If you operate a black-owned business or any other minority-owned business and need a loan, there are financing opportunities available.
What Are Minority Business Loans?
Small business loans for minorities are intended to give socially or economically disadvantaged groups access to business financing. While many funding options aren’t specifically labeled for minorities, there are programs and organizations that help connect minority business owners with financing opportunities.
Let’s take a look at what small business loans for minorities are available, how to qualify for them and the additional resources that can connect your business with the funding and guidance it needs to flourish.
Is Your Business MBE Certified?
Many organizations will require you to be a certified Minority Business Enterprise (MBE) or Disadvantaged Business Enterprise (DBE) to be eligible for black-owned business loans, grants or other resources. The main provider of these certifications is the National Minority Supplier Development Council (NMSDC). Their MBE program qualifies you as a DBE and is recognized nationwide by suppliers, both public and private.
To qualify, your business must:
Be at least 51% owned by 1 or more members of an approved minority group
Have day-to-day operations and decision-making handled by minority owner(s)
Be a for-profit business
Be located in the territorial U.S.
Best Small Business Loans for Minorities: 7 Sources
1. SBA Microloans
Through the Small Business Administration’s (SBA) loan programs, the SBA guarantees a percentage of the funding for small businesses. SBA loans are good options for minorities who don’t qualify for traditional bank loans and are an excellent choice for minority owners facing financial challenges.
While there aren’t any restrictions regarding who can apply for SBA microloans, this program is particularly beneficial for women, veterans, economically disadvantaged or minority business owners who have recently launched their ventures.
Microloans are issued by third-party lenders, which in most cases, are nonprofit, community-based organizations. While the maximum funding amount available to applicants is $50,000, the average loan is $14,000. You can expect an interest rate between 6%-9%.
Microloans can be used for working capital, inventory, supplies or purchasing machinery, among other purposes, but they cannot be used for real estate purchases or debt refinancing.
If you’ve been seeking black- or minority-owned business loans for your startup, microloans can help entrepreneurs who might have limited financing options when opening a new company.
2. SBA Community Advantage Loans
The SBA Community Advantage Loan Program opens access to financing options that some minority business owners might not otherwise qualify for.
The program encourages local lenders, nonprofits and even mission-focused organizations to issue SBA 7(a) small business loans for female minorities, veterans and other members of underserved communities.
The SBA typically considers inner-city and rural areas and any low- to moderate-income community that’s “underserved.” If your business has at least 50% of its employees residing in an underserved area, you could qualify for the Community Advantage Loan Program.
The SBA guarantees up to 85% of the amount issued (maximum of $250,000), making this an excellent option for you if you’ve had trouble qualifying for conventional term loans.
Term length maximums are 10 years for working capital and equipment and 25 years for commercial real estate.
Interest rates are comparable to 7(a) program loans, with maximum rates at 9.25%.
3. Accion Network
The Accion Network’s goal is to distribute small business loans for minorities, and other funding, across the United States. More than 60% of Accion Network’s borrowers are part of minority groups.
This nonprofit organization offers affordable, flexible funding options to businesses across industries. You can apply for microloans and qualified borrowers can receive more substantial amounts.
Accion offers loans for everything you need, from working capital to renovations.
They’re an excellent option for startups, as well.
4. Union Bank
Union Bank’s Business Diversity Lending Program offers up to $2.5 million in loans for minority business owners.
The program is designed to help small minority businesses finance projects of all sizes. Qualifying businesses must have been operating for at least 2 years and have annual sales of less than $20 million.
Union Bank offers both secured and unsecured loan options with fixed or variable rates. Your creditworthiness will determine your financing amount and terms.
5. Business Consortium Fund
The Business Consortium Fund (BCF) is a registered CDFI that offers minority business loans. They have 2 programs open to any certified Minority Business Enterprise seeking funding.
BCF Direct Lending Program
The BCF will often directly lend to businesses. They offer term loans and lines of credit, ranging from a minimum of $75,000 to $500,000, although loans up to $1.125 million will be considered on a case-by-case basis.
Loans reach maturity in 7 years, making these a good loan option for minority owners who need a medium-sized term loan.
BCF Loan Guaranty/Loan Participation Program
Like SBA loan programs, the BCF guarantees part of your funding if you have trouble acquiring financing from traditional lenders. Their involvement, dubbed the Loan Guaranty/Loan Participation Program, provides a credit enhancement by covering a portion of the funding.
Consider BCF loans for minority business owners if you need to finance equipment or invoices, or need a quick boost in working capital.
6. Indian Loan Guarantee Program
The Indian Loan Guarantee Program (ILGP) helps American Indian and Alaskan native tribes or groups obtain funding from various lenders, excluding credit unions, by providing guarantees or insurance for minority business loans. These guarantees can help native business owners secure financing at reasonable rates, which might otherwise be unattainable.
These are the requirements to qualify for the ILGP:
Be an enrolled member of an American Indian or Alaskan Native tribe or group
Be an American Indian or Alaskan native group or tribe
An American Indian or Alaskan Native tribe or group must have 51% ownership of the financed business
The financed project should benefit a reservation or tribal service area’s economy
The borrower must invest 20% equity in the project
ILGP-secured funding can be used for operating capital, lines of credit, construction and equipment purchases, among other projects.
7. State and Local Programs
Helping business owners obtain financing to grow their companies is one way state and local governments can ensure their respective economies thrive.
There are myriad programs available, and the easiest way to find one for your business is to search the web for (your state’s name) and “minority business loans.”
One such program is the Pennsylvania Minority Business Development Authority (PMBDA). The PMDBA provides low-interest minority business loans that can be used for different purposes, including working capital, building construction and renovation projects. The authority will finance up to 90% of approved projects.
Another program is New York’s Accompany Capital, which provides small business loans, credit-building loans and microloans to minority business owners.
Fast Capital 360 helps small business owners find the best loan options from the industry’s top lenders. Fast Capital 360 is building cutting-edge platforms to automate & optimize every step in the application, approval and funding process.
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