Minority business loans and other unique programs exist for minority-owned businesses throughout the U.S. While many of these programs are state or community-specific, there are some large-scale programs as well. Read on to find out more.
What are minority business loans?
According to the U.S. Census Bureau, more than 1 million businesses in the U.S. are now owned by minorities, roughly 17% of all U.S. businesses.
In total, minority-owned businesses account for about $1.8 trillion in annual revenue and employ over 6 million workers throughout the country.
However, despite the considerable growth in minority-owned businesses, it remains unfairly difficult for minorities to obtain traditional loans, even when comparing equal credit and other financial determinations.
Fortunately, several organizations and programs have stepped up to help bridge that gap and make it easier for minority-owned businesses to get the funding they need to build and grow.
Minority business loans are one such umbrella of programs, which refers to any loan program specifically designed for minority-owned businesses.
In addition, later we’ll also break down some additional resources that minority-owned businesses can take advantage of to obtain funding and grow their business.
Minority business loan options
Several minority business loan options are available, from SBA loan programs to other major loan programs as well as state and local programs.
Here are just some of the programs available to minority-owned businesses:
1. SBA 8(a) Business Development Program
One of the most notable minority-based business funding programs, the SBA’s 8(a) Business Development Program was created for minority and disadvantaged businesses.
Technically not a loan program, 8(a) participants enjoy several benefits related to easier access to business funding.
Most notably, members of the 8(a) program have access to an annual pool of federal contract funds reserved for 8(a) participants. That means not only fairer qualification given the program guidelines but less competition as a whole.
And if the idea of applying for federal contracting dollars sounds daunting (as with anything government-related, it can be painfully confusing), you get access to a specialist representative who will help you through the entire process.
So, how do you become a part of the program?
To be approved for the SBA’s 8(a) Business Development Program, you must meet these guidelines:
- Be 51% or more owned and controlled by U.S. citizens who qualify as economically and socially disadvantaged
- Must be involved in the day-to-day operations of the business itself
- Have a personal net worth of less than $250,000
- And have less than $4 in assets
Keep in mind that there are additional guidelines to qualify as an 8(a) business you’ll need to meet as well.
For all the information you need to get started with the SBA’s 8(a) Business Development Program, see here.
2. SBA Community Advantage loans
The second of three main programs the SBA offers to minority-owned businesses, SBA Community Advantage loans are a part of the SBA’s flagship 7(a) loan program, which is offered in conjunction with local lenders.
The SBA Community Advantage loan program offers funding in the form of term loans to business owners in underserved markets, between $50,000 and $250,000 in funding. Interest rates typically range from 7-10%.
To learn more about the SBA’s Community Advantage loan program, click here.
3. SBA Microloans
The third and final SBA program minority-owned businesses can take advantage of is the SBA Microloan program.
SBA Microloans are exactly what they sound like: small loans between $500 and $50,000 (with the average Microloan being $13,000).
The Microloan program is designed for new businesses that are minority, women, or veteran-owned or low-income, with roughly half of all Microloans going to minority-owned businesses each year.
Microloans have a relatively short-term repayment plan at within six years and have an average interest rate of 8-13%.
To learn more about the SBA’s Microloan program, click here.
4. Business Consortium Fund
The Business Consortium Fund, or BCF, is a U.S. Department of the Treasury certified Community Development Financial Institution designed to help minority business owners in various ways.
The BCF has several programs, including its Direct Lending Program, which offers minority business owners $75,00 to $500,000 either in the form of a term loan or as a business line of credit.
To be approved for the program, you’ll first need to get your business certified as a minority-owned business with the National Minority Supplier Development Council.
Click here to find out more about certifying with the NMSDC or here to learn more about the BCF’s Direct Lending Program.
State and local minority loan options
While several national programs exist to help minority-based businesses, programs also exist on the state and local level.
Below is a list of example state and local programs for minority-owned businesses, but take the time to research what programs might exist in your area as this list is definitely not exhaustive.
1. Community Development Financial Institution Fund
The Community Development Financial Institution Fund was established by the U.S. Department of Treasury. Through the fund, CDFI’s or Community Development Financial Institutions offer both financial and technical assistance to minority-owned businesses.
These institutions come in two forms:
The BEA Program’s mission is to facilitate investment in economically distressed communities around the country to revitalize those areas.
Native Initiatives offers monetary awards and technical training opportunities to help create jobs, build businesses, and create economic growth in Native Communities.
As a whole, the CDFI provides affordable credit, capital, and other business and financial growth opportunities to minority and economically distressed communities nationwide.
Click here to view the CDFI’s Award Database to search for these and other CDFI organizations in your state to see what awards are available.
2. Minority and Women Revolving Loan Trust Fund program
The Minority and Women Revolving Loan Trust Fund program offers working capital and fixed asset loans to women and minorities in New York.
The loans range up to $35,000 for their trust fund program and $50,000 for fixed asset loans and require businesses have less than $100,000 in annual gross revenue.
3. National African American Small Business Loan fund
The National African American Small Business Loan fund offers business loans to African American-owned businesses in several major cities throughout the U.S., including New York and Los Angeles.
The fund also offers comprehensive business services, including marketing, business plan development, and tech assistance.
Loan amounts range from $35,000 to $250,000 and can be provided in the form of short-term loans or business lines of credit.
Do you qualify for minority business loans?
Now that we’ve covered some unique options for minority-owned businesses to obtain funding, you might be wondering: will I qualify?
The main prerequisite for most minority business loan programs is that the majority owner (51%+) must be part of a minority group.
It is possible in some rare cases that a program might require all owners to be part of a minority group, but most programs only require a single majority owner.
Beyond that, every loan program is different, so you’ll need to check with each individual program’s qualification factors to figure out what you’ll need to qualify.
Grants and additional resources for minority-owned businesses
In addition to the above minority business loan programs, there are several grants and additional resources for minority-owned businesses to take advantage of.
While obtaining a business loan is generally easier (both to find and obtain), grants and other similar programs are a chance at debt-free capital for your business, so they’re worth looking into.
Here are a few:
1. U.S. Minority Chamber of Commerce
The Minority Chamber of Commerce is a national organization supporting minority-owned businesses throughout the U. S.
While not offering any direct grant or funding programs, the MCC is great for connecting you to existing resources, including both grants and new and existing funding programs.
2. Minority Business Development Agency (MBDA) Business Centers
MBDA business centers connect minority-owned businesses in 34 states with countless small business services.
Services include:
- How to secure funding
- Other financial counseling
- And contract acquisition
Financial counseling is 1-on-1 and offers minority-owned businesses an invaluable financial overview from one of the MBDA’s own financial experts.
3. Grants.gov
A final and the best general source for finding qualifying grants is Grants.gov.
The site offers up-to-date information on more than 1,000+ grant programs throughout the U.S.
It has an easy search function with access to information on countless minority-based grant programs, such as the Minority Research Grant Program.
Make your dream business a reality
Much still must be done to bridge the divide that minority-owned businesses face in today’s business world.
However, progress has been made and there are programs and resources available to business owners who are willing to look.
Get the funding your business needs to make your dreams a reality, with the loan programs and additional resources we covered in this guide.
Frequently asked questions
To apply for and potentially obtain most minority business grants, you must:
– Get certified as a minority-owned business
– Create your business plan
– Visit a grant directory such as Grants.gov to find a grant that matches your business
– Gather your business documents
– Apply for the grant (double-check whether there is a deadline, as most grants work on an annual limited-time application schedule)
To certify as a minority-owned business, apply with the National Minority Supplier Development Council (or simply NMSDC).
The NMSDC has regional offices throughout the country where you can apply to become a recognized minority-owned business.
