Since 2007, more than 8 million minority-owned firms have launched small businesses in the US. In fact, minority small business owners are represented in every industry sector, according to the US Department of Commerce.
Lenders have taken notice. Funding options abound for minority business loans.
What Defines a Minority-Owned Business?
How does a minority-owned business qualify for a loan? What if the businesses are single proprietors, owned by minority entrepreneurs?
Here’s the definition:
A minority-owned business is one with at least 57% owned or controlled by one or more minority individuals.
What are Minority Business Loans?
This is another simple definition. Minority business owners can get small business financing that’s especially set up for them. Lenders want to foster small business growth, especially among minority-owned businesses. So, they offer minority-specific business funding.
What are the best business loans for minorities? It depends on which type of loan is best for your business. We’ve got a list for you.
Best Minority Small Business Loan Options
Minority small Business loans are greatly varied. They vary by type of lender, and also by minimum requirements regarding financial eligibility and credit score. Some have a maximum loan amount, and interest rates can be lower or higher than what’s currently available at banks and other traditional lenders.
As you can see, loans for minorities run the gamut in the lending world. They include small business startup loans, online small business loans, small business loan programs, third-party nonprofit lenders and even business grants.
No matter what type of minority business enterprise you seek to fund, you’ll find the right option for you. We’ve included the links so you can easily research further.
1. SBA 7(a) Loan Program
The Small Business Administration has long been the go-to for small businesses seeking loans, especially for working capital. The SBA 7 (a) Loan Program is a great fit for moderate-income business owners, whether or not they are minority business owners.
2. SBA 8(a) Business Development Program
Minority-owned small businesses can find a good fit with this Small Business Administration program. The SBA 8 (a) Business Development Program seeks to promote underserved business owners including minority-owned businesses. SBA loans have competitive interest rates and are a great way to build business credit.
3. Community Development Financial Institutions — Best for Bad credit
Community development financial institutions (CDFI’s) are among the best small business loans for minorities and other underserved business owners. CDFIs are best for those with a low personal net worth and/or bad credit.
4. Accion USA – Microloan Program
Minority-owned businesses can turn to a microloan program such as the one offered by Accion USA. A microloan can be a small amount of money, with the loan proceeds supporting a start-up business idea.
5. SBA Community Advantage Loans:
Underserved communities in underserved markets are the focus of the SBA Community Advantage Loans.
6. Fundbox — Loans for Minority Startups
Fundbox is the site for minority business owners hoping to finance a startup.
7. OnDeck – Online Term Loans
If you meet the minimum personal credit score requirement, you should consider a term loan from OnDeck, which seeks to fund small businesses owned by minorities.
8. SBA Microloan Program
Again, the Small Business Administration has long set the standard. The SBA Microloan program is a good choice for an eligible small business owner.
9. SBA Express Loan
As it sounds, this small business loan from the SBA is on the fast track.
10. USDA business loans
The USDA seeks to fund small businesses operating or seeking to operate in rural communities. Loan applications must be made through local USDA offices.
11. National Funding – Working Capital Loans
If your small business is already operating and you need a loan for a special project or expansion, try National Funding.
12. Business Consortium Fund Loan
The Business Consortium Fund Loan can be a source for venture capital funds, as a group of business owners seeks to build a diverse company.
13. Union Bank Business Diversity Lending Program
Some banks and credit unions offer loans aimed at serving minority applicants. The Union Bank Business Diversity Lending Program is one of the top sources for minority business owners.
14. Nonprofit Organizations
If you’re a minority-owned nonprofit organization, one of your best bets for a loan is a Community Development Financial Institution, or CDFI (see #3 above).
15. SBA Patriot Express Loan Program — Startup Expansions
If your small business startup is ready to expand, check the Small Business Administration Patriot Express Loan Program. This SBA program has already loaned more than $633 million to support startup expansions.
16. Business Center for New Americans
This is a Community Development Financial Institution that focuses on lending to minority business owners who are newcomers to the US. The Business Center for New Americans strives to build community wealth.
17. Backstage Capital
As it sounds, the Backstage Capital minority business loan focuses on small businesses involved in the arts.
18. National African American Small Business Loan Fund
Minority entrepreneurs involved in black-owned businesses should apply to the National African American Small Business Loan Fund. The funds are available through the National Black Chamber of Commerce.
19. Wells Fargo’s Community Development Banking and Lending Division
The Wells Fargo Community Development Banking and Lending Division focuses on commercial real estate loans.
20. Bank of America’s Merrill Lynch Entrepreneurial Finance Group
The Bank of America Merrill Lynch program focuses on entrepreneurs.
21. Microloan Business Loans from Online Lenders
Online lenders may offer microloans to minority owners. Lenders include Kiva, Lift Fund, Grameen, and others.
Other Resources for Minority Business Owners
Minority businesses can also seek to obtain grants or other monies from agencies. Keep in mind, that it’s not free money, but the terms are typically generous.
Small Business Grants
Small Business Grants often are pass-through monies. For example, a local entity such as a town or college gets a government grant. The monies are passed through to local small businesses.
That’s the basics of how minority small business grants are obtained via the USDA Rural Business Development Grant (RBDG) program. You can apply for loan funds and get technical assistance using your local USDA office.
Minority Business Development Agency
There are some steps to take to apply for a government grant through this Minority Business Development Agency program. For example, you have to set up an account at Grants.gov and you’ll need an EIN to set up an account. Once you’ve done that, you’ll be able to keep tabs on available grant monies.
Small Business Development Centers
Small Business Development Centers may be set up through the Small Business Administration and/or through local universities. Small business owners can get monies by joining the center.
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