Minority business loans can be a crucial source of funding to help entrepreneurs from historically underserved communities launch a new business or scale an existing business.
You can obtain these business loans from a variety of sources, including the U.S. Small Business Administration, banks, online lenders, and nonprofits.
Here are the top small business loans for minorities and how to find them—plus, additional financing solutions and resources for you to consider.
Best for: New business owners that need $50,000 or less in funding.
Minority small business owners seeking loans of $50,000 or less should investigate the SBA microloan program. Although this program is open to any eligible small business owner, SBA microloans can be a particularly good starting point for minorities.
The SBA makes these loans through third-party nonprofit lenders. Many of these local nonprofits exist to help minorities and other underserved entrepreneurs. They offer management and technical assistance to small business owners along with the loan. To find local microlenders, contact your local SBA District Office.
Best for: Owners of established businesses who want to grow their companies.
SBA 7(a) loans are guaranteed by the U.S. Small Business Administration (SBA), which is a federal entity created to foster small business growth. SBA 7(a) loans are not exclusively for minority business owners. However, 27.6% of SBA 7(a) loans went to minority applicants in fiscal year 2020, according to the Congressional Research Service.
You can qualify for an SBA 7(a) of up to $5 million, making this a good option for large investments in business. The maximum repayment terms typically range from 10 to 25 years. The best part is that the interest rates on 7(a) loans are some of the lowest around, allowing minority business owners to invest more profits in growth rather than paying off debt.
Best for: Businesses operating in underserved markets and communities.
Also run by the SBA, the Community Advantage Loan Program works to meet the financial needs of small businesses in underserved markets. This program encourages local, mission-based lenders such as nonprofit organizations to make loans of up to $250,000 to minorities, women, veterans, and other underserved business owners.
By guaranteeing the majority of the loan amount, the SBA attempts to help small business owners who might not qualify for traditional financing, so this is a great option if you are looking for minority small business loans. You have to demonstrate creditworthiness and your ability to pay back the loan, but a lack of collateral or balance sheet assets won’t prevent you from qualifying. To get started, contact your local SBA district office.
Best for: Low-to-moderate income business owners.
Several nonprofit lenders make loans to small businesses. For example, international lending organization Accion Opportunity Fund has a U.S. loan program targeting low- to moderate-income business owners who have difficulty accessing capital through traditional channels, making it a great option for loans for a minority small business. While not minority-specific, Accion Opportunity Fund offers loans from $5,000 up to $100,000 in 44 states.
Another nonprofit lender to check out is Kiva. This organization, built on a social lending model, offers up to $15,000 in no-interest financing for eligible small business owners. First, you must get a small network of your family and friends to lend money to you, after which you can pitch your business idea to Kiva’s network of 1.9 million lenders to get additional financing.
Best for: Minority business owners with large capital needs.
If you’re looking for minority-specific business funding, Union Bank is another good option to consider. The bank provides business loans and business lines of credit exclusively for minority-owned businesses in Arizona, California, Oregon, and Washington.
These products have less stringent lending standards than traditional Union Bank small business loans and are designated for minority small business owners who want loans of up to $2.5 million. Loan products come with fixed or variable interest rates, with terms up to 25 years.
Best for: Immigrant-owned businesses.
Accompany Capital, previously known as the Business Center for New Americans, gives business loans of $500 to $50,000 to minority business owners in the United States. Accompany Capital specifically works with immigrants, refugees, women, and other minority entrepreneurs. These are short-term loans that must be paid back between six months and three years. They offer low, fixed interest rates.
This organization helps finance minority entrepreneurs who were turned down from traditional financing options for any number of reasons. The loan the borrower requested might have been too small, the bank wouldn’t lend to a startup, or the borrower’s credit score was too low. If you can demonstrate an ability to repay the loan, you’re likely to qualify for a loan from Accompany Capital. Because of the looser qualification requirements, this program is also a great startup loan for minorities.
Best for: Minority-owned businesses in rural areas.
The U.S. Department of Agriculture (USDA) Business and Industry Loan Guarantee Program offers loans guaranteed by the USDA and issued by local banks and direct lenders. The main qualification is that your business should be located in a rural area, defined as a town with fewer than 50,000 inhabitants. USDA business loans are open to any eligible rural business, but they are a great choice for minority entrepreneurs given that minorities in rural communities are more likely to live in substandard housing and are more likely to be poor, according to research from the Housing Assistance Council.
USDA loans are a good option for business owners who need large amounts of capital. These loans extend up to a maximum of $25 million and can be put toward a variety of business needs, including working capital, the financing of real estate, business expansion, and debt refinancing. USDA loans come with low interest rates and long terms and require 10% to 20% down.
Best for: Minority entrepreneurs certified by the National Minority Supplier Development Council.
Business Consortium Fund Loans are loans specifically for minority-owned businesses offered by the National Minority Supplier Development Council (NMSDC). Term loans and lines of credit can range from $250,000 to $750,000, with repayment terms of up to five years.
To be eligible for a Business Consortium Fund Loan, you must certify your business with the NMSDC and have had a vendor or supplier relationship with an NMSDC national or regional corporate member.
As you can see, there are some fantastic loan programs available to minority business owners. However, some of these options can be a challenge to get due to high demand and limited capital resources. So, if you don’t qualify for any of the aforementioned options, consider online small business loans available to all small business owners.
Here are the lenders we recommend:
OnDeck is an alternative lender that offers business loans on a wider credit spectrum. OnDeck offers both short-term loans and business lines of credit for borrowers with a minimum personal credit score of 600. You could qualify for up to $250,000 in financing with a quick, online application. OnDeck is a great option for minority business owners who need capital for just about any business need.
Read more about OnDeck.
Bluevine provides lines of credit, making them a highly flexible lender to work with. Their line of credit product requires a credit score of at least 625 and $10,000 in monthly revenue. You can secure loan amounts up to $250,000 on a one-year term.
Read more about Bluevine.
Beyond small business loans for minorities, there are also many small business grants that focus on minority-owned businesses. Unlike loans, grants are interest-free and don’t need to be paid back. That’s like free money to grow your company.
Before applying for grants, loans, or other resources, be sure to apply for minority business enterprise (MBE) certification through the NMSDC. To qualify as an MBE, you must have a for-profit business that is at least 51% owned, operated, capitalized, and controlled by a member of a minority group.
Here’s a list of the best small business grants for minorities.
Another resource for minority business owners is the SBA 8(a) Business Development Program. This certification program helps minority-owned businesses get access to federal contracts. In order to even the playing field for small businesses owned by socially and economically disadvantaged people, the government limits competition for some federal contracts to businesses that participate in the 8(a) Business Development program.
To qualify for this program, your business must be 51% owned by someone from a socially and economically disadvantaged background. Minorities are presumed to be socially disadvantaged under federal law. On the economic side, the owner’s personal net worth and average gross income for the last three years must be $250,000 or less, and their assets must be $4 million or less.
If you meet these basic requirements, you can apply to get certified online, after which you can start competing for contract set-asides. You can also get free business mentorship and training through the 8(a) program.
There are federal, state, local, and private loan programs tailored to addressing some of the challenges that minority small business owners face when trying to access capital. The list above should help you get started in your search for a business loan.
Looking for more options?
Check out our ultimate guide to small business financing.
Priyanka Prakash is a senior contributing writer at Fundera.
Priyanka specializes in small business finance, credit, law, and insurance, helping businesses owners navigate complicated concepts and decisions. Since earning her law degree from the University of Washington, Priyanka has spent half a decade writing on small business financial and legal concerns. Prior to joining Fundera, Priyanka was managing editor at a small business resource site and in-house counsel at a Y Combinator tech startup.