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What Are Minority Business Loans?

Businesses almost always need loans to meet their daily needs to operate until their earning assets are adequate to cover their working capital needs. As the business continues to thrive and their own assets grow, they profit and can start repaying their loan to the bank. However, minority business loans are available as there are sources of business funding offered exclusively to minority-owned businesses.


Why small business loans for minorities are needed?

Based on data provided by U.S. Census Bureau, minority entrepreneurs owned nearly 27.6 million businesses and the number is growing yearly. However, their need for funds has always been a challenge for minorities. The Federal Minority Business Development Agency attested that most minority entrepreneurs have credit scores lower than other business owners and lack assets for loan security from financial institutions and land government contracts. According to recent studies, the average credit score given to minority business owner is only 707. This score is 15 points lower than the average of all other small business owners in the U.S.

Why Do Minorities Have Difficulty Accessing Small Business Loans?

Minority business owners find it difficult to obtain small business funding for these reasons:

  • Lack of assets
    Compared to their white counterparts, the wealth levels for African-Americans and Latinos are lower by 11 to 16 times.
  • Location of business in poor locations
    Small businesses are needed in poorer communities to motivate their economies, but big lending institutions do not typically approve funding programs, especially with long-term goals in mind.
  • Unreliable credit history
    Based on business records, the credit score average found in minority small business is only about 707 – that is 15 points lesser than other average U.S. small business owners.

Where to Find Minority Small Business Loans?

When seeking funding, even strong minority businesses have to face minor issues like having only a minimal collateral or inadequate credit history, resulting in denying an application or even giving loans with higher rates and shorter terms. Minority borrowers have destroyed their good record that is needed to qualify for credit needed by lending institutions for a minority-owned business. If you are looking for loans to bolster your minority business enterprise, there are lots of loans available. Below are listed many options offered for you to get the best one that suits your business.

Who qualifies for the loan?

Loans for minorities are available for (i) African-Americans; (ii) Natives of Alaska; (iii) American Indians; (iv) Asian-Americans; (v) Hispanic-Americans or (vi) Pacific Islanders. Only members of the above groups of a minority must own a minority-owned business and have ownership of at least 51% of the company.

Four Steps to Prepare for a Minority Business Loan

  1. Look at the Pros and Cons of a loan
    Any kind of debt is a serious matter; it is very important that you carefully consider how the amount of the loan can provide for your business and how much is the interest.
  2. Consider the Amount You Need
    You have to decide exactly how much working capital you need. Think about what you can afford, what you need the loan for and how long you’ll need to pay it back.
  3. Research for better deals
    Now that you’ve figured out what you need, it’s time to research and shop around for better deals. Make sure you’re getting the right type of loan for your needs at the best possible rate and with the simple application process.
  4. Opt for the Best Offer
    Compare differently available loans found on business centers to include APR and the repayment period. Round up alternative financing options or available grants program that may be a good fit.

Types of Loans Available for Minority-Owned Businesses

However, as of now, there are several avenues that have tried to bridge the gap of finance that exists by providing loans to minority-owned businesses who are often economically disadvantaged individuals. Study this list of loan types available for minority-owned businesses that any minority may qualify to get a quick loan to either start or expand their businesses.

  • The Black-Business Loan Fund (BBLF)
    For African Americans to qualify for this loan program, they have to own at least 51% of the total value of the business that has been operational in the last two years. No collateral is needed but you just need to make an application and that is all.
  • The SBA Community Advantage Loans
    The only thing that could be a hindrance to assessing this type of SBA loans is the aspect of creditworthiness. The SBA demands that an applicant can have access to capital for loans if they do not have bad credit.
  • Minority-Owned Business Loans
    The loan is offered by Accion an NGO that is fully dedicated to cushioning all minorities regardless of their origin or race. There is no restriction to this loan for you can use this loan to whichever type of business that you want.
  • The Business Diversity Lending Program
    Offered by Union bank, you have to fall under the bank’s race category, have active business for the last 2 years, run 51 % of the business and you can borrow less than $2.5 million. To get the loan, the application is done online.
  • The National-African American Micro Business Loan Fund
    This business loan is at present for the minority African-Americans who are residing in the following places: Chicago, Los Angeles, and New York. They can easily access loans of between $35,000 and $250,000.
  • Business and Industry Guaranteed Loan Program
    Once you approach a lender who can lend you credit, just fill out the documents and present them at the rural development office. The lender and the borrower will first discuss and agree with interest rates for the loans.
  • The Hispanic Small Business Loans
    Capital is the property owned and managed by Hispanics for they have created and provided a platform to guarantee the availability of money or rather capital to any Hispanic who starts or expands a business.
  • The ATNI Loan Fund
    The advantage of ATNI Loan Fund is twofold: they either give a borrower a full loan or at times act as an intermediary between the borrower and the financial institution. As community-based financing, they offer different types of business loans.
  • Latino Economic Centre Loans
    If you belong to the minority in Minnesota, then Latino Economic Development Centre will get you a soft loan to expand your business


There are many financial opportunities and financing options that most of the minorities have yet to explore. Many organizations are willing to give small business loans at low interest rates to minority groups with the aim of improving their lives. Minority business loans are quickly accessible and do not have a lot of restrictions.