Running A Business

The Best Loans for Minority Small Business Owners

Mar 02, 2019 • 5 min read
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      As reported by the Harvard Business Review, the long-standing profile for successful entrepreneurs has been white and male. The deck was stacked in favor of this demographic, which is a big reason for the perpetuation of this profile. For example, if you break down the $85 billion invested by venture capitalists last year, only about 2% went to businesses led by women. And research shows that businesses owned by minorities are 3 times more likely to get shut down on loan applications.

      Now, here’s some good news. Racial minorities own more businesses than ever. Currently, 10% of small businesses are owned by Hispanics, 7% are owned by blacks, and 4% are owned by Asians. For a little historical context, in 2012, minorities owned about 8 million businesses. If that sounds like a lot, it is. You only had to go back 5 years prior and minorities owned nearly 3 million fewer businesses.

      Some government agencies help spur this diversifying growth by providing loans specifically to businesses owned by minorities. For example, the House recently passed a bill to expand the Small Business Administration’s microloan program.

      “Lending organizations aren’t making enough loans,” said Senator Kirsten Gillibrand at the time. “And they’re not reaching enough entrepreneurs to actually reflect the population of incredibly diverse communities like the ones here in Rochester. And they’re not reaching enough women entrepreneurs.”

      Knowing that the federal government, as well as countless organizations, are making efforts to increase loan options for minority entrepreneurs, here’s a look at some of the options available:

      8(a) Business Development Program

      The US Small Business Administration runs the 8(a) Business Development Program, which is intended to “help provide a level playing field for small businesses owned by socially and economically disadvantaged people or entities.”

      In a nutshell, the government plans to award at least 5% of their contracting dollars to disadvantaged businesses. Other offerings include development assistance, training, and technical guidance. Qualifying businesses must be more than 50% owned by a citizen who has experienced prejudice and is disadvantaged due to race or ethnicity.

      Business Center for New Americans Microloans

      These loans are provided by the Business Center for New Americans and are earmarked for minority business owners. While they’re technically referred to as “microloans,” the amounts can range anywhere from $500 up to $50,000.

      To qualify, you need to meet some rudimentary financial terms and have (or be in the process of obtaining) all your necessary business licenses. If you’ve been turned down for loans in the past, don’t give up hope. There’s no minimum credit score required, so as long as you show a willingness and ability to make payments, you stand a good chance of getting approved.

      Business Lines of Credit

      Although it’s not technically a loan, this form of financing can be extremely helpful for minority entrepreneurs looking for access to funds on a revolving basis. With a business line of credit, you can borrow up to $500,000. Simply use what you need, make your payments, and you’ll once again have access to the full amount.

      To qualify, you need to have a credit score of 680 or higher, have been in business 6 months or longer, and have some financial history for the lender to review. These borrower-friendly requirements make a line of credit ideal for those who have been rejected for loans in the past.

      Term Loans

      Term loans are versatile and can be used for everything from hiring additional staff to purchasing a new alarm system for your office. Loan amounts range from $5,000 all the way up to $2 million. As for the “term” part of the name, that refers to how long of a period you have to repay the loan. The general timeline is 1-5 years.

      Term loans can fund in as little as 24 hours and can have interest rates dipping to 6%. Qualifying can be a bit more difficult than with some of the other options on this list, but the benefits make the extra effort more than worth it.

      Kiva Loans

      Long known for its international microloans (with borrowers in 80 countries), Kiva has expanded to the United States. In the past year alone, this lender has provided $1 billion to 2.6 million borrowers. Yep, it’s big time.

      To qualify for one of these microloans, you need to fill out their simple online application and prove that you’re a “financially excluded and socially impactful borrower.”

      Accion Loans

      With microloans of up to $50,000, this nonprofit lender is dedicated to helping disadvantaged borrowers build their businesses up to meaningful scale. With operations worldwide, most Accion loans go to Asia, Latin America, sub-Saharan Africa, and the United States.

      Qualifying isn’t too difficult as long as you have a solid credit history and can provide financial records that demonstrate the health of your business.

      While minority entrepreneurs undoubtedly face unique challenges, it’s important to remember that you also have lots of friends rooting for you. By connecting with the diverse resources available, ranging from the federal government to local organizations, you can become empowered to write your own success story.

      About the author
      Grant Olsen

      Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on and Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

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