Building and growing your small business is a major part of the American dream. But for many minorities, it feels inaccessible or even impossible.
That’s partially so because minority-owned businesses often struggle to access capital: the cash and other resources necessary to build and grow a business from scratch. Minority business owners are much less likely to receive loans, too.
That said, there are ways to acquire the capital you need to start and run the small business of your dreams. Read on for more information about business loans for minorities.
Minority Small Business Loans Explained
Minority small business loans are financial solutions specifically designed to make capital more accessible for minority-owned and operated small businesses. Put another way, they’re loans designed with the explicit intention of helping small business owners who belong to minority groups get their enterprises up and running.
Besides standard loans, there are many different types of small business loans tailored to minority business owners from organizations like nonprofits and even the US Small Business Administration or SBA.
In any case, minority small business loans should be considered alongside other funding options and solutions depending on your financial needs.
Which Businesses Qualify for Minority Small Business Loans?
In most cases, minority small business loans are only available to businesses with a majority ownership status of 51% or more. In other words, the business needs to be owned by a minority group or individual by 51% or more, so the business is mostly or entirely under that minority individual’s/group’s leadership.
Additionally, minority small business lenders may have additional requirements based on their goals and restrictions. Therefore, you should read the terms and conditions of any loan before signing on the dotted line.
For example, some small business loans for minorities require every business owner or member to be a part of the same minority group. Other small business loans for minorities are only available for companies owned by one specific minority group, like African Americans, Asian Americans, etc.
Types of Minority Small Business Loans
There are many different types of minority small business loans you can apply for and take advantage of.
First up are minority SBA loans from the Small Business Administration. One example is the 8(a) Business Development Program, which is designed for disadvantaged small businesses. It doesn’t offer specific loans but helps you qualify more readily for standard SBA loans.
You should also check out the SBA Community Advantage loans, which are administered by community-based lenders. So long as you are an entrepreneur in an underserved market and need between 50,000 and $250,000 in cash, you may qualify for these term loans, which have fixed repayment schedules.
Or you can qualify for SBA microloans, usually available in amounts ranging from $500 to $50,000.
Then there’s the Union Bank Business Diversity Lending Program, which offers loans to minority business owners. You can potentially get up to $2.5 million from these loans, though you need to own and actively manage 51% or more of your business to acquire this funding.
Consider checking out the National Minority Supplier Development Counsel Business Consortium Fund. This helps to make minority business owner financing much simpler and more streamlined through different programs. As a minority business borrower, you can get up to $500,000 through the Direct Lending Program in this fund.
If you are a Native American, you may qualify for financing through the Indian Loan Guarantee program, allowing you to borrow up to $500,000. These are just a few examples of the types of loans you can qualify for as a small business owner who also belongs to at least one minority group.
Other Financial Resources for Minority Small Business Owners
In addition to small business loans, you may be able to secure financial resources through other means and strategies as a minority business owner.
Small Business Grants
For starters, you can look at small business grants, which are from several of the same organizations broken down above. For example, the FedEx Small Business Grant Contest offers up to $50,000 in prize money and is open to many different types of small businesses.
You can also check out the grants.gov website, which helps you keep track of over 1000 grant programs across many federal agencies, such as the US SBA and the Department of Commerce.
Or consider the Minority Business Development Agency or MBDA, which operates various business centers that offer financial services like grants to minority-owned firms and businesses.
Trading and Investments
As a minority small business owner, you can alternatively get the capital you need to start or grow your business through trading on the market. Forex trading specifically could be a profitable way to build up cash if you don’t have a lot already. Why?
Forex markets are open 24 hours a day and comprise over 170 different currencies. That means you can trade cryptocurrencies, standard currencies like USD/EUR, or more exotic currency pairs like USD/SEK. With the right trading strategy, your investments could help you get the cash you need to make your entrepreneurial endeavors succeed.
Community Fundraising
Many minority business owners are part of tight-knit, supportive communities. You may be able to raise the capital you need to build or grow your business by asking for community funds, then promising to pay back the loan once your company starts to turn a profit.
Community fundraising isn’t as reliable as other financing measures, of course, but it can help you shore up any financial gaps in your business plan if needed.
Wrap Up
Ultimately, minority small business owners have a lot of loans and other financial tools they can use to get the capital they need to thrive. Consider applying for a minority small business loan or pursuing a different financial strategy today!
