Our picks for the best minority business loans
Best for SBA loans for minority entrepreneurs
Why we picked it: So far in the 2024 fiscal year, more than 32% of SBA 7(a) loans have gone to minority business owners (those who identify as Black, Asian, Hispanic, American Indian or Alaska Native), totaling more than $4 billion in funding. SBA 7(a) loans can be used for a wide array of business purposes, and offer low rates and favorable terms to those who qualify.
Best for fast business loans for minorities
Best for startup business loans for minorities with low revenue
Why we picked it: Fundbox is an online lender, which means the application and funding process should be faster than a traditional lender. It also has low minimum qualification requirements — a 600 credit score, only six months in business and $100,000 in annual revenue — making it a good fit for startups, as well as low-revenue businesses.
Best for minority entrepreneurs with bad credit
Best for established minority-owned businesses
Why we picked it: For businesses that have been operating for at least two years, Funding Circle’s business loans offer flexible terms up to seven years, which can be more affordable for larger business purchases. For the favorable terms, competitive rates and the loan amounts, the minimum qualifications (660 credit score and no specific revenue requirement) are fairly flexible.
Best for equipment loans for minority-owned businesses
Best for bank business loans for minorities
Best for first-time business loans for minorities
Why we picked it: Bank of America’s cash-secured business line of credit has relatively flexible requirements if your business is less-established, and can help your business start to build credit. The minimum deposit to secure the line of credit is $1,000, and your limit is based on the total amount you’ve deposited. After one year of good standing, your account can be reviewed to graduate to an unsecured credit line, at which time your original deposit will be refunded to you.
Best for microloans for minority-owned businesses
Why we picked it: Many larger lenders don’t find it lucrative to lend in small amounts; however, if your business is forced to take more money than it needs, it can end up doing more harm than good. SBA microloans fill that gap. They are typically offered through nonprofit, community lenders, and have more flexible requirements than other SBA loans.
Best for business loans for minority women
Why we picked it: Accion is a nonprofit community development financial institute that provides business loans between $5,000 and $250,000 to underserved communities. Although the loan application process can be longer than some online options, Accion structures your repayment terms in a way that works best with your unique business. In addition to funding, Accion provides a resource library plus free mentoring and coaching to its borrowers.
What is a minority-owned business?
A business is typically considered to be minority-owned if it’s at least 51% owned and operated by people of specific ethnicities. For example, the National Minority Supplier Development Council (NMSDC), defines a minority business owner as an American citizen who is at least 25% Asian-Indian, Asian-Pacific, Black, Hispanic or Native American.
How to get certified as a minority-owned business
Although certification as a minority-owned business isn’t always required to apply for a business loan, it can be helpful for other opportunities such as government contracts, business grants and business resource programs. Options to get certified as a minority-owned business are often available through your city or state government as well as the NMSDC.
Typically, you’ll need to be able to show that your business is 51% owned and operated by individuals that meet specific ethnic definitions. The requirements and process to become certified, however, can vary. Some programs, like the SBA 8(a) Program, require you to renew your business’s certification on an annual basis.
How to get a minority business loan
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Determine your funding needs. Start by deciding how much capital you need and how you’re going to use it. You’ll also want to consider the loan type that might be best for your needs — a term loan vs. line of credit, for example — as well as how much debt you can afford.
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Evaluate your credentials. Consider your personal credit score, time in business and annual revenue to get a sense of where you stand before applying. Also think about your cash flow, sales projections and available collateral.
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Get certified as a minority-owned business. Although this certification isn’t required to apply for a business loan, it may be helpful for opportunities now and in the future. You can get certified as a minority-owned business through your state, or through the NMSDC.
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Research and compare lenders. As you begin your search for financing, you should compare several small-business lenders to find the right fit for your needs. You’ll want to consider factors such as loan offerings, interest rates, repayment terms, qualifications, funding speed and lender reputation.
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Gather your documentation and apply. Although business loan requirements and application processes will vary by lender, you’ll generally need to provide bank statements, tax returns and other business financial documents. The more accurately you can complete the lender’s application, the faster you will be able to receive a decision. Some online lenders can fund applications within the same day, whereas others will take a few business days. More traditional lenders, like bank and SBA lenders, can take several days to several weeks.
Where to get a minority business loan
SBA lenders
Online and alternative lenders
Alternative lenders, which include online lenders, are third-party lending companies that don’t hold deposits like banks or credit unions do. Alternative lenders may offer more flexibility in loan amounts and requirements than traditional banks, and many target funding access to minority-owned businesses or other underserved communities.
Banks and credit unions
Community development financial institutions
Minority depository institutions
Minority depository institutions (MDIs) are mission-driven banks that provide banking services and loans to underserved communities. They are officially defined as financial institutions whose voting stock is at least 51% owned by minority individuals, or if the majority of the board of directors is part of an underserved community and the primary community served is predominantly minority.
Microlenders
Additional funding sources for minority-owned businesses
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Grants for minority entrepreneurs. The government and private organizations offer business grants and awards to minority-owned businesses. Opportunities often vary drastically from state to state, but here are some minority small-business grants to consider.
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Venture capital. Venture capital firms are third-party investment companies that fund startups and entrepreneurs in exchange for a percentage of ownership in your business. Firms like Oakland-based Kapor Capital and Harlem-based Harlem Capital are dedicated to closing the gap in venture capital that many minority-owned businesses experience.
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Friends and family. If you’re struggling to qualify for traditional funding, borrowing from friends and family is also an option, and may allow you to avoid paying too much in interest. Accepting a business loan from family or friends does have the potential to affect personal relationships, however, so it’s best to make sure you trust the person you ask, and put the terms of your agreement in writing.
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Self-funding. Self-funding, also known as bootstrapping, is another option to fund your business, if you have enough money in savings. You may also consider Rollovers as Business Startups (ROBS) transactions, which allow you to use retirement savings to fund your company. With self-funding you can save money on interest and avoid diluting your ownership; however, you are at risk of losing your own money if your business fails.
How to get a minority business loan
1. Determine your funding needs
2. Evaluate your credentials
3. Get certified as a minority-owned business
Although this certification isn’t required to apply for a business loan, it may be helpful for opportunities now and in the future. You can get certified as a minority-owned business through your state, or through the NMSDC.
4. Research and compare lenders
5. Gather your documentation and apply
Some online lenders can fund applications within the same day, whereas others will take a few business days. More traditional lenders, like bank and SBA lenders, can take several days to several weeks.
Other resources for minority-owned businesses
Government and nonprofit organizations may offer free assistance to minority entrepreneurs. These resources may help you gain access to alternative financing options, educational tools or advice from industry experts.
Minority Business Development Agency
National Minority Supplier Development Council
Business Consortium Fund
SBA 8(a) business development program
SBA HUBZone Program
The SBA’s HUBZone Program is a certification program dedicated to awarding government contracts to businesses in underutilized zones, specifically designated as HUBZones. HUBZone-certified businesses are eligible to compete for contracts that are specifically set aside for small-business owners, and get a 10% price evaluation preference.