According to data from the US Census and the Minority Business Development Agency (MBDA), almost 37% of the US population identifies as a minority groups. 45% of small businesses in US were minority ethnic groups. The number has increased from 15% from last couple of years. However getting funding for minority owned business is still difficult.
Minority business owners experience much more difficult existence 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 minority owned businesses start out under capitalized and may find it quite difficult to develop the needed cash flow to develop and sustain their business.
Certify As Minority Owned Business
For minority owned businesses, it is necessary to certify his/her business through National Minority Supplier Development Council (NMSDC). They advances business opportunities for certified minority businesses by connecting them to their corporate members. It takes almost 90 days to become a member of NMSDC. Once you get the membership, you can benefit your business from opportunities to grow your minority owned business by gaining government and private contracts.
For membership, you need to meet the following criteria;
- You must be a US citizen
- You must be 51% minority owned and controlled business
- You must be a profit business located in the US
- Business daily operations and management must be exercised by minority business owner
Why Minority Businesses Are Rejected for Traditional Funding
Here are the three most common problems that can cause a rejection on loan from traditional sources;
- Lower Net Worth
Lower net worth of minority owned businesses is the number one reason for getting rejection on loan. The wealth level of minorities are 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 reveals the lender that they have no expensive assets that the bank can take if they fail to pay back the debt.
- Less Optimal Vicinity
Another factor that can cause rejection on loan from traditional sources 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
Good credit score is as important as good business performance. Getting loan from banks require perfect credit score, and mostly the minority businesses have less than perfect credit score. Consequently, they got rejected for traditional type of funding.
How Alternative Lenders Help?
Fortunately, over the last decade or so, the small business lending industry has developed dramatically, and small business loans are no longer limited to white business owners. There are many alternative lenders who don’t classify borrowers based on credit report. These alternative lenders provide unsecured business financing solutions that don’t require collateral or personal guarantee.
Minority Business Loans Made It Easy!
Being minority business owner you deserve the equal access to funding resources as all other non-minority businesses utilize to grow their businesses. Though there are lots of traditional and government funding programs out there, but they came at high rates and consist of long-drawn-out lending process. The alternative lenders offer fast and flexible funding solution, minority business loan, especially meant to offer financial help to minority businesses. Minority business loans from alternative lenders don’t require good credit score or personal guarantee. These simple to apply and easy to acquire minority business loans can help businesses to fund the business growth.
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.