Access to funds is critical for minority entrepreneurs, particularly those who run their businesses in economically disadvantaged areas.
Not sure what business financing options and small business resources are available to you as a minority entrepreneur? Not to worry. We’ve got you covered here.
Understanding the Landscape
Approximately 20% of small businesses in the U.S. are owned by minorities, and that number is expected to grow in the coming years.
These business owners don’t do it alone. Many take out small business loans to help them. Like Lisa Price, founder of Carol’s Daughter. What is now a multi-million-dollar beauty brand started small. Price bootstrapped the business until she was ready for a warehouse, and at that point, she took out a business loan.
So how do you thrive as a minority entrepreneur and find the funding you need? Sometimes it’s simply a matter of knowing where to look for business loans for minorities, as well as accessing the many free small business resources available.
Types of Business Loans for Minorities
Let’s explore your options for business loans for minorities.
Traditional Bank Loans
Banks and credit unions offer business loans that often come with competitive interest rates and longer repayment periods. Lenders may want you to have a credit score of 640 or higher, and to be in business for at least a year.
SBA Loans
Although the Small Business Administration offers several services designed for minority business owners, its loan programs are available to any qualified applicant.
SBA 7(a) and 504 loans are available to business owners who aren’t eligible for other types of financing. These programs may offer the lowest interest rates compared to other options, and can be used to purchase equipment or real estate, invest in marketing, hire staff, and more, and repayment periods can be as long as 25 years.
Accion Opportunity Fund
The Accion Opportunity Fund is designed to help women and people of color grow their businesses. Accion offers working capital loans and equipment financing, as well as free business coaching and other resources.
Microloans
If you’re looking for a loan of $250,000 or less, consider a microloan. These loans come in smaller amounts, though they may need to be repaid in a matter of months, rather than years. The SBA offers a microloan of up to $50,000, with a repayment period of six years.
Online-Only Lenders
If you don’t qualify for a traditional or SBA loan, research online-only lenders. You might find more options. Some lenders are willing to look at factors other than your credit when reviewing your application. So even if your credit is under 600, you may still be eligible for business loans for minorities.
Community Development Financial Institutions (CDFIs)
Community Development Financial Institutions cater to underserved markets, which often include minority communities. Banks and credit unions that qualify as CDFIs offer grants, loans, and other financial products to help businesses. Search for a CDFI in your community.
Business Grants for Minorities
While they’re not loans and don’t need to be repaid, grants are another important financing option to consider. There are grant programs available specifically for minority-owned businesses, including:
You may also find local programs
How to Qualify for Minority Business Loans
Maximize your chances of getting approved for business loans for minorities with these tips.
Know What Lenders Want
Spending a few hours searching for loans online can help you narrow down your list to those that you qualify for. Lenders will usually consider your credit score, time in business, and annual revenues. They may also need to evaluate the value of the collateral you can provide to secure the loan.
Focus on Building Your Credit
The higher your credit scores, the more opportunities you’ll have for financing. If you don’t have a business credit history, consider opening a PAYDEX account. Then, if you have commercial credit accounts with vendors who report, you could build a credit history for your business.
If your business doesn’t have a credit history, lenders will look at your personal credit scores, so make sure they’re up to snuff. Review your credit report to make sure it’s accurate, and if it’s not, contact creditors to update their information.
Get Your Documentation Ready
You’re going to be asked for documentation when you apply for a loan. You may need to provide financial statements and tax returns for the past two or more years. Gather these documents ahead of time so you’re not rushed when you’re ready to apply.
Get Professional Help
It can be overwhelming to apply for financing if you’ve never done it before. But you’re far from alone when it comes to finding and applying for business loans for minorities. Take advantage of the many resources available to minority business owners. And talk to lenders. They’re there to answer any questions you have about financing and help you find the best option for your needs.
Resources and Tools for Minority Entrepreneurs
If you’re not sure where to start in applying for business loans for minorities, take advantage of these resources that provide assistance to minority businesses, many of which are completely free.
Minority Business Development Agency (MBDA)
The MBDA has business offices across the country that provide business consulting, financing, and contract opportunities.
Small Business Administration (SBA)
The SBA provides loans, grants, and training programs tailored for minority entrepreneurs. Its 8(a) Business Development Program is open to business owners who are socially and economically disadvantaged who want to secure federal contracts.
National Minority Supplier Development Council (NMSDC)
The NMSDC helps connect minority-owned businesses with corporate members to foster business relationships and also offers a wealth of resources, training, and events for business owners.
Operation HOPE
Operation HOPE provides the tools business owners need to succeed, including financial education, one-on-one coaching, events, and training.
SCORE
SCORE provides free mentoring, coaching, and workshops for all business owners. You can attend local events or online webinars to learn how to write a business plan, how to market your business, and more.
Grants.gov
Grants.gov is a database of grant opportunities for businesses. You can filter search results based on your industry or other qualifications.
Black Business Alliance
BBA provides access to capital, training, networking, and more for Black-owned businesses.
U.S. Minority Chamber of Commerce
The Minority Chamber of Commerce provides many benefits to members, including technical assistance in applying for loans, business consulting services, training, and continuing education, and networking opportunities.
Resources for minority entrepreneurs looking for business loans can lead to more options. Take advantage of the free tools and organizations that offer education, training, and mentoring to take your business to the next level.
