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Small Business Loans For Minority
Of the two million new businesses started in the United States over the past decade, more than 50 percent are minority-owned. Despite this growing trend, many minority-owned businesses need assistance in obtaining the capital needed to start or grow a business.
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SBA minority loans are one popular option because of their relatively low interest rates and flexible amounts. You can also consider a variety of minority business grants and small business loans.
The U.S. Small Business Administration (SBA) is committed to helping minority-owned businesses and underserved entrepreneurs develop and grow their businesses.
The Community Advantage loan program, which is set to expire on September 30, 2024, helps small business owners in underserved markets. Loans are made by mission-oriented, community-based financial institutions, including Certified Development Companies (CDC).
The SBA’s 7(a) loan is for all types of small businesses, but 30% of 7(a) loans went to minority applicants in fiscal year 2021. The program provides financing to start a business, expand operations, or purchase equipment or land. The SBA uses the FICO Small Business Scoring Service (SBSS) instead of a personal credit score when determining eligibility for 7(a) loans. The SBSS minimum score is subject to change based on current credit and market conditions.
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Keep in mind that this is not the best option for a startup loan, as you usually need to be in business for at least two years.
The SBA offers microloans of up to $50,000 to minority-, women-, low-income, and veteran-owned businesses. With a maximum amortization period of six years, these loans can be used for working capital or for the purchase of equipment, supplies or other business-related goods. In fiscal year 2021, SBA brokers made 4,514 microloans totaling $74.7 million. The average SBA microloan was $16,557.
While the following small business loans aren’t just for minority borrowers, they do show a sampling of what’s available.
Reliably provides working capital loans to support day-to-day operations such as payroll, inventory, marketing and other short-term expenses. Although it requires a monthly income of $15,000, it can be an ideal option for new businesses with poor credit. Trusted connects you with a business expert who will help guide you through every step of the loan process. Uskottava also has business expansion loans and merchant cash advances for small businesses. Borrowers can get funding the same day they are approved.
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The American Express Business Line of Credit offers small business owners continuous lines of credit up to $250,000. Once approved, you don’t have to withdraw money until you need it, and you won’t incur any charges until you do. Loan terms are 6, 12 and 18 months, but you must borrow at least $500 if you choose a 6 month loan term (higher for 12 and 18 month terms). American Express Business Line of Credit has also recently partnered with the Accion Opportunity Fund to provide financial and educational support to at least 250,000 medium-sized and black-owned businesses by the end of 2024.
OnDeck’s business time loans range from $5,000 to $250,000 with loan terms up to 24 months. You can use the funds for various expenses, such as expanding to a new location, renovating or launching a marketing campaign. Repayment is due daily or weekly. The APR starts at 29.90%, although the average APR for OnDeck-era loans is 62.1% based on loans originating in the half year ending 3/31/2022.
OnDeck also offers a business line of credit. However, there are some industries that OnDeck does not serve, such as adult entertainment, mortgage brokers, firearms dealers, and more.
A merchant cash advance can be a good fit if you need immediate funds to cover expenses such as payroll, inventory or other business needs. Uplyft uses artificial intelligence to analyze applicants and make faster decisions. Plus, it usually has more lenient small business loan requirements than other types of loans because you’re borrowing against your future income. Repayments are daily or weekly, depending on the specific advance payment. Uplyft also offers business loans and SBA loans.
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The SBA defines a minority-owned business as a business that is either wholly or equally (at least 51%) owned and day-to-day managed by members of one or more ethnic or racial groups.
Minority business owners can explore the following options when looking to finance their small business needs. Eligibility requirements may vary depending on the lender.
Although it can be challenging to find small business loans for minorities with bad credit, it is still possible. Some lenders – especially online alternative lenders – offer bad credit to businesses.
Some options include accounts receivable financing and merchant cash advances that are available to borrowers who cannot get a loan elsewhere.
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If your financing options are limited due to bad or bad credit, consider ways to improve your credit score before applying.
In addition to loans granted to minority-owned companies, there are minority grants for small businesses. Here are a few starting points:
Federal grants – many of which are available to minority-owned businesses – are listed on Grants.gov. These grant opportunities are very specific and may not fit the specific needs of your business, but it’s helpful to keep an eye on your options. Several federal agencies sponsor these grants, including the Department of Agriculture, the Department of the Interior, the Environmental Protection Agency, and NASA.
One noteworthy presentation is the Ministry of Agriculture’s rural business development grant program. These grants are large (typically $10,000 to $500,000) and are open to businesses that operate in rural areas or outside cities with populations of less than 50,000.
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In addition to the federal government, several companies offer small business grants to minorities. Some of the options below are tailored to specific minority business owners, while others are more common:
In addition to the $50,000 grand prize, 10 other winners will win a $30,000 grant. All prizes include $1,000 in FedEx printing and business services.
The SBA’s 8(a) Business Development program is designed to assist small, disadvantaged businesses, including minority-owned businesses. The federal government aims to award 5% of federal contract dollars annually to businesses that are at least 51% owned and operated by economically or socially disadvantaged US citizens.
To qualify, you must obtain minority-owned business certification through the SBA’s online application. Once approved, the designation lasts up to nine years, depending on the status of your company. Qualified applicants can receive business advice and technical support and bid on government contracts as a sole source or as part of a joint venture.
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As the name suggests, the Minority Business Development Agency (MBDA) – part of the US Department of Commerce – works to promote the growth of minority-owned businesses.
Business owners can get advice from experts at MBDA Business Centers nationwide, including finding capital. MBDA also promotes the interests of minority-owned businesses while administering public and private sector programs.
The National Minority Supplier Development Council (NMSDC) focuses on strengthening opportunities and market access for minority-owned suppliers. NMSDC helps its 1,500 business members integrate into supply chains, access programming and training opportunities, and network with other industries.
Service Corps of Retired Executives (SCORE) is a valuable source of free business mentoring and training for minority-owned and non-minority-owned businesses. SCORE, SBA’s resource partner, has provided mentoring, workshops and educational resources to more than 11 million entrepreneurs since 1964 through more than 10,000 volunteers across the United States.
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The Office of Small Business Development Centers (SBDC), which is part of the SBA, makes special efforts to reach minorities from socially and economically disadvantaged groups. It is dedicated to supporting entrepreneurship, small business development, and the U.S. economy by funding and overseeing a nationwide network of development centers.
Minority business grants often have specific criteria and strict eligibility requirements, making it difficult to qualify. In addition, small business loans usually require a minimum FICO score or a certain number of years in business.
In addition to offering SBA loan options for minority-owned businesses, we highlighted online lenders that met the following criteria:
Working capital loans can provide quick financing in the form of short-term loans, lines of credit and other operating expenses, such as covering rent or salary payments.
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Secured business loans are “secured” with some collateral. The security of the lender can mean lower interest rates for you, but also the risk of losing your property.
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