Best Business Loans for Minority Business Owners
Features like services in multiple languages, accelerator programs and diversity initiatives make these lenders stand out.
| Lender | Starting rate | Amount | Term | Time in business | |
|---|---|---|---|---|---|
|
31.30% (suffix) |
$5k – $250k |
18 – 24 months | 12 months |
Best minority business loan lenders at a glance
Best for: Same-day funding – OnDeck
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- Same-day funding available
- Fair credit accepted
- Shorter time in business requirement
- Higher interest rates
- Charges an origination fee
- Term loans require a blanket lien and a personal guarantee
If you need same-day funding, OnDeck has the capacity to fund your loan in less than 24 hours. As an added bonus, its qualification criteria are fairly flexible, requiring only a minimum credit score of and a 12 months business history to obtain up to $250,000 in financing.
That said, there are some trade-offs to that flexibility. For one, OnDeck’s interest rates are fairly high, not to mention that you could be charged an origination fee. Plus, each of its term loans is secured by both a blanket lien on your business assets and a personal guarantee.
Read our OnDeck business loan review.
What is a minority business loan?
The SBA defines a minority-owned business as a firm either wholly or equally (at least 51%) owned and run on a daily basis by one or more members of an ethnic or racial group.
For example, the following ethnic and racial groups may be eligible for an SBA loan for minorities:
- Black
- Hispanic
- Asian-Pacific
- Asian-Indian Subcontinent
- Native American
- Alaskan Native
However, colloquially, the term “minority businesses” can also include other underserved communities, such as women-owned businesses, veteran-owned businesses or businesses run by people with disabilities.
Where to get minority business loans
Minority business owners can explore the following options when looking to finance their small business’s needs. Eligibility requirements may vary based on the lender.
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Online lenders
Alternative online lenders typically have easy application processes, along with more flexible requirements and faster funding times. -
SBA lenders
Backed by the U.S. Small Business Administration, many SBA lenders work with underserved markets. -
Community Development Financial Institutions (CDFIs)
CDFIs are mission-driven, privately owned financial institutions that provide economic opportunities for minority-owned businesses. You can search the CDFI Fund’s database to find an award that fits your needs and criteria. -
Banks and credit unions
If you have an existing relationship with your local bank or credit union, reach out to them to see what loans they can offer. -
Microlenders
If eligible, your small business could borrow up to $50,000 with an SBA microlender. Although these loans come in small amounts, they also come with short repayment terms. -
Peer-to-peer business loans (P2P lending)
With P2P lending, you can connect with individual investors via P2P lending platforms. Rates and terms vary, but it can be a great way to access the funds you need to push your business to the next level.
While it may be challenging to find small business loans for minorities with bad credit, it’s still possible. Some lenders — especially alternative online lenders — will provide bad credit business loans.
Some options include accounts receivable financing and merchant cash advances, which can be accessible to borrowers who can’t obtain loans elsewhere.
If your financing options are limited due to a poor or bad credit score, consider ways to boost your credit score before applying.
Small business grants for minorities
In addition to loans for minority-owned businesses, minority grants are available for small businesses. Here are a few starting points:
Federal grants
Federal grants — many of which are available to minority-owned businesses — are listed on Grants.gov. These grant opportunities are very specific and might not fit your business’s specific needs, but keeping an eye on your options is useful.
Several federal agencies sponsor these grants, including the Department of Agriculture, Department of the Interior, Environmental Protection Agency and NASA.
One notable entry is the Rural Business Development Grants program from the Department of Agriculture. These grants are large (generally $10,000 to $500,000) and are open to businesses operating in rural regions or areas outside of cities with a population of 50,000 or more residents.
Other small business resources for minorities
Consider these resources as a way to stay connected with upcoming opportunities and support for minority-run businesses.
The SBA’s 8(a) Business Development program is designed to benefit small, disadvantaged businesses, including those owned by minorities. The federal government aims to award 5% of federal contract dollars on a yearly basis to businesses that are at least 51% owned and operated by economically or socially disadvantaged U.S. citizens.
To qualify, you must get certified as a minority-owned business through an online application with the SBA. Once approved, the designation lasts up to nine years depending on your business’s standing. Qualified applicants can access business counseling and technical support, as well as bid on government contracts as a sole source or as part of a joint venture.
As its name suggests, the Minority Business Development Agency (MBDA) — part of the U.S. 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 how to find capital. The MBDA also advocates for the interests of minority-owned businesses while administering public and private sector programs.
The National Minority Supplier Development Council (NMSDC) focuses on boosting minority-owned suppliers’ opportunities and market access. From its national office in New York and 23 affiliate regional councils nationwide, NMSDC helps its 1,500 corporate members integrate into supply chains, access programming and educational opportunities and network with others in their fields.
The Service Corps of Retired Executives (SCORE) is a valuable source of free business mentoring and education for minority-owned and non-minority-owned businesses. A resource partner of the SBA, SCORE has offered mentoring, workshops and educational resources to more than 11 million entrepreneurs since 1964 via 10,000-plus volunteers across the U.S.
The organization also provides webinars and courses specific to minority-owned businesses, including options in Spanish.
The Office of Small Business Development Centers (SBDC), part of the SBA, makes a special effort to reach minority members of socially and economically disadvantaged groups. It is dedicated to supporting entrepreneurship, small business development and the U.S. economy through funding and overseeing a nationwide network of development centers.
Alternative funding options for minority-owned small businesses
Minority business grants often have specific criteria and strict eligibility requirements, making it hard to qualify. Additionally, small business loans typically require a minimum FICO Score or a certain number of years in business to apply.
If neither a grant nor a loan feels like the right fit for your business, you can also consider:
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Small business credit cards
Although funding your entire business with credit cards is not a good practice, using them for a few low-cost expenses can be helpful. Some business credit cards offer incentives and rewards, which can help offset the cost of the high interest rate. -
Crowdfunding
You can raise money from friends, family and other supporters via platforms such as GoFundMe. Crowdfunding can be a great way to fundraise for a specific purpose, such as purchasing new equipment, since you don’t need to repay the funds. -
Bootstrapping
If you have an idea for a business but don’t want to take on debt, you can start with a smaller version and scale up as you become profitable. For example, if you plan to start a restaurant, you can start with a table at a local farmer’s market and use your profits towards a food cart, scaling up from there to a full restaurant.
Our methodology: How we chose the best minority business loans
We reviewed more than 22 lenders to determine the overall eight best minority business loans. To make our list, lenders must meet the following criteria:
- Minority business focus: We focus on selecting lenders who cater to minority business owners in the services they offer, whether that’s through solely working with underserved communities or by offering essential services, like access to multilingual lending agents.
- Rates and terms: We prioritize lenders with more competitive fixed rates, fewer fees and greater options for repayment terms, loan amounts and APR discounts.
- Repayment experience: For starters, we consider each lender’s reputation and business practices. We also favor lenders that report to all major credit bureaus, offer reliable customer service and provide unique perks to customers, like free business coaching.