In 1969, Richard Nixon, a Republican candidate, ended the ‘vicious cycle of despair and dependence’ and formed MBDA (Minority Business Development Agency) to give a business platform to African Americans, Hispanics, Asians, and Native Americans. His efforts had an impact, and by 1972 the black-owned businesses contracts spiked to $7.26 billion from $4.5 billion. Although at that time these numbers were the result of funding through the private sectors, nowadays as 51% of the US’s small businesses are minority-owned, so government and multiple private and online lenders are offering Minority Business Loans.
Before going into ‘how to fund a minority-owned business using a minority business loan?’ let us explore what categorizes as a minority-owned business, and what type of funding options are available for them?
Minority Business Loans and Grants
America’s minority-owned small business industry doesn’t only comprise of African-Americans; minority businesses consist of people of color and women. According to the stats of 2014, 30% of the US enterprises are women-owned, making a significant impact on the economy. The financial needs of a minority-owned business are the same as the needs of a majority-owned business. A supplementary hike of working capital can promote their business the same as other businesses. Despite the similar needs, the funding and financing options for a business owned by a woman or a Hispanic are fewer in number. Although multiple government-approved and private funding is available, there is no such loan as a ‘minority business loan.’
Debt financing – borrowing money from the lenders and paying it back in time – is one of the funding options. Even though some of these are not designed especially for women and colored entrepreneurs, but still they are up for the taking. Browse the following options and apply for one that can help you run your business more smoothly and effectively.
- SBA 7(a) Loans & 8(a) Business Development Program
Technically, these loans are not just fashioned for minority business owners, but minority business owners have higher chances of getting approved for a one! According to a report, shared by a lending institution, which almost 80% of the applicants are Black and Hispanic and over the years on average they have been offered more than $150,000 each.
- SBA Community Advantage Loans
SBA Community Program helps small businesses who fail to qualify for a traditional loan. As banks are a bit reluctant to offer loan to a minority-owned business, so SBA Community Advantage Loans can provide enough working capital to keep your business going in the right direction.
- SBA Microloan Program
If you think your small business can benefit from $50,000, apply for the SBA Microloan Program. Usually, third-party lenders offer to fund. This amount is enough to form a sound foundation for your business.
- Accion U.S. Network
Accion U.S. Network also doesn’t entertain minority business owners specifically, but they target businesses with low income and those who are having trouble approving for a traditional loan. This funding institute offers loans ranging from $200 to $300,000. So, no matter which state you are from, you can apply for loans by Accion U.S. Network.
- The National African American Small Business Loan Fund (NASBLF)
JP Morgan Chase and Valley Economic Development Centers joined their resources and initiated The National African American Small Business Loan Fund to help business owners with low income and inadequate working capital residing in New York, Los Angeles, and Chicago. If you fulfill the criteria, then you must take advantage of NASBLF program.
- Business Center for New Americans (BCNA)
BCNA offers minority business loans to women entrepreneurs, refugees, and immigrants who are working in this economy. Basically, this organization caters to the need of owners who are rejected by the traditional lenders due to a poor credit score and not enough credit history.
As a minority business owner, if you think your small business can benefit from the above funding options, you must apply away.
Apart from a wide range of above-mentioned minority business loans, many organization offer grants for small business offering the opportunity to cover financial needs! Although the qualification criteria of approval of a minority grant are a bit rigid, an owner isn’t bound to make the repayments on time; this is free money!
- Community Programs to Improve Minority Health Grant Program
Running a small health clinic can be challenging, especially for a minority. Incoming cash flow is a major requirement, and this funding program offers multiple propitious grants. Apply for this with a reason to spread awareness about mental and physical health in the minorities.
- Community Connect Grants
Although this grant is not only for minority business owners, often times funding institution put minority business owners and disadvantaged business owners in the same category. So, if you are a minority, running a small business from a rural area, you can apply for this grant and improve and upgrade your technical resources.
- Rural Business Opportunity Grants
The motive behind Rural Business Opportunity Grants and Community Connect Grants is the same, both of these funding programs offer grant up to $100,000 to improve the economic state of the rural areas. If you consider yourself an agent of change in the small business industry, this is your chance to change things around.
- Improving Minority Health Grant program
United States Department of Agriculture offers this funding program to improve the standard of health care in the rural area form the Minority. Running a small business in that area is perplexing, this grant can help boost the financial condition of your small business.
- Tribal Energy Development Capacity Grant
It is hard to secure this grant using a direct approach; you must get the right contract and move further with it. Basically, if you are working on any small project related to energy development in rural areas, then this grant can give you access to money.
Multiple funding institutions are offering grants to help minority small business owners eventually resulting in the betterment of the U.S. economy.
Small Business Certified as a Minority-Owned Business
With a wide range of funding options available, you can promote your small business, implement strategies that can help it grow and much more. In addition to this, you can benefit from small business grants and loans if you are a certified Minority-Owned Business. With proper business certification, you have access to special government-run programs helping you grow a rapid pace. If your minority-owned business is not certified yet, get in contact with National Minority Supplier Development Council (NMSDC). With easy access to an online application, you can get certified in 90 days.
Before filling out the application, make sure you satisfy the following criteria:
- Your business must be owned by someone who is 25% Asian, Black, Hispanic, or Native American.
- The staff supervising and managing the daily operations must be a Minority.
- You must have your office in America.
If you satisfy the above criteria, then you are all set for the certification, make sure you are ready to submit the business and financial documents as required. This certification opens multiple doors of funding possibilities for your small business.
Alternative Growth Options
The research suggests that minority based loans and grants have been the major reason behind the significant increase of the minority-owned business. Some analytics reveals other features such as community support, networking, information and knowledge regarding business, and advanced access to the working capital and streamlined cash flow.
A vast majority of the minority-owned businesses are uplifted and encouraged by their community. They strive to uplift the small businesses that are running in their community so that they have access to advanced services.
Recent trends have shown, as the number of minority-owned businesses is increasing, so are the platforms and funding institutions. Multiple small business owners gather and discuss problems, solutions, and opportunities to improve their business standards.
As compared to the past, a modern day small business is financially stronger, wiser, and experienced. With these attribute, they are posing a strong financial position.
Multiple federal and local sectors are offering loans, grants, and training to elevate minority-owned businesses and small business industry as a whole.
With external funding – minority business loans – and inner support, minority-owned businesses are flourishing and becoming a valuable factor in American economic growth. As a side note, the government has offered special grants and services to the Minority, and so does private and online lending but discrimination still exists. All things considered, it is arduous to get funding as minority business owners.
Why is it hard to secure a loan as a Minority Business Owner?
So far we have acknowledged the importance of funding to boost the growth of any business, but poor credit score, inadequate income and the fact that the majority of the Minority is running an office from a rural area make it hard for minority-owned businesses to get proper funding.
One of the major requirements to qualify for a small business loan or a minority business loan is a decent annual revenue. Research suggests that businesses owned by African-Americans have an average of $35,000. These numbers mark them as a risky borrower, so banks are reluctant to offer loans. Lower income and poor credit score suggest that these business owners don’t have enough resources to offer collateral, making it hard for them to secure a loan in the competitive lending industry.
In addition to this, the primary location of your business has a major role to play in the approval of your loan application. Banks target small business that has customer flow and retention, and that is not the case with the businesses owned by the Minority.
Lastly, current research has pointed out the discrimination that goes into the lending industry. A Social experiment was carried out, and the results were rather unexpected. As per the experiment, the lenders withheld significant information from the Minority business owners but shared the same information with white business owners. In addition to this, lenders asked more questions and demanded more financial documents from African-American and Hispanic business owners. In addition to this, the discrimination between women and men entrepreneurs exists! Banks and lending institutions offer more capital to men as compared to women. In order to improve the small business industry, we must ensure that every small business has access to an equal number of financial resources – it is a long way to go!
For now, if you belong to a minority and need funding for your small business, you can explore minority business loans, grants for minority, and private funding. If you have a stellar credit score and streamlined cash flow, then alternative lenders like us provide funding at an affordable interest rate and flexible terms. Take actions to improve your credit score, and if you have any pending debt, remember to clear it on time.
If you think you find the proper funding that you were looking for, then head over to our website. Apply for a minority business loan. For more information about the grant and loans especially customized for minority-owned business, follow us on Facebook (@Onlinecheck) and Twitter (@Onlinecheck). If you have any question, feel free to call us on our toll-free number at (833) 827-4412, our loyal and keen financial advisor will answer your every question and guide you throughout the way. Join our forces to eliminate the difference between minority-owned and majority-owned businesses.