Minority Business Loans And Grants – Minority Small Business Loans – What You Need to Know It’s a myth that minority small business owners have difficulty accessing financing. So we’re here to help you with some of the minority small business loan resources you need, as well as some tips on how to secure that financing.
Looking for minority business loans? You are not alone. It’s no secret that the tech world is male-dominated and white-dominated. Study after study has shown that underrepresented groups are underrepresented to angel investors and venture capitalists, who receive less funding when they come forward. And when it comes to debt?
Minority Business Loans And Grants
For example, a 2014 study by Brigham Young University researchers employed nine “mystery shoppers” to find small business loans. three black; Three are Hispanic; And three were white. They all wore similar clothes, had almost identical backgrounds, and demanded $60,000 for the same business plans.
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Minority small business owners were given less information about loan terms, asked more questions about their personal finances, and given fewer applications than white small business owners.
And these interactions have long-lasting effects. The same study conducted in-depth interviews with 39 entrepreneurs—16 white, 13 Hispanic, and 10 black—seeking financing. They found that for minority small business owners, persistent rejection, denial, and limited access to credit lead to low self-esteem and feelings of self-worth. Although the study did not examine whether these small business owners continued to seek funding or continued with their businesses, it is not far-fetched to speculate that this disillusionment and reduced self-worth played a role.
So these are the facts: Institutional racism and individual discrimination have a serious impact on minority business owners and make it more difficult for them to get ahead. But this is not news to people from underrepresented groups. Minority small business owners know they have a tougher road than whites, and that doesn’t stop them from starting businesses. In fact, from 2007 to 2012, the percentage of minority-owned businesses rose from 22 percent to 29 percent of all businesses, according to the Small Business Association.
With such persistence, it is an irony that a minority of small business owners have difficulty accessing financing. So we’re here to help you with some of the minority small business loan resources you need, as well as some tips on how to secure that financing.
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First, let’s define what is considered a “minority” in this world of lending. An African American, Hispanic American, Asian American, Pacific Islander, Alaska Native, or American Indian is considered a minority. For a business to be considered minority-owned, someone in this group must own at least 51%.
In addition, to qualify for certain loans or grants, you usually need to obtain certification as a minority business owner (MBE) or a disadvantaged business owner (DBE). However, this is not the case for all loans and grants, so make sure it is necessary before going through the certification process.
While there is no umbrella group that provides small business loans to minorities, there are a variety of resources if you know where to look. Many of these loans and grants exist at the local and state level, so your first step and best bet is to connect with a local agency that works with minority business owners or a lending agency that can help you navigate your local landscape. Some may be listed under loans or grants to “disadvantaged groups” or loans or grants specifically targeted at disadvantaged communities.
Federal loan programs are specifically targeted at minority business owners, as well as some that are generally targeted at small business owners who need additional assistance. Here are some of the best minority loans for small businesses, along with some of the best general loans.
Loan & Grant Options For Minority Business Owners
An SBA small business loan is a loan backed by the Small Business Administration (SBA). Founded in 1953, the SBA is a federal government program that provides support to small business owners in the form of mentoring, workshops, counseling and small business loans.
Although the loans are backed by the SBA, they do not come directly from the SBA. To access financing, you need to find a local lender that offers SBA loans. Here are three SBA loans that are good options for minority small business owners.
The SBA 8(a) Business Development Program is designed specifically for small businesses. To qualify, businesses must be at least 51 percent owned and controlled by “socially and economically disadvantaged persons.” In addition to the racial categories described above, people can demonstrate that they are economically or socially disadvantaged by other factors, including “gender, physical disability, prolonged residence in an environment segregated from the mainstream of American society.”
Instead of a loan, the SBA 8(a) Business Development Program involves experience. Participation in the program is divided into two phases over nine years: a four-year development phase and a five-year transition phase. In addition to finance, entrepreneurs receive guidance, procurement assistance, business consultancy, training, financial assistance, guarantees and other managerial and technical assistance.
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BSA 7(m) microloans are approved by the SBA and financed through nonprofit community intermediaries. Loans are very small, with a cap of $50,000 and an average loan amount of $13,000. The program is specifically designed to help women, low-income entrepreneurs, veteran and minority entrepreneurs, and other small businesses that need small amounts of financial assistance.
The 7(a) loan program is the SBA’s most popular small business loan. 7(a) Loan Program SBA small business loans can be used to purchase fixed assets, working capital, finance, purchase an existing business, and repay debt. To qualify, a business must first meet the SBA’s size criteria. Because SBA loans are specifically for small businesses, they have created a “Size Criteria Tool” to help small business founders and owners determine whether or not they qualify.
Once you’ve determined whether or not your business meets the size criteria, here’s a checklist of the remaining requirements to qualify for the SBA’s 7(a) Small Business Loan Program: U.S. At, you have the ability to profitably repay the loan and operate the business and you have the capital you own.
Accion is a microlending network that offers a variety of loans, including loans specifically targeted at minority business owners. They make loans starting at $200 and up to $1,000,000 to low- and moderate-income entrepreneurs who have difficulty obtaining financing from other sources. For starters, they also have a simple one-page application form, making the barrier to entry lower than some other institutions.
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Union Bank provides up to $2.5 million in loans to minority small businesses under their Business Diversity Lending Network. In addition to having at least 51 percent minority ownership, businesses must have annual sales of more than $20 million, be in business for at least two years and require less than $2.5 million in debt.
The New Americans Business Center offers loans to new Americans (sometimes called “refugees”) in the greater New York area. Loans do not require a credit score, but loans over $3,001 must have a co-signer; The borrower settles 20 percent of the loan amount with previous personal investment; The debtor has not declared bankruptcy in the last 12 months; The borrower has sufficient cash flow; and they have the required licenses or are in the process of obtaining such licenses.
Balboa Capital offers loans specifically to Hispanic small business owners, one of the fastest growing groups of entrepreneurs in the United States. Loans are up to $250,000 and are available even to people with no or bad credit. Businesses must be at least one year old and generate at least $300,000 in annual revenue. They offer easy online check-in and even have Spanish-speaking staff to help people with a language barrier.
The Associated Tribes of the Northwest Indian Revolving Loan Fund offers Native American business owners loans of up to $125,000 at fixed interest rates that are typically slightly higher than traditional banks. Loans can be used to expand, relocate or start a new business. They also provide technical assistance to Native Americans trying to start businesses; bridge financing between Native American companies and commercial financial institutions; and educational assistance and technical support to promote economic empowerment among tribals.
Small Business Relief Office
Community Development Financial Institutions (CDFIs) are small lending institutions, such as credit unions or community development trusts, specifically targeting underserved communities, making them an excellent choice for minority small business loans. To qualify, a business must be certified as a minority-owned small business or a women-owned small business (MWBE); Have three years of business or personal tax returns; business and personal credit reports; Six months of business and personal bank statements; Year-to-Date Balance Sheet;
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