Looking for minority business loans? You’re not the only one. It’s no secret that the tech world is overwhelming male and overwhelming white. Study after study has shown that not only do underrepresented groups pitch less to angel investors and venture capitalists, they also receive less money when they do pitch. And when it comes to loans? Same problem. Underrepresented groups consistently receive less money than white men on loans.

For example, a 2014 study from researchers at Brigham Young University recruited nine “mystery shoppers” to go and seek small business loans. Three were black; three were Hispanic; and three were white. They all wore the same clothing, had nearly identical backgrounds, and asked for $60,000 for identical business plans.

Can you guess what happened?

The minority small business owners were given less loan term information, asked more questions about their personal finances, and offered less application than the white small business owners.

And those interactions have long-lasting effects. The same study did in-depth interviews with 39 entrepreneurs —16 white, 13 Hispanic and 10 black — who sought funding. They found that the continuous denial, rejection, and restricted access to loans for minority small business owners led to lower self esteem and feelings of self-worth. While the study didn’t examine whether or not those small business owners continued to seek funding or continued their businesses, it’s not a far reach to assume that this frustration and diminishment of self worth probably had an effect.

So those are facts: Institutional racism and individual discrimination have serious effects on minority business owners and make it a lot harder to get ahead. But for people of underrepresented groups, this isn’t news. Minority small business owners know that they have a harder path moving forward than white men and it doesn’t keep them from starting businesses. In fact, from 2007 to 2012, the percentage of minority-owned businesses jumped from 22 percent of total businesses to 29 percent, according to the Small Business Association.

With tenacity like that, it’s a travesty that minority small business owners have such a difficult time accessing funding. So, we’re here to help with some much-needed resources for minority small business loans, as well as some tips on how to secure that funding.

WHO QUALIFIES FOR SMALL BUSINESS LOANS FOR MINORITIES?

First off, let’s define what counts as a “minority” in this world of lending. African-American, Hispanic-American, Asian-American, Pacific Islander, Alaskan Native, or American Indian people qualify as minorities. In order for a business to qualify as minority-owned, it needs to be at least 51 percent owned by someone from one of those groups.

Additionally, you’ll often need to be certified as a minority business enterprise (MBE) or a disadvantaged business enterprise (DBE) in order to qualify for certain loans or grants. That’s not the case for all loans and grants, however, so make sure it’s a requirement before going through the process of getting certified.

WHERE CAN I FIND SMALL BUSINESS LOANS FOR MINORITIES?

While there’s no one overarching group that provides small business loans for minorities, there are a variety of resources out there, if you know where to look. Many of these loans and grants exist at a local and state level, so your first move and best bet should be to connect with a local organization that works with minority business owners or with a lending institution that can help you navigate the local landscape. Some may be listed under loans or grants for “disadvantaged groups” or as loans or grants that specifically target disadvantaged communities.

There are also federal loan programs that specifically target minority business owners, as well as some that are more generally for small business owners who need some extra help. Here are the top minority small business loans, with a couple of great general ones thrown in there as well.

1. SBA Loans

A SBA small business loan is a loan that is backed by the Small Business Administration (SBA). Founded in 1953, the SBA is a federal government program that provides support to small business owners in the form of mentorship, workshops, counseling, and small business loans.

While the loans are backed by the SBA, they don’t come directly from the SBA. You’ll have to find a local lender who provides SBA loans in order to access to the funding. Here are the three SBA loans that are the best options for minority small business owners.

SBA 8(a) Business Development Program

The SBA 8(a) Business Development Program is specifically for small disadvantaged businesses. In order to qualify, businesses must be owned and controlled at least 51 percent by “socially and economically disadvantaged individuals.” In addition to the racial categories outlined above, people can also show that they’re economically or socially disadvantaged by other factors, including “gender, physical handicap, long-term residence in an environment isolated from the mainstream of American society.”

Rather than a loan, the SBA 8(a) Business Development Program is an involved experience. Participation in the program is divided into two phases over nine years: a four-year developmental stage and a five-year transition stage. In addition to funding, entrepreneurs receive mentoring, procurement assistance, business counseling, training, financial assistance, surety bonding, and other management and technical assistance.

SBA Micro-loan Program

BSA 7(m) Micro-loans are approved and financed by the SBA via non-profit, community-based intermediaries. The loans are quite small, with an upper limit of $50k and an average loan amount of $13k. The program was created specifically to help women, low income, veteran, and minority entrepreneurs, as well as other small businesses in need of small amounts of financial assistance.

SBA 7(a) Loans

The 7(a) Loan Program is the most popular SBA small business loan. 7(a) Loan Program SBA small business loans can be used for purchasing fixed assets, working capital, to finance startups, to purchase an existing business, and for debt repayment. In order to qualify, a company must first meet the SBA size standards. Because SBA loans are specifically for small businesses, they’ve created a “size standards tool” that helps founders and small business owners determine whether or not they qualify.

Once you’ve determined whether or not your company qualifies under the size standards here is a checklist of the remaining requirements for qualifying for a 7(a) Loan Program SBA small business loan: for-profit, in the US, you have the ability to repay the loan and manage the business, and you have equity.

Accion U.S. Network

Accion is a micro-lending network that does a variety of loans, including those specifically targeting minority business owners. They do loans starting as low as $200 and go up to $1,000,000 for low- and moderate-income entrepreneurs who have trouble getting access to funding through other sources. They also have a simple, one-page application form to get started, making the barrier to access even lower than some other institutions.

Union Bank Business Diversity Lending Network

Union Bank provides minority small business loans for up to $2.5 million under their Business Diversity Lending Network. In addition to being at least 51 percent owned by minorities, the businesses must also have annual sales that don’t exceed $20 million, be in business for at least two years, and need a loan of less than $2.5 million.

Business Center for New Americans

The Business Center for New Americans offers loans to to New Americans (sometimes called “refugees”) in the greater New York City area. The loans don’t require a credit score, but do require that loans over $3,001 have a cosigner; that the borrower match 20 percent of the loan amount with previous personal investment; that the borrower hasn’t declared bankruptcy in the past 12 months; that the borrower has sufficient cash flow; and that they have the required licenses or be in the process of getting those licenses.

 Balboa Capital

Balboa Capital offers loans specifically for Hispanic small business owners, one of the fastest growing groups of entrepreneurs in the United States. The loans are up to $250,000 and are available even to people with no or poor credit scores. Businesses must be at least a year old and generate at least $300,000 in annual revenue. They offer an easy online application and even have Spanish-language staff to help people facing a language barrier.

The Affiliated Tribes of Northwest Indians Revolving Loan Fund

The Affiliated Tribes of Northwest Indians Revolving Loan Fund offers loans up to $125,000 to Native American business owners, with fixed interest rates that are generally a bit higher than those from traditional banks. The loans can be used for expansion, relocation, or starting a new business. They also provide technical assistance to Native Americans who are trying to start businesses; bridge financing between Native American businesses and commercial financial institutions; and educational assistance and technical support to promote financial capacity building within the Tribes.

Community Development Financial Institution (CDFI) loans

Community Development Financial Institutions (CDFIs) are small loaning institutions — like credit unions or community development funds — that are specifically targeted to underserved communities, making them a great option for minority small business loans. In order to qualify, a business has to be certified as a minority owned small business or woman owned small business (MWBE); have three years of business or personal tax returns; business and personal credit reports; six months of business and personal bank statements; year-to-date balance sheet; and year-to-date profit and loss statement.

 Minority Business Development Agency

The Minority Business Development Agency is a government-run agency that helps connect minority small businesses owners with the resources they need to succeed. Those resources include capital, contracts, and markets. They operate business centers throughout the country where minority small business owners can go to get help with getting ahead.

 

MORE INFORMATION ABOUT GETTING A SMALL BUSINESS LOAN

The “where” isn’t the only question you need to answer when you’re looking to get a minority small business loan. You also need to make sure you have all of the right background information and documents in place for when you actually apply.

In addition to being certified as a minority-owned business, here are some things you also need to get together before you go for a loan:

• A clear outline of how much money you need and why you need it.
• Advice from other minority small business owners who have already secured loans.
• A decision about which lending institution is the best fit for your startup.
• A loan application from that institution.
• Your personal and business credit history, with repairs if necessary.
• A business plan.

And you can check out this article for more information on everything you need to apply for a small business loan.

 Location-specific loans

Nearly every locality has their own, location-specific loans or organizations that target minority business owners and because they’re only available to people who live in those areas, we can’t list them all out here. But it’s worth your time to do a search in your area, either through online search engines or through your personal lending institution.

Ask: Are there are any lending, funding, or educational groups that specifically target my demographic? Or are there any that are looking to fund businesses that serve those communities? Your local community may have even more resources than you realized for minority small business owners.

 Other funding sources

And of course, minority small business loans aren’t the only option for funding. Here at Startups.com, we’re all about helping you get the money you need for your startup to succeed. Check out the below guides to other funding sources. Happy fundraising!

1. Series Seed Funding: A, B, C, D, E
2. Crowdfunding
3. Small Business Loans
4. Small Business Grants
5. Private Investors
6. Angel Investors