4 Places That Offer Small Business Loans for Minorities

According to the US Senate Committee on Small Business and Entrepreneurship, there are over 4 million minority-owned companies in the United States, and they total around $700 billion in sales annually.

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4 Places That Offer Small Business Loans for Minorities

According to the US Senate Committee on Small Business and Entrepreneurship, there are over 4 million minority-owned companies in the United States, and they total around $700 billion in sales annually. 

Despite this growth, minority entrepreneurs still struggle in some areas of running a business — access to capital being of particular significance. Without access to funding, these businesses can’t achieve their fullest potential.

Additionally, minority-owned businesses may not have adequate access to resources that help them navigate lending and business in general.

Fortunately, several government and nonprofit organizations have created programs to provide small business loans for minorities as well as education and training. 

Business Capital Consultants cares deeply about helping business owners understand how to borrow money — as the business lending world is complicated — and secure the right funding. We’ve compiled a list of places that offer small business loans to minorities below. Remember to weigh these against typical financing vehicles, and if you need help navigating your options, BCCUSA is here to assist.

What Qualifies as a Minority-Owned Business?

A business is generally considered minority-owned if at least 51% of ownership belongs to a minority group.

With that said, exact qualifications vary by lender. Some may go further and require all members of the business to be part of minority groups, while others only ask for minority ownership.

The Small Business Administration

The SBA has numerous programs to assist minority entrepreneurs fund and grow their small businesses.

SBA 8(a) Business Development Program

The SBA designed their 8(a) Business Development Program specifically to assist minority-owned businesses. 

This program doesn’t provide loans. However, becoming an 8(a) participant makes it easier for you to qualify for other SBA lending products. 

Being an 8(a) participant brings you numerous other benefits.

 

  • Set-aside and sole-source contracts: Every year, the SBA sets aside some federal contracts for 8(a) participants to help minority-owned businesses win contracts and earn revenue. 8(a) companies also get a Business Opportunity Specialist who helps them navigate federal contracting.
  • Mentor-Protege Program: This program pairs small “protege” businesses with larger “mentor” businesses. The mentor provides valuable business development training and guidance in several areas to the protege. Mentor-protege pairs can also form joint ventures and compete on contracts together.
  • 7(j) Management and Technical Assistance Program: This program offers education, training, and consulting in various of business activities, such as accounting, marketing, and financial analysis. 

 

To qualify for 8(a), you must meet the following requirements:

  • Business must be 51% or more owned and controlled US citizens considered economically and socially disadvantaged
  • Owner must have a personal net worth of $250,000 or less
  • Owner must have earned an average Adjusted Gross Income (AGI) of $250,000 or less for the past three years
  • Owned must have $4 million or less in assets
  • Owner must manage day-to-day operations and be involved in long-term decisions

SBA 7(a) Community Advantage Loans

The SBA’s 7(a) Community Advantage Loan program was designed to help small businesses in underserved markets — especially those in low-income communities. Qualified 7(a) businesses can get loans up to $250,000. Interest rates tend to be the Prime Rate + 6%. Only loans are available — no lines of credit.

Businesses can use these funds for anything except for uses prohibited explicitly by the SBA.

To qualify, you must meet the following requirements: 

  • Demonstrate that you’ve tried and failed to get funding from other sources
  • Invest time and money in your business
  • Fewer than 500 employees
  • Less than $7.5 million revenue on average each year for the past three years
  • Personal net income under $5 million (after taxes and not counting carry-over losses)
  • Tangible net worth under $15 million

SBA Microloans

SBA microloans are available for everyone, but they were designed to help provide small business loans for minorities and other underserved entrepreneurs. In fact, in 2018, minority-owned businesses received 48% of all SBA microloans issued.

Microloans range from $500 to $50,000, with interest rates of 8%-13%. You must repay these loans within six years.

Nonprofits

Several nonprofits provide small business loans for minorities. For example, Accion is an international nonprofit that offers funding and resources for businesses in low- and moderate-income communities. They end up helping many minority-owned companies but don’t provide minority-specific business loans.

However, many other organizations of similar size and smaller focus specifically on lending to minorities. Business lending brokers can help you find and access these organizations with ease.

US Department of Commerce Minority Business Development Agency

The US Department of Commerce’s Minority Business Development Agency has established Minority Business Development Centers around the country to provide minority-owned businesses with training and support. Although they don’t offer loans, they do help businesses obtain loans and optimize their use of their financing.

With that said, the MBDA does have grants for which minority-owned businesses can apply. Grants can partially help you fund your business in lieu of loans.

US Department of Agriculture

Minority-owned businesses in rural communities can take advantage of the USDA’s Business and Industry Loan Guarantee program. The primary qualification for this program is living in a rural area as defined by the USDA (50,000 or fewer inhabitants).

Businesses can get loans up to $25 million and use them for several business purposes, such as working capital, real estate, and refinancing.

Studies have shown that minorities in rural communities are more likely to be poor — and thus struggle to build a business and create wealth for themselves. The high borrowing limits on these loans make them excellent for minority-owned enterprises.

Minority-owned businesses face unique struggles when obtaining capital to start or grow. When you work with BCCUSA, we handle the difficult parts for you. 

We find the best source of funding based on your goals and situation, then present your business in the best possible light to lenders. Even after you receive funding, we make sure you know how to obtain and use capital to grow your company.

We’re more than a broker — we’re a partner in your business. To learn more, schedule a free 30-minute consultation with one of our experts today.

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