LGBTQ-Owned Businesses

The Financing Dilemma for Small LGBTQ-Owned Businesses

Last Updated: September 21, 2023By Tags: , , ,

In recent years, the LGBTQ community has made significant strides in gaining acceptance and equality. However, when it comes to starting or expanding a small business, many LGBTQ-owned business owners face unique challenges. One such hurdle is the difficulty in finding adequate financing options.

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As per an analysis conducted by the SBCS report, it was found that LGBTQ-owned businesses have a similar frequency of applying for funding compared to other businesses. Additionally, the analysis conducted by The Center for Economic Advancement & Research (CLEAR) and the Movement Advancement Project (MAP) revealed a troubling finding: LGBTQ-owned enterprises were at a lower likelihood of having their funding applications approved in comparison to non-LGBTQ businesses.

Why LGBTQ-Owned Businesses Don’t Get Funding?

Based on the report by CLEAR and MAP, it was found that 35 percent of LGBTQ-owned businesses that faced funding rejections were informed that their insufficient sales were the reason for denial. In comparison, the corresponding percentage for non-LGBTQ+ businesses was 26 percent.

Similarly, when it came to loan denials, 15 percent of LGBTQ-owned businesses were notified that the lack of documentation was the cause, whereas only 6 percent of non-LGBTQ+ businesses received a similar explanation.

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The report by CLEAR and MAP highlights a particularly troubling issue where lenders are telling LGBTQ+ business owners that they do not support or finance “businesses like theirs.” This choice of words may serve as a coded message that reflects explicit anti-LGBTQ+ sentiments.

It bears a resemblance to the language underlying the 2018 Supreme Court case Masterpiece Cakeshop v. Colorado Civil Rights Commission, where the phrase “we don’t serve customers like you” was used. Shockingly, the report reveals that while 24 percent of non-LGBTQ+ businesses were provided with this reason for funding denials, the figure rose to 33 percent for LGBTQ-owned businesses.

Strategies for LGBTQ-Owned Businesses to Obtain Funding

1. Research LGBTQ-Friendly Funding Sources

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Take the time to identify financial institutions, organizations, and investors that explicitly support and advocate for LGBTQ+ entrepreneurs. Look for grants, loans, and investment opportunities tailored to the needs and goals of LGBTQ-owned businesses.

2. Network Within The LGBTQ+ Business Community

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Connect with local LGBTQ+ business associations, chambers of commerce, and networking groups. Engaging with these communities can provide access to valuable resources, mentorship, and connections to potential funding sources or investors specifically interested in supporting LGBTQ-owned enterprises.

3. Develop a Solid Business Plan

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Create a comprehensive business plan that highlights the unique value proposition of your LGBTQ-owned business, target market, growth potential, and financial projections. A well-structured and persuasive business plan specific to LGBTQ-owned organizations enhances credibility and increases the likelihood of securing funding.

4. Seek Assistance from Small Business Support Organizations

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Reach out to small business support organizations that specialize in assisting LGBTQ+ entrepreneurs. These organizations offer guidance, workshops, and one-on-one counseling to help navigate the funding landscape and optimize the chances of obtaining financial support.

5. Leverage Crowdfunding & Online Platforms

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Explore crowdfunding platforms and online fundraising opportunities specifically designed for LGBTQ-owned businesses to showcase your venture to a broader audience. Craft a compelling campaign that highlights your business mission, values, and impact, attracting supporters who resonate with your cause and are willing to contribute financially.

Conclusion

Despite progress in LGBTQ equality, small business owners in the community still face significant obstacles in securing financing. Discrimination, limited networking, and lack of access to traditional funding channels pose challenges.

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However, by building supportive networks, exploring alternative financing options, and leveraging LGBTQ-friendly resources, these entrepreneurs can thrive. Moreover, Financial institutions must implement LGBTQ-friendly policies to foster inclusivity.

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