How to Start a Business as Black American? (Simple Guide)
Black-owned businesses grow fast in America— their number increased by 56.9% from 2017 to 2022—yet they still face challenges in accessing capital and networks.
After consulting with over 40 Black entrepreneurs during entity formation in the past 3 years, I've identified 3 critical steps that significantly improve success rates. My work includes guiding clients through SBA 8(a) certification processes and connecting them with minority-focused funding sources.
This guide provides actionable steps to launch your Black-owned business, from meeting certification requirements to securing grants and leveraging political support networks.
Quick Summary
- To start a business as a Black American, define clear business goals, secure funding, and leverage community support for growth.
- Meeting qualification criteria, such as minority ownership and U.S. citizenship, is essential for certifying a business as Black-owned.
- In fiscal year 2023, the Minority Business Development Agency (MBDA) facilitated $1.5 billion in capital access and $3.8 billion in contract awards for minority-owned businesses.
- It is crucial to recognize and overcome the unique challenges faced by Black entrepreneurs in establishing and growing their businesses.
How to Start a Business as a Black American
Step 1: Secure Your Legal Foundation First
Before pursuing funding or certifications, establish your business entity properly. Based on my consulting work, entrepreneurs who register their LLC or corporation before applying for programs avoid costly delays and rejections.
Take the time to:
- Choose Your Structure: Select between LLC, S-Corp, or C-Corp based on your growth plans and tax strategy.
- Register Properly: File formation documents with your state and obtain an EIN from the IRS immediately.
- Open Business Banking: Separate personal and business finances from day one to build credible financial records for future certification applications.
Step 2: Build Certifiable Documentation Early
The most common mistake I see is entrepreneurs waiting until they need certification to gather required documents. Start building your documentation portfolio immediately.
Critical documents include:
- Financial Records: Maintain clean bookkeeping from your first transaction—certifications require 2-3 years of records.
- Operational Control Evidence: Document that minority owners control day-to-day operations through meeting minutes, decision logs, and management agreements.
- Personal Financial Statements: Track personal net worth separately, as programs like DBE have specific thresholds ($2.047 million maximum).
Step 3: Apply for Certifications Strategically
Rather than pursuing all certifications simultaneously, prioritize based on your business model and revenue goals.
Strategic approach includes:
- Start with SBA 8(a): This 9-year program provides the longest runway for growth and access to sole-source contracts up to $7 million.
- Add DBE if Transportation-Focused: Only pursue if your business serves transportation or public infrastructure projects.
- Consider State Certifications: Many states offer additional MBE/WBE certifications that complement federal programs.
Following these steps lays a strong foundation for your Black-owned business. Now let's explore the SBA 8(a) certification in detail—often the most valuable program for Black entrepreneurs seeking federal contracts.
"Success in entrepreneurship often comes from embracing your unique identity and leveraging it as a competitive advantage"
- Sarah Johnson, Business Strategist at Smith & Johnson Marketing LLC
Understanding the SBA 8(a) Certification
Once you have met the qualifications, the next crucial step is securing the SBA 8(a) certification.
The Small Business Administration (SBA) operates this government-owned program to support socially and economically disadvantaged individuals [1].
Obtaining the SBA 8(a) certification opens access to federal contracts and business development resources.
To be eligible for this certification, you must meet specific requirements:
- Small business: Your business must be classified as a small business according to the SBA size standards.
- Demonstrating good character: The leader or owner of the business must demonstrate good character and integrity in their business practices.
- Proving success potential: Your Black-owned business needs to exhibit the potential for success and growth.
The SBA reviews applications and typically responds within 90 days.
Upon acceptance, you will gain access to valuable networking opportunities with private corporations, government entities, and federal agencies.
This certification gives you access to sole-source contracts and mentorship programs that support business growth.
Utilizing Grants to Boost Your Black-Owned Business
Grants provide a swift and effective means of obtaining funding for your Black-owned business.
Households with White householders held 10 times more wealth than those with Black householders in 2021, US Census shows, making grants critical for Black-owned businesses to bridge the startup capital gap [2].
Organizations like the Minority Business Development Agency (MBDA) and the Disadvantaged Business Enterprise (DBE) offer valuable grant opportunities.
This support helps companies secure capital and access contracts for business expansion. Let's examine each program in detail.
Minority Business Development Agency
The federal government established the Minority Business Development Agency (MBDA) to advance Black-owned businesses.
In fiscal year 2023, the agency facilitated access to $1.5 billion in capital and helped secure over $3.8 billion in contract awards for minority-owned businesses.
These substantial funds are channeled into financial investments and contracts to support and empower minority-owned LLC businesses.
Through this initiative, the MBDA has successfully facilitated revenue growth, with many companies reaching the milestone of $1 million in revenue [3].
Additionally, their efforts have generated more job opportunities for African Americans, fostering economic growth and prosperity within the community.
Federal contracting offers significant opportunities for Black-owned businesses. In 2023, small disadvantaged businesses received $76.2 billion in federal contracts, representing a record high [4].
Disadvantaged Business Enterprise Program
The Department of Transportation established the Disadvantaged Business Enterprise (DBE) Program to support women- and minority-owned businesses and foster their economic development.
The program incentivizes companies engaged in projects focused on public transportation improvements [5].
As of October 2025, the DBE Program underwent significant changes. You must now provide detailed personal narratives demonstrating how you have experienced social and economic disadvantage, rather than qualifying based solely on race or gender.
To be eligible, you must demonstrate that your business is minority-owned and that the owner's personal net worth does not exceed $2.047 million. All currently certified DBEs must undergo reevaluation under the new requirements.
After you provide required credentials and meet program criteria, the DOT approves your application.
This acceptance gives you access to a network of valuable connections and resources, facilitating your business's growth and success.
Advantages of Launching a Black-Owned Business
1. Political Support
A substantial number of U.S. cities are led by African-American mayors, showcasing significant minority leadership and political backing.
Cities such as Houston, Washington, D.C., and Atlanta have emerged as successful hubs for Black businesses and chambers of commerce, providing an encouraging environment for entrepreneurial endeavors.
2. Networking Opportunities
Starting a Black-owned business opens doors to valuable networking opportunities within the community.
Collaborating with other Black-owned businesses can lead to mutual success, creating a supportive ecosystem that fosters growth and prosperity.
3. Access to Government Contracts
Government entities often allocate a percentage of their funding specifically to support Black and women-owned businesses.
As a business advisor, I've seen firsthand how obtaining proper certification can transform a company.
Certification makes your business eligible for government contracts and increases your competitive advantage when bidding on federal projects.
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FAQs
Why Is It Harder for Black-Owned Businesses?
It may be harder to create Black-owned businesses because they are hindered by lower personal wealth, which can be attributed to various factors, including barriers to bank loans and other institutional capital sources. However, a significant contributing factor is the stark inequalities that exist among different racial groups in America, affecting the amount of wealth held by each group.
What Are the Most Common Black Businesses?
The most common black businesses are in the health care and social assistance sector. They hold the largest number and proportion of majority Black- or African American-owned businesses.
References:
- https://www.sba.gov/federal-contracting/contracting-assistance-programs/8a-business-development-program
- https://www.census.gov/library/stories/2024/04/wealth-by-race.html
- https://www.mbda.gov/about/history
- https://bidenwhitehouse.archives.gov/cea/written-materials/2024/12/20/racial-disparities-in-government-contracting/
- https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise
