According to data from the US Census and the Minority Business Development Agency (MBDA), almost 37% of the US population identifies as a minority. 45% of small business owners in the US belong to minority and ethnic groups. The number has increased from 15% for the last couple of years. Although we claim to be a free country; getting funding for minority-owned business is still difficult.
Minority business owners experience much more difficulty from starting a business to securing loans and keeping the business wheel running. Minority-owned businesses are more likely to be rejected for a loan as compared to non-minority businesses. Many minorities owned businesses start out under capitalized and may find it quite difficult to develop the required cash flow to grow.
Certify as Minority Owned Business
For minority-owned businesses, it is necessary to certify his/her business through the National Minority Supplier Development Council (NMSDC). It takes almost 90 days to become a member of NMSDC. Once you get the membership, you can utilize the resources to grow your business by gaining government and private contracts.
For membership, you need to meet the following criteria;
o You must be a US citizen
o You must be 51% minority owned and controlled business
o You must be a profitable business located in the US
o Business daily operations and management must be exercised by minority business owner
Why Minority Businesses are rejected by Traditional Lenders?
Here are the three most common problems that might be the reason for rejection:
- Low Net worth
The lower net worth of minority-owned businesses is the number one reason for the rejection. Research suggests: the net worth of minorities is 16% lower than the white people. Traditional lenders often reject their loan request just because they can’t provide any collateral to secure the funding amount. Their low net worth and no collateral doesn’t guarantee the payback of their funds.
- Less Optimal Vicinity
Another factor that can cause rejection is that these businesses are located in the less optimal vicinity-normally urbanized areas. According to the SBA, the location of business plays an important role in the approval and rejection of a loan.
- Bad or No Credit History
A good credit score is as important as good business performance. Getting a loan from banks require a perfect credit score, and most of the times minority businesses don’t fit the criteria. Consequently, they get rejected for a traditional type of funding.
Alternative Lenders come to the rescue!
Fortunately, over the last decade or so, the small business lending industry has spiked dramatically, and small business loans are no longer limited to white business owners. There are many alternative lenders who don’t classify borrowers based only on the credit card report. They provide unsecured business financing solutions that don’t require collateral or personal guarantee. Alternative lenders try to make the whole process free of gender and racial bias.
Minority Business Loans Making Life Easier!
Being a minority business owner you deserve equal access to funding resources. Though there are plenty of traditional and government funding programs in the market, they came at high rates and consist of the long-drawn-out lending process.
On the other hand, alternative lenders offer a fast and flexible funding solution to minorities. Minority business loans from alternative lenders don’t require a good credit score or personal guarantee. These loans simple to apply and acquire.
If you are looking to fund your minority-owned business, get minority business loans from Merchant Advisors.
For more details, please call us on our toll-free number (833) 827-4412. Alternatively, get your free online quote by filling our online application form, if you’re ready to apply for a minority business loan.