancelled checks
- Financial statements and business tax returns
- Proof of business liability insurance
After application submission, the MSDC affiliate will conduct a review and reach out regarding clarification, omissions or errors. Next, they'll arrange a site visit for visual confirmation. Once completed, the certification committee and board will conduct a final review and approve or reject the application, then notify the applicant.
Numerous certifications exist for minority-owned small businesses. Getting that approval can help you get your foot in the door with a variety of opportunities and partnerships. However, gaining a minority-owned business certification doesn't guarantee you'll win a government or private contract, so it's important to focus on business development. Build relationships with procurement personnel and other decision makers, and notify them every time you win a bid and perform well on a contract. This way, you can successfully leverage past work and certification to effectively build your business.
Financial insights for your business
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.