SAN FRANCISCO — Getting a small-business loan is difficult, but it can be even tougher if you’re a minority business owner. But despite hurdles such as less wealth, fewer assets and less appealing credit, minority-owned businesses continue to grow at a faster pace in the U.S. than other businesses.
The number of minority businesses increased from 5.8 million to 8 million from 2007 to 2012, with minority firms providing 7.7 million jobs in 2012, according to a report by the federal Minority Business Development Agency (MBDA).
“As communities of color continue to grow across the nation, it’s really important that we [hone] in on the unique experience of minority-owned businesses,” says Sasha Werblin of the Greenlining Institute, a nonprofit that helps bring capital and resources into minority communities that were hit hard during the recent foreclosure crisis.
There are several lenders and organizations that can help secure small-business loans, grants and other financing resources, experts say:
Small Business Association (SBA): The Community Advantage Loans program is for new and existing small businesses that are located in underserved communities and need $250,000 or less. The loans are not exclusively for minority business owners, but the SBA works with local, mission-based lenders to provide financing.
The SBA’s microloans program, meanwhile, provides microloans of up to $50,000 through nonprofit organizations.
One microloan provider is the Opportunity Fund, which serves California businesses. The company recently partnered with Lending Club to make small-business loans available to underserved areas of California.
The company has given more than $83 million in microloans since 1994, officials say, and 90 percent of its borrowers are minority-owned businesses.
“We’re trying to get capital into the hands of entrepreneurs who can’t get it through the traditional financial system,” says Caitlin McShane, marketing and communications director for Opportunity Fund.
Other microlenders working with the SBA include Liftfund, which said more than 80 percent of its borrowers were Hispanic or African American in 2014, and Accion, which says more than 60 percent of its borrowers come from minority communities.
The SBA’s Business Development Program helps socially or economically disadvantaged small-business owners through business development assistance, training workshops, and management and technical guidance.
Online lenders: Also known as alternative lenders, this new breed of lenders provides small-business loans more quickly, but at a higher annual percentage rate (APR) than traditional banks.
They don’t specialize in small-business loans for minorities, but these lenders provide an option for borrowers who don’t qualify for a bank loan due to poor credit, no collateral or a limited business history, or for those who can’t afford to wait several months for financing.
If you have bad credit and want a short-term loan, you might want to consider OnDeck, which requires a minimum personal credit score of 500, or Kabbage, which weighs your credit score less heavily than your monthly revenue and years in operation.
If you’re looking for expansion financing, you might consider Lending Club, Funding Circle or SmartBiz. For minority-owned businesses with invoices, BlueVine and Fundbox provide working capital solutions.
Additional options: Financing also can be found through these business organizations:
Minority Business Development Agency: This agency of the U.S. Department of Commerce promotes the growth of minority-run small businesses by connecting owners to financing resources, federal contracts and market opportunities.
The MBDA recently launched the Minority Business Enterprise Technology Initiative to help aspiring technology entrepreneurs bring new products and services to market.
National Minority Supplier Development Council: The council is a corporate member organization focused on increasing business opportunities for certified minority businesses. It also operates the Business Consortium Fund, which offers several financing programs and business advisory services for certified minority-owned businesses.
National Association for the Self-Employed: This nonprofit association is a good resource for all small-business owners. It provides educational resources and grants, and in 2015, it will have awarded more than $48,000 in grants to small businesses. Small grants of uo to $4,000 are available.
USDA Rural Business Enterprise Grant Program: This program is for the development or expansion of small businesses in rural areas – minority or not. Grants range from $10,000 to $500,000.
Operation HOPE Small-Business Empowerment Program: This program is designed for aspiring entrepreneurs in any low-wealth community. It provides access to small-business financing options, as well as help with setting up a business plan and financial statements, credit counseling and educational resources.
FedEx Small Business Grant Contest: This annual grant contest by FedEx awards 10 small businesses with grants of up to $25,000. Any for-profit small business that has been in operation for at least six months is eligible to enter.