Closing the funding gap for minority- and women-owned businesses is a hot topic these days; while closing this gap is crucial, many long-standing programs have also helped these companies grow and thrive. Underserved markets and minority and female entrepreneurs may take advantage of official certifications that confirm a company is a Minority Business Enterprise (MBE) or Women Business Enterprise (WBE). MBE or WBE certification is akin to a “seal of approval” that the business has been examined and that a minority or woman truly controls major decision-making authority over the company and owns a majority interest in it. Certification can have substantial benefits – and for some businesses, even help to increase sales and revenues. The steps to certification can be confusing and time-consuming, but understanding the process and requirements can help to reduce frustration for many entrepreneurs and increase the chance of a successful certification.

Benefits of Certification

WBE- and MBE-certified companies receive substantial benefits, including unique access to corporate and government supply chains, funding, training and networking opportunities. 

Access to Corporate and Government Supply Chains

MBE or WBE certification has been most advantageous for companies whose customer base includes large corporations and government entities. Some government entities are required by law to purchase a minimum percentage of their supply needs from MBEs and/or WBEs. Many corporations, although not legally bound, realize the benefits in purchasing from MBEs and WBEs and have committed to buying a substantial amount of goods and services from them. In today’s competitive business landscape, MBE and WBE certifications offer one way to differentiate a company from other potential suppliers. Businesses in nearly every sector can be good candidates to contract with large corporations and governments with diversity supply goals, including manufacturing, construction, architecture, communications and marketing, engineering, human resources, healthcare, technology, property management, food supply and telecommunications. Once certified, a business can be placed into a database of suppliers that corporations and governments may use to better achieve supplier diversity. MBE- and WBE-certified companies also have access to a list of businesses and government entities interested in purchasing from certified businesses, providing valuable information on prospective customers. 


Research indicates that minority- and female-owned businesses have traditionally had less access to debt and equity capital than their non-minority and male counterparts. For example, just 4% of conventional small-business loans go to women-owned businesses, according to a U.S. Senate Committee on Small Business and Entrepreneurship report, and Babson College found that only 3% of venture capital dollars are invested in companies with a female CEO.1 Studies show a similar funding gap for minority-owned businesses. The U.S. Department of Commerce Minority Business Development Agency (MBDA), for example, reported that, even though venture capital focused on investing in minority-owned businesses provides comparable returns to that without such a focus, minority-owned businesses receive just 38% as much new equity investment as do non-minority businesses. In an attempt to help bridge this funding gap, there are special programs that provide funding to minority- and women-owned businesses. MBE or WBE certification is required for participation in some of these programs, and if not required, can often help legitimize and better document the business’s status as minority- or women-owned. 

More equity investors – such as venture capital, angel investment and accelerator funds – are acknowledging the benefits of investing in women- and minority-owned startup companies and are preserving certain pools of capital for these businesses. Funds sensitive to the importance of MBE or WBE certification can structure their equity investment so the minority or female entrepreneur maintains sufficient ownership and control to retain certification. Most of these funds have their own screening process to correctly identify businesses that are owned and controlled by minority and women entrepreneurs, but MBE and WBE certification can certainly help.

Exclusive pools of debt financing are also available to women- and minority-owned businesses, and unlike equity financing, certification is often a must to obtain these loans. Federal agencies, such as the U.S. Small Business Administration (SBA), and about 20% of U.S. states offer lending programs specifically for these businesses. For example, New York’s Minority and Women-Owned Business Development and Lending Program arranges for certified MBEs and WBEs to obtain loans, direct financial awards, incubator assistance and technical assistance. These loans frequently offer favorable terms, such as lower interest rates, than what banks typically charge as well as slightly more relaxed collateral or guarantee requirements. Although not as generous in amount or availability, some organizations even offer grants and outright financial awards to support women- and minority-owned businesses. For example, the MBDA provides various grant awards, often administered on a state or local level, to certified MBEs.

However, well-intentioned programs that provide preferred lending and equity investment to certified businesses are not helpful if applicants cannot successfully obtain funding from these sources. Studies show that the yield rate for equity investment, which is the percentage of investment opportunities brought to the attention of investors that result in an investment, is lower for minority- and women-owned businesses than for businesses in general (18.5% and 14.4%, respectively, compared with 20.0% for the overall investment market).2 Coaching on how to correctly fill out a loan application, how to posture the business for equity investment and appropriate uses of capital are invaluable for businesses seeking crucial funding. Many valuable opportunities to obtain this type of coaching are restricted to certified MBEs and WBEs. For example, the Women’s Business Development Center’s Access to Capital Program provides business counseling on how to prepare the financial projections necessary to obtain capital and offers assistance with packaging loan requests and presenting loan packages to lenders.

Training and Networking Opportunities

Certification also provides women and minority business owners with valuable training and networking programs, through which they can find mentors, meet potential new customers and learn best practices for business success. For example, the Office of Native American Affairs, in conjunction with the SBA, offers several training and networking opportunities, including a business primer program, online courses and podcasts, outreach programs for Native American business owners and entrepreneurial empowerment workshops. In addition, many private certifying agencies, such as the Women’s Business Enterprise National Council and the National Minority Supplier Development Council (NMSDC), host conferences and events that educate certified companies on business success and connect potential purchasers with certified businesses. Certified businesses can use these conferences and events to improve business operations and profitability, promote their products and services and connect with other MBEs and WBEs to explore partnership and mentoring opportunities.

The Certification Process

WBE and MBE certifications are typically obtained through not-for-profit business advocacy organizations or government entities. While the exact requirements vary depending on the certifying organization, there are many common elements, including a careful investigation of the company’s ownership, personal investment and control/authority of the business. Unsurprisingly, each certifying organization is committed to investigating whether the minority or female entrepreneur is more than a figurehead and has invested his or her capital, time and commitment to promoting the business’s day-to-day success.


The most critical minimum qualification for certification is that 51% or more of the business is owned by a woman (for WBE certification) or a minority (for MBE certification). In general, eligible minority groups include Asian Indian, Asian Pacific, black, Hispanic and Native American. There are some exceptions to the 51% minimum ownership amount. For example, the NMSDC Growth Initiative allows MBEs to accept greater equity investment while still potentially retaining their MBE status. Under this program, a business may be certified as an MBE if minority individuals own at least 30% of the firm’s economic equity and control the daily operations of the business, at least 51% of the company’s voting equity and a majority of the board of directors. The MBE’s non-qualifying investor must be an approved “professional institutional investor” that is in the business of making equity investments and manages more than $25 million in capital.

Personal Investment

Certifying organizations will verify that the woman or minority entrepreneur has made a personal investment in the company and has real financial risk, and they will request records showing the source of initial funding for the business. Without real financial “skin in the game,” it is believed that the entrepreneur will not be effectively motivated to lead and grow the company. If the female or minority entrepreneur has provided special expertise, ideas or skills in lieu of a personal financial commitment, the certifying agency will likely need documentation that these attributes are truly valuable and a substantial and unique contribution to the business’s success. In addition, certifying entities will closely examine any personal guarantees in place for business loans.


The woman or minority entrepreneur must have actual control and ultimate authority over the company’s major direction and day-to-day management. Evidence such as the corporate minute book, checkbook and organization chart will, at minimum, be required.

The Kitchen Sink

Certifying agencies are not limited in the scope of their requests and ultimately want to ensure that the business’s success does not depend significantly on finances or resources from non-qualifying individuals. Companies that are substantially owned by non-qualifying individuals will be subject to additional examination that can vary greatly depending on the circumstances and would be wise to prepare for significant disclosure – the “kitchen sink” – and a site visit. It is also important to be prepared with all required documentation and support the first time around. If denied an MBE or WBE certification, businesses can make an appeal, but these can take months to process and are often unsuccessful. In addition, companies that have been denied certification are often prohibited from reapplying for several years and must disclose the denial upon reapplication.


There is no single path to running a successful business. But for some companies, MBE and WBE certification can provide helpful advantages along the way, such as a mentor, a new customer or a needed loan.

Brown Brothers Harriman’s Private Banking group has unique expertise advising minority and female entrepreneurs with the structural, operational and financial issues facing their companies, and we are pleased to share our expertise with you.

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1 For more information on the funding gap for women-owned businesses, refer to “Bridging the Funding Gap: The Rocky Trail to New Summits of Success Infographic” in our Q1 2016 issue of Women & Wealth Magazine.
2 Source: Center for Venture Research, “The Angel Investor Market in Q1Q2 2015.”