The MWBE Certificate: An Intro to the What, Why, and How

Posted March 20, 2019 by Sasha Butkovich in Running a Business 101
State programs exist to help minority- and women-owned businesses compete against others in their industry. Read about the MWBE certificate and why you should apply.

Running a small business is a challenging endeavor. Developing the products or services, gaining more customers and contracts, and competing in the marketplace are all part of the daily grind.

For minority and women-owned businesses, there are programs in most states that can actually help give you a leg up. If you haven’t heard of the MWBE certification, it’s about time you dive in.

What is the MWBE certificate?

MWBE stands for Minority/Women-owned Business Enterprises. In some states, the two may actually be separate, and you may see MBE or WBE instead. In either case, it’s a legal certification issued by the state that provides developmental benefits to these businesses. At least 38 states, plus Washington D.C. and Puerto Rico, have state-level MWBE development programs.

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The Benefits of Getting Certified

There are many benefits to obtaining the MWBE certification. Firstly, it gives a leg up to businesses that otherwise might not have the resources to compete with bigger players by giving them access to business development assistance.

The MWBE certificate can help your business get government contracts that may not have been accessible before.

This can help your business get government contracts that may not have been accessible before. If you have a catering company, for example, you might have the opportunity to cater a treasury lunch. If your company makes soap, you might be in the running to supply soap to a state office facility.

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Certified businesses are added to the state’s list of MWBEs. This list is also publicly accessible, so you get greater visibility with other companies too. Maybe someone needs a graphic design agency for their website, and they want to work with a MWBE; they can find you on the list.

Small business owners may also be able to access networking events through the MWBE program. Additionally, some states offer business workshops and courses to those businesses. The benefits vary by state, but in sum, MWBE certification gives businesses the ability to reach a broader network of customers, contracts, and resources.


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Why Businesses Work with MWBEs

Why might other companies seek out MWBEs to work with? The first reason has to do with the bottom line: they can gain substantial tax savings.

On the federal level, companies can get tax breaks for using minority and women-owned businesses in procuring materials and supplies.

On the federal level, companies can get tax breaks for using minority and women-owned businesses in procuring materials and supplies. There’s also a federal tax incentive that reduces tax liabilities for companies using minorities that supply labor or services to a project funded with federal or state grants or loans. On the state level, some states also offer additional tax breaks of their own.

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Another reason is more philosophical. Companies may simply want to pursue diversity among their supplier and customer network. Depending on a business’s objectives, seeking out MWBEs to partner with can help reinforce their mission and values.

How to Get the MWBE Certificate

As mentioned above, many states offer MWBE programs, and they differ from state to state. You’ll want to check the specific eligibility requirements in the state where your business is based to make sure you qualify.

Federal statutes related to business define “minority” as people who are African-American, Alaskan Native, American Indian, Asian-American, or Hispanic. MWBEs are companies with minorities or women controlling 51% of the firm's operations. Publicly owned businesses may also qualify, but minorities or women must control more than 50 percent of the stock offerings.

In addition, there may be other qualifications required by the state. This could include things like a personal net worth restriction for the owners, a restriction on the number of employees at the company, or a length of time the business must have been in operation. You’ll also have to provide supporting documents to back it all up. Again, check your state’s rules for the full details.

Applying and becoming certified can be a bit of a lengthy process. And to top it off, you’ll likely need to get re-certified each year. But depending on your business, it can be well worth it to reap all the benefits.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.