10.11.20166 min read

Minority Small Business Loans: Your 6 Best Options

by Meredith Wood

Whether to invest in new equipment or materials, bridge cash flow when a customer pays at a leisurely pace, or to take advantage of growth opportunities, most small businesses will need financing at some point over the course of their operations.

Historically, though, minority business owners have faced more challenges in securing financing. But the financing landscape for small businesses is changing, meaning new opportunities and a broader range of minority business loans are available.

Typically, lenders define minorities as African-American, Hispanic-American, Asian-American, Alaskan Native, Pacific Islander, or American Indian individuals. A business is classified as minority-owned if 51 percent or more is owned by a member of one of these groups. To qualify for a minority loan application, your business must be certified as a minority business enterprise (MBE) or disadvantaged business enterprise (DBE).

Understand eligibility nuances

Minority business owners who take the time to understand the nuances of the eligibility requirements will have the best chances of success in getting approved for a loan. That said, the guidelines are not necessarily straightforward, and lenders are not known for being especially transparent. But with some research and due diligence, you can find your way.

As a minority small business owner, you may face unique circumstances such as starting a business in an underserved area, being economically challenged, or seeking a smaller-than-average loan. That doesn’t have to be a show-stopper, though; it just means you may need some extra guidance on where to look. Some federal, state, local, and private loan programs are tailored to address these specifics.

For that reason, it can be advantageous to work with a local organization that knows the nuances of your market and can help you find your best match for lending, enabling you to learn about ultra-niche programs. For example, WESST is a nonprofit organization dedicated to assisting small business owners in New Mexico, including a loan program to help political refugees.

To complicate things further, many geographically-specific organizations also have special niches, which can make researching the best minority business loans for your needs a lengthy process. We hope the following resources will help you get a head start.

1. National Minority Supplier Development Council

The National Minority Supplier Development Council, or NMSDC, helps minority-owned businesses get their certification as a Minority Business Enterprise (MBE), which in turn, helps them become eligible for minority financing programs.

Once certified, the NMSDC connects minority business owners to contracting opportunities with its extensive network of corporate partners. As an MBE-certified member, when you establish a supplier and/or vendor relationship with one of the NMSDC’s national or regional corporate members, you expand your pool of possibilities for financing.

With these certifications and relationships in place, you will have more direct access working capital loans, as well as specialized and long-term financing through the NMSDC’s partners. Although there are a few steps to the process, this is a solid source for minority business loans.

2. National Minority Business Council

The National Minority Business Council’s (NMBC) goal is to expand opportunities for small, minority, and women business owners. The organization provides business assistance, educational opportunities, seminars, purchasing listings, and related services to businesses across the United States.

3. The U.S. Department of Commerce’s Minority Business Development Agency

Minority-owned businesses that are looking to expand into new domestic and global markets can access business expertise at an MBDA Business Center.

MBDA Business Centers help minority small business owners start and grow their companies by securing capital, competing for contracts, identifying strategic partners, and enhancing their expertise through education and mentoring.

Strategically located in areas with large concentrations of minority businesses, the centers are staffed by specialists with the knowledge and practical experience needed to run successful and profitable businesses. Business referral services are provided free of charge.

5. Small Business Administration 8(a) Certification Program

This federally-funded initiative helps minority-owned small businesses attract more clients, projects, and revenue by getting them a foothold in government contracting

The SBA’s 8(a) Business Development Program offers specialized business training, counseling, marketing assistance, and high-level executive development. In addition, you can access surplus government property and supplies, SBA-guaranteed loans, and help in building your competitive and institutional knowledge and skills.

Another facet is the 8(a) BD Mentor-Protégé Program, which pairs young companies with more experienced counterparts to accelerate and facilitate learning.  

6. Union Bank

Union Bank provides specialized loans and lines of credit of up to $2.5 million for companies who meet the bank’s definition of a minority-owned business. Union Bank’s definition is the same as the EEOC’s, and its offerings have eased lending standards, simplifying the process and qualifications for new businesses who need financing.  

These organizations offer the cornerstone of successful businesses—people and information. While they can direct you to minority business loans, these organizations can also make introductions, help you prepare a winning loan application, and get expertise on running your business successfully.

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Meredith Wood is the editor-in-chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. She is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more. 

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