Unlock Potential: A Comprehensive Guide to Minority Business Loans

In October, the U.S. Census Bureau reported that 21% of all businesses are minority-owned. The NAACP also noted that only 5% of businesses are Black-owned, pointing to how difficult it is for underrepresented individuals to find the funds they need to open and operate small businesses. 

Minority business owners need funding to purchase startup materials, purchase extra inventory, repair and finance equipment, buy real estate, address cash flow shortages, and expand operations. 

For various reasons, minority entrepreneurs and business owners from historically underserved backgrounds find it more challenging to secure funding. These reasons range from systemic biases and a lack of access to traditional funding vehicles to socio-economic factors. 

Despite these challenges, minority business loans are growing in popularity, and lenders like SBG Funding are making it easier than ever for minority-owned businesses to qualify for the financing they need.

Exploring Minority Business Loans

Business loans are a cornerstone of operations, but many small business owners from underserved communities face added challenges when attempting to finance their companies. Many of these owners face systemic discrimination and implicit biases when attempting to get funds from traditional lenders. 

Still, more face pushback when business plans include demographically or ethnically diverse locations, owing to harmful preconceived notions that these areas are inherently bad for business. Luckily, there are minority business loans, which are lump-sum loans, funding, or financing available to small business owners and operators from diverse backgrounds. 

Minority business loans also come in the form of programs and initiatives tailored to these individuals, allowing them equal opportunities to contribute to the growth of the economy and their communities. 

Stuffy traditional banks and credit unions often fail to realize the regenerative effect of opening new businesses in underserved communities. On the other hand, online lenders, like SBG Funding, offer tailored financial solutions to these businesses so they can make an immediate impact. 

Types of Loans Available for Minority Business Owners

Although obtaining a lump-sum term loan from a bank or credit union is still possible, countless programs provide funding specifically for minority business owners. In addition to minority business loans, several other initiatives provide grants, educational assistance, and micro-funding. 

SBA Loans

The U.S. Small Business Administration’s purpose is to foster and support America’s numerous emerging and small business enterprises. The SBA offers a range of guaranteed loans and programs designed to support minority business owners, including:  

• SBA 7(a) – Not specific to underserved owners but is available to anyone who meets the strict eligibility requirements. Applicants receive generous repayment terms and lending up to $10 million with the right partner, such as SBG Funding. 
• SBA 8(a) Business Development Program – A nine-year loan program to help business owners who are socially or economically disadvantaged. The 8(a) BDP provides a maximum of $7 million (more for government contracts) while also providing developmental assistance, government surplus supply support, and mentorship. 
• SBA Microloan – When millions are too much, a microloan program provides up to $50,000, which can be just what a small business owner needs to get started. 
• Community Advantage Pilot Loan Program – An SBA-backed loan program (up to 90%) that provides up to $350,000 for businesses in low-to-moderate income (LMI) areas, historically underutilized business zones (HUBZones), promise zones, opportunity zones, and rural areas.

Each Small Business Administration loan and lending program has unique requirements. Traditionally, qualifying for these small business loans is more challenging than other funding options, but they can be a favorable solution for many business owners. 

State and Local Programs

While the U.S. Small Business Administration is a federal agency, individual states and even cities have programs designed to provide funding for marginalized individuals. Here’s a look at some options available:

• State-specific government websites – State governments compile various initiatives for business owners to find funding. For example, Colorado has 19 such programs, including the Native Film Workshop Grant and the Colorado Credit Reserve. Other states, like New York and California, have even more programs to support minority business owners. 
• Women and Minority Businesses – To aid in finding local grants and loans, the website Women and Minority Businesses compiles a directory of federal, state, and local lenders. The site lists each state, making it easier to find local solutions, especially grants and special lending programs. 

New local programs pop up all the time, and even local universities have programs designed to help minority small business owners receive the funding they need. 

Private and Nonprofit Lenders

Moving away from government-backed and public-sourced funding, private and non-profit sources are excellent sources to tap into. Not only do private institutions have greater flexibility in who can qualify, but they can also support a greater number of small businesses. Some of these options include:

• Minority Business Development Agency (MBDA) Grants – The MBDA awards an estimated $420,000 to minority-owned businesses. Owners can also receive guidance through the Capital Readiness Program, which further helps obtain funding.
• Black Angel Group – A collective of angel investors providing Seed funding through Series A funding for black-owned businesses. The Black Angel Group consists of more than 200 Black tech operators who want to pass along their success. Companies like Outlier, PayHippo, and ClevrAI have received working capital through Black Angel Group investors. 
• NAACP Grant – Helps connect Black business owners with organizations that provide funding. Business owners can land up to $25,000 in grants, provided they operate in the Northeastern United States. 
• Accompany Capital – Formerly Business Center for New Americans (BCNA), Accompany provides between $500 and $35,000 to women, immigrants, and refugees only. The organization provides technical assistance and educational opportunities, like workshops to improve financial literacy and business management skills. 

SBG Funding partners with many organizations to provide funding to minority-owned businesses. Contact us today to create a tailored financial solution that meets your business needs. 

How to Apply for Minority Business Loans

A business must be 51% or more minority-owned and operated to qualify for a minority business loan. That 51% must be historically underserved individuals with diverse ethnic heritage. Currently, the U.S. Government recognizes owners and operators who are ethnically Black, Hispanic, Asian-Pacific, Asian-Indian, Native American, or Alaskan Native as a minority. 

Outside of this initial requirement, the standard loan application requirements also apply. These requirements could include acceptable credit scores, sound financial history, business plans, tax returns, years of business tenure, and solid revenue. 

SBG Funding isn’t like other lenders, and our goal is to remove as much friction as possible from the application and approval process. That’s why we’ve reduced the process to three simple steps:

1. Fill out our online application. 
2. Submit the required documents and sign the agreement.
3. Get approved and funded. 

SBG Funding also has less stringent approval requirements. In fact, many business owners can find a financing solution with the following:

• A 600+ FICO score
• Six months in business
• $250,000 in annual revenue

Our outstanding customer service and support make SBG Funding a no-brainer for minority-owned businesses. Plus, we can approve you in as little as 24 hours, giving you almost instant access to working capital.

Top Tips for a Successful Application

As with other loans, preparing yourself ahead of time can make the outcomes more favorable, like higher maximum loan amounts, longer repayment terms, or lower interest rates. Preparation for ideal lending conditions includes:

1. Improving your credit scores to 700+
2. Increasing annual revenue to $1 million or more
3. Operating your business for two or more years
4. Implementing detailed business and financial planning
5. Creating a business case for financing
6. Only borrowing what you need 
7. Ensuring low debt-to-income and healthy debt-service coverage ratio (DSCR)

The better your overall financial health, the more likely you are to obtain the funding you need at the terms that work for you. 

Specialized Support for Minority-Owned Businesses

Funding a minority-owned business is difficult enough without navigating an overly complicated lending process. SBG Funding’s commitment to straightforward lending helps Minority-owned, Women-owned, and Veteran-owned businesses find tailor-made business financing for their organizations. 

SBG Funding provides financing of all kinds, such as:

• Bridge Capital
• Business Lines of Credit
• Short-term Small Business Loans
• Equipment Financing
• Invoice Financing
• SBA 7(a)

Additionally, SBG Funding helps you improve bad credit through high approval rates and no collateral required. With SBG Funding, you’ll also receive funds much quicker than through a traditional lender. We focus exclusively on providing tailored financing solutions to meet your business needs, helping you access the necessary capital to take your business to the next level. 

If you operate a manufacturing, restaurant, HVAC, automotive, healthcare, or retail business, use our Funding Calculator to find out how much you can get for your business! 

Chart a Path Forward with SBG Funding

Minority business owners have more financing options than ever before. From business grants and loan options to organizational support, underrepresented individuals can get the funds they need to start a new business, purchase equipment or inventory, and expand operations. 

SBG Funding makes the lending process even easier, thanks to a simple three-step application process and next-day funding. Our outstanding customer support and wide variety of lending solutions fit your specific needs, and we’re only a call away. Apply now to get your minority-owned business funded today!