Since 2007, more than 8 million minority-owned businesses 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. Financing 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 sole proprietorships, owned by minority entrepreneurs?
Here is the definition:
A minority-owned business is one that is at least 57% owned or controlled by one or more minority persons.
What are minority business loans?
This is another simple definition. Minority business owners can get small business financing specially designed for them. Lenders want to encourage small business growth, especially among minority-owned businesses. Therefore, they offer minority-specific business financing.
What are the best business loans for minorities? It depends on which type of loan is best for your business. We have a list for you.
Best Loan Options for Minority Small Businesses
Minority small business loans are wide-ranging. They vary depending on the type of lender and also on the minimum requirements regarding financial eligibility and credit rating. Some have a maximum loan amount and interest rates may be lower or higher than what is currently available from banks and other traditional lenders.
As you can see, minority loans run the gamut in the lending world. They include small business loans, online small business loans, small business loan programs, nonprofit third-party lenders, and even business grants.
No matter what type of minority business enterprise you’re looking to finance, you’ll find the right option for you. We have included the links to make it easier for you to investigate.
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 ideal for moderate-income business owners, whether or not they are minority business owners.
2. SBA 8(a) Business Development Program
Minority-owned small businesses may be a good fit for 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 (CDFIs) are among the best small business loans for minorities and other underserved business owners. CDFIs are best for those with low personal net worth and/or poor credit.
4. Acción USA – Microcredit Program
Minority-owned businesses can use a microloan program like the one offered by Accion USA. A microloan can be a small amount of money, and the loan proceeds support a start-up business idea.
5. SBA Community Advantage Loans:
Underserved communities in underserved markets are the focus of SBA Community Advantage Loans.
6. Fundbox: Minority Startup Loans
Fundbox is the site for minority business owners hoping to fund a start-up.
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 finance minority-owned small businesses.
8. SBA Microloan Program
Again, the Small Business Administration has long set the standard. The SBA microloan program is a good option for an eligible small business owner.
9. SBA Express Loan
As it seems, this SBA small business loan is on the fast track.
10. USDA Business Loans
The USDA seeks to fund small businesses that operate or seek to operate in rural communities. Loan applications must be made through local USDA offices.
11. National Financing – Working Capital Loans
If your small business is already up and running and you need a loan for a special project or expansion, try National Funding.
12. Loan from the Business Consortium Fund
The business syndicate loan can be a source of venture capital funds as a group of business owners seek to build a diverse company.
13. Union Bank Business Diversity Loan Program
Some banks and credit unions offer loans designed to serve minority applicants. Union Bank’s Diversity Business Loan Program is one of the top sources for minority business owners.
14. Non-profit organizations
If you’re a minority-owned nonprofit, 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 out the Small Business Administration’s Patriot Express Loan Program. This SBA program has already lent more than $633 million to support start-up expansions.
16. Business Center for New Americans
This is a Community Development Financial Institution that focuses on making loans to minority business owners who are newcomers to the US The Business Center for New Americans strives to build wealth in the community.
17. Backstage Capital
As it sounds, Backstage Capital’s 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 must apply to the National African American Small Business Loan Fund. Funds are available through the National Black Chamber of Commerce.
19. Wells Fargo Community Development Banking and Lending Division
Wells Fargo’s Community Development Banking and Lending Division focuses on commercial real estate lending.
20. Bank of America Merrill Lynch Corporate Finance Group
The Bank of America Merrill Lynch program focuses on entrepreneurs.
21. Microloan business loans from online lenders
Online lenders can offer microloans to minority homeowners. Lenders include Kiva, Lift Fund, Grameen, and others.
Other Resources for Minority Business Owners
Minority businesses may also seek grants or other funding from agencies. Note that it’s not free money, but the terms are usually generous.
Small Business Grants
Small business grants are often rollover funds. For example, a local entity, such as a town or university, gets a government grant. The money is transferred to local small businesses.
That’s the basics of how minority small business grants are obtained through the USDA’s Rural Business Development Grant (RBDG) program. You can apply for loan funds and obtain technical assistance through your local USDA office.
Minority Business Development Agency
There are a few steps to follow to apply for a government grant through this Minority Business Development Agency program. For example, you must set up an account on Grants.gov and you will need an EIN to set up an account. Once you’ve done that, you’ll be in control of the grant money available.
Small Business Development Centers
Small Business Development Centers may be established through the Small Business Administration and/or through local colleges. Small business owners can earn money by joining the center.
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