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The Best Small Business Loans For Minorities

There are many loan and financing resources specifically aimed at minority businesses. Check out this list of our top choices to see which one is right for you.

    Erica Seppala
  • Last updated onUpdated

  • Chelsea Krause
  • REVIEWED BY

    Chelsea Krause

    Lead Staff Writer

Our content reflects the editorial opinions of our experts. While our site makes money through referral partnerships, we only partner with companies that meet our standards for quality, as outlined in our independent rating and scoring system.

Business owners seeking minority business loans not only face the typical challenges of financing, but biases and language barriers also make it harder to get access to the best small business loans.

The good news is that many programs and lenders now explicitly aim to improve access to minority business loans. Below, we’ll delve into a few great sources of minority business loans and resources for finding additional financing.

Learn More About Our Top Picks

CompanyBest ForNext StepsBest For
SBA Microloans

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  • Term loans
  • FICO: Varies
  • APR: 8%+
  • Term loans
  • FICO: Varies
  • APR: 8%+

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Accion

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  • Term loans, equipment financing
  • FICO: N/A
  • APR: 8.49%+
  • Term loans, equipment financing
  • FICO: N/A
  • APR: 8.49%+

Visit Site

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CDFI

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  • Term loans, lines of credit, equipment financing, & real estate financing
  • FICO: Varies
  • APR: Varies
  • Term loans, lines of credit, equipment financing, & real estate financing
  • FICO: Varies
  • APR: Varies

Visit Site

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Kiva U.S.

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  • Crowdfunded loans
  • FICO: N/A
  • APR: 0%
  • Crowdfunded loans
  • FICO: N/A
  • APR: 0%

Visit Site

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Fundbox

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  • Lines of credit
  • FICO: 600+
  • APR: 4.66%+
  • Lines of credit
  • FICO: 600+
  • APR: 4.66%+

Apply Now

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Lendio

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  • Term loans, short-term loans, SBA loans, merchant cash advances, lines of credit, & equipment financing
  • FICO: 550+
  • APR: Varies by lender
  • Term loans, short-term loans, SBA loans, merchant cash advances, lines of credit, & equipment financing
  • FICO: 550+
  • APR: Varies by lender

Apply Now

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Read more below to learn why we chose these options.

The Best Minority Business Loans

Minority business loans aren’t fundamentally different than any other type of loan. Instead, the underwriting process takes into account obstacles and practices commonly encountered by minority business owners. Here are some of the best minority business loan options we’ve come across.

  • SBA Microloans: Best For Borrowers With Good Credit
  • Accion: Best For Borrowers With Poor Credit
  • CDFI: Best For Businesses In Economically Distressed Communities
  • Kiva U.S.: Best Crowdfunded Loans
  • Fundbox: Best For Lines Of Credit
  • Lendio: Best Marketplace To Compare Loan Offers

Comparison Of The Best Business Loans For Minorities

Max. Borrowing AmountAPRTerm LengthsFICOTime In Business
SBA Microloans$50KTypically 8%-13%6 yearsVariesVaries
Accion$250KStarts at 8.49%12 to 60 monthsN/A12 months
CDFIVariesVariesVariesVariesVaries
Kiva U.S.$15K0%36 monthsN/AN/A
Fundbox$150KStarts at 4.66%12 or 24 weeks6006 months
LendioVariesVariesVaries550

SBA Microloans: Best For Borrowers With Good Credit

SBA Microloans


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Pros

  • Good rates
  • Long repayment terms
  • Suitable for startups

Cons

  • Long application process
  • Slow time to funding
  • Partial down payment may be required for startups

Why We Chose SBA Microloans For Borrowers With Good Credit

The federal Small Business Administration (SBA) exists largely to help businesses that would otherwise be denied funding by guaranteeing 50%-85% of loans underwritten by third parties. These loans — the 7(a) and 504 are the most popular —  generally have better rates and longer terms than the applicant would normally be able to access on their own.

Of particular interest to minority business owners, however, might be the SBA microloan program. A microloan is defined as a loan that is $50,000 or less. Many microlenders specialize in lending to underserved communities. These loans can be used for almost any business-related purpose, including starting a business from scratch. And unlike many microloans offered without an SBA guarantee, you can take up to six years to pay off your balance.

Merchant Maverick recommends SmartBiz to borrowers who need help navigating the SBA loan application process.

SBA Services

Though the SBA doesn’t generally lend directly, it offers the following services through its SBA-approved lenders:

  • Term loans up to $5 million
  • Lines of credit up to $5 million

SBA microloans are available up to $50,000.

SBA Loan Rates & Fees

SBA Microloan rates generally range from 8% to 13% and vary by lender. Fees are up to 3% of the loan amount. Microloans have maximum term lengths of six years.

If you’re interested in a 7(a) loan, maximum rates start at the prime rate plus 3% and are based on the borrowing amount. SBA 504 loan rates are based on the market rate of U.S. Treasury bonds. Disaster relief loans like EIDL or PPP may have lower rates.

SBA Loan Eligibility Requirements

Eligibility requirements vary by intermediary. Microloans are typically easier to obtain than SBA 7(a) and 504 loans, which typically require a good credit score and a time in business of at least two years.

Choose SBA Microloans If...

  • You want a low-interest loan but don’t qualify for traditional bank funding
  • You need to borrow $50,000 or less

Get Started With SBA Microloans

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Accion: Best For Borrowers With Poor Credit

Total Rating 3.8
Rates & Fees5.0

Services2.1

Eligibility Requirements4.1

Application3.5

Sales & Advertising Transparency4.8

Customer Service3.9

User Reviews3.2



Pros

  • Lower qualifications than banks
  • Monthly repayments
  • Suitable for startups

Cons

  • Rates can be expensive
  • Some additional fees charged
  • The application process may require a lot of information

Why We Chose Accion For Borrowers With Bad Credit

In addition to the specific challenges faced by minority business owners, credit score requirements may also be a barrier to small business funding. Fortunately, lenders such as Accion are willing to work with people whose credit score has fallen below the 600 mark.

Accion specializes in lending to underserved communities and borrowers, and around 60% percent of its borrowers are based in minority communities. You can borrow up to $250,000 with Accion’s working capital loans. Preapprovals can be obtained in just 15 minutes, but the application and funding process can be lengthy. However, the competitive rates and longer repayment terms are generally worth the wait for borrowers with newer businesses or lower credit scores that don't qualify with other lenders.

Accion Services

Accion offers working capital loans from $5,000 to $250,000.

Equipment financing that can be used to purchase trucks and trailers is available. Borrowing amounts are $5,000 to $250,000.

Accion Rates & Fees

Interest rates range from 8.49% to 24.99%. Repayment terms are from 1 to 5 years, and payments are made monthly. An origination fee of 3% to 5% will apply. There are no prepayment penalties.

Accion Eligibility Requirements

To qualify for a working capital loan from Accion, you must meet these basic requirements:

  • Time in business of at least 12 months
  • Annual revenue of $50,000+
  • Own at least 20% of the business

Accion loans are not available to borrowers in Montana, North Dakota, South Dakota, Tennessee, and Vermont.

Choose Accion If...

  • You’ve been in business for at least one year
  • Credit challenges prevent you from obtaining affordable funding elsewhere

Get Started With Accion

Read our in-depth review

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CDFI: Best For Businesses In Economically Distressed Communities

CDFI


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Pros

  • Full spectrum of banking services
  • Rates are competitive with other community banks
  • Great for businesses operating within economically distressed areas

Cons

  • Availability is contingent upon your location
  • May need to meet high qualifications
  • Not targeted specifically at minority-owned businesses

Why We Chose CDFIs Businesses In Economically Distressed Communities

To qualify as a CDFI, banks have to apply to the federal Community Development Financial Institutions Fund and prove that they’re primarily lending to under-served markets. CDB can have either a national or a state charter and serve low-to-middle income communities.

While not explicitly targeted at minority communities, they do often work in and with them. The Bank Enterprise Award Program, in particular, is targeted to communities where at least 30% of residents have incomes that are less than the national poverty rate and where unemployment rates are at least 1.5 times the national unemployment rate.

CDFI Services

CDFIs usually offer the full-service spectrum of bank-based lending products, from checking accounts to home mortgages, lines of credit, and, of course, business loans. You can find some of these institutions through the Community Development Bankers Association.

CDFI Rates & Fees

CDFI rates and fees vary by bank.

CDFI Eligibility Requirements

Eligibility requirements for CDFI loans may vary by institution. While banks generally prefer to work with borrowers with good-to-excellent credit, CDFI’s may be more lenient in some cases.

Choose A CDFI If...

  • Your business operates in an economically distressed community
  • You want to choose from a wide selection of financial products at competitive rates

Get Started With CDFI

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Kiva U.S.: Best Crowdfunded Loans

Total Rating 4.2
Rates & Fees5.0

Services2.9

Eligibility Requirements4.9

Application3.5

Sales & Advertising Transparency5.0

Customer Service4.1

User Reviews4.4



Pros

  • Interest-free loans
  • No credit check
  • Suitable for new businesses

Cons

  • Low borrowing amounts
  • Involved application process
  • Funds can take awhile to disburse

Why We Chose Kiva U.S. For Best Crowdfunded Loans

If you’re an entrepreneur looking to raise a small amount of money to get your business idea off the ground and you’re willing to think outside of the box, look to Kiva U.S. While getting a loan from Kiva U.S. may take a little more time and work, your reward will be an interest-free loan.

Kiva lends based on metrics it calls “social underwriting,” which attempts to measure your overall character and standing within your community. There are no time in business, credit score, or revenue requirements, so this option is ideal for borrowers with credit challenges and new businesses.

Kiva U.S. Services

Kiva U.S. offers small business loans up to $15,000 with repayment terms of 36 months.

Kiva U.S. Rates & Fees

Because Kiva U.S.’s loans are crowdfunded, they have a 0% interest rate and no additional fees.

Kiva U.S. Eligibility Requirements

Kiva U.S. does not require any minimum credit score, time in business, or revenue to qualify. However, you do have to be at least 18 and have a U.S. business that isn’t in bankruptcy proceedings. You’ll also need to be able to raise the capital for the loan through crowdfunding.

Choose Kiva U.S. If...

  • You’re willing to put in the time/effort for an interest-free crowdfunded loan
  • You’re a new business, have low revenues, or have poor credit and can’t qualify for funding elsewhere

Get Started With Kiva U.S.

Read our in-depth review

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Fundbox: Best For Lines Of Credit

Total Rating 3.8
Rates & Fees3.1

Services3.6

Eligibility Requirements4.5

Application4.8

Sales & Advertising Transparency3.8

Customer Service3.0

User Reviews4.4



Pros

  • Lower qualifications than banks
  • Fast and easy application process
  • Low credit requirements

Cons

  • Rates can be expensive
  • Repayments are required frequently

Why We Chose Fundbox For Best Lines Of Credit

Fundbox isn’t explicitly aimed at minority-owned businesses, but its method of underwriting avoids many of the dysfunctions that those businesses encounter in the lending process.

Fundbox doesn’t use the typical standards for lending. You don’t have to have been in business very long, and your credit score needs to be at least 600. You can receive a credit decision in just minutes, and you can begin making draws immediately on your line of credit once approved to have funds in your bank account as quickly as the next business day.

Fundbox Services

Fundbox offers business lines of credit up to $150,000 with repayment terms of 12 or 24 weeks. Payments are made weekly.

Fundbox Rates & Fees

Fundbox’s borrowing fees start at 4.66% for 12-week repayment terms and 8.99% for LOCs with 24-week repayment terms. There are no draw fees or hidden fees.

Fundbox Eligibility Requirements

To qualify for a Fundbox line of credit, you must meet these minimum requirements:

  • Have a business checking account
  • Personal credit score of 600+
  • Time in business of 6+ months
  • Annual revenue of $100,000+

Choose Fundbox If...

  • You want a flexible line of credit to draw from as needed
  • You’re a newer business that’s been in operations for at least six months
  • You have a lower credit score and don’t qualify for funding elsewhere

Get Started With Fundbox

Read our in-depth review

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Lendio: Best Marketplace To Compare Loan Offers

Total Rating 4.8
Rates & Fees5.0

Services5.0

Eligibility Requirements4.9

Application4.5

Sales & Advertising Transparency4.4

Customer Service4.9

User Reviews4.9



Pros

  • Lower borrower qualifications than banks
  • High borrowing amounts
  • The application process is fast and easy
  • Multiple types of financing available

Cons

  • Rates can be expensive
  • Funds can take a while to disburse
  • Not specifically targeted at minority businesses

Why We Chose Lendio As Best Marketplace Lender

If you want to compare loan offers with little effort, give Lendio a try. Through Lendio, you can receive offers from 75+ lenders with a single application.

Although Lendio isn't specifically targeted at minority businesses, it works with a variety of lenders that offer funding to underserved borrowers, new businesses, and business owners with poor credit scores.

Lendio Services

Lendio offers a wide variety of services, including:

  • Short-term loans up to $500,000
  • Term loans up to $2 million
  • Lines of credit up to $500,000
  • Merchant cash advances up to $200,000
  • SBA loans up to $5 million
  • Equipment financing up to $5 million

Lendio Rates & Fees

Lendio’s rates and fees vary depending on the lender you’re matched with. Low-interest options like SBA loans are available, as are more expensive, subprime options.

Lendio Eligibility Requirements

Lendio recommends a credit score of at least 550, but keep in mind that each of the lenders in Lendio’s network has their own requirements. The higher your credit score, the longer you’ve been in business, and the higher your revenue, the more matches you’re likely to receive.

Choose Lendio If...

  • You want to compare rates and terms with a single application
  • You’re unsure of which type of loan is best for your business

Get Started With Lendio

Read our in-depth review

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Business Loan & Funding Products Review Methodology

We spend hours researching and evaluating each business loan and funding product that we review at Merchant Maverick, placing special emphasis on key characteristics to generate our ratings.

Weighted Rating Breakdown

Rates & Fees 20%
Services 20%
Eligibility Requirements 20%
Application 15%
Sales & Advertising Transparency 10%
Customer Service 10%
User Reviews 5%

When rating lenders and funding providers, we use a 31-point rubric that looks at rates and fees, services, eligibility requirements, application, sales and advertising transparency, customer service, and user reviews. We weigh each section differently to calculate the total star rating. This rubric is applied to traditional term loans, as well as short-term loans, start-up loans, lines of credit, online lending products, merchant cash advances, and equipment financing products.

  • Rates & Fees: 20% of the total star rating
  • Services: 20% of the total star rating
  • Eligibility Requirements: 20% of the total star rating
  • Application: 15% of the total star rating
  • Sales & Advertising Transparency: 10% of the total star rating
  • Customer Support: 5% of the total star rating
  • User Reviews: 5% of the total star rating

Each section is further broken down into granular, weighted subsections, in which we examine specific attributes like terms lengths, conditions of repayment, credit score and revenue requirements, ease of application, length of time to funding, the ethics involved in promoting the lending product, customer support, and the overall reputation of the lender or funding provider.

Read more about how we rate small business lenders.

Why We Recommend These Lenders For Minority-Owned Businesses

While the causes are numerous and complicated, minority-owned businesses face challenges that can negatively affect their success and growth. Access to capital is one of them.

Despite higher growth in minority-owned businesses in the US relative to those that are white-owned, those businesses still appear to face challenges that threaten their stability. According to the U.S. Census Bureau, when it comes to businesses with employees, just 2.3% are Black-owned, and 6.5% are Hispanic-owned, despite being 13.6% and 18.9% of the U.S. population, respectively.

One particularly worrying development is that more minority-owned firms earned less than $100,000 in revenue in 2021 than in 2020. While this trend impacted white-owned businesses as well, the impact was greater on minority-owned businesses. Low credit scores also remain an issue, particularly for Black business owners, with 23% classified as “high credit risk.”

With these trends in mind, Merchant Maverick chose lenders that either explicitly have a mission to support minority-owned businesses and/or have more lenient underwriting practices. This is in addition to general considerations like interest rates, terms, and breadth of services.

Additional Funding Resources For Minority-Owned Businesses

Getting financing can be a complicated and anxiety-inducing process, especially if you’ve never done it before. In addition to the lenders/organizations above, these organizations may be able to help you get financing.

Minority Depository Institutions (MDIs)

Banks with at least 51% minority ownership can qualify as MDIs so long as they also primarily serve communities that are predominantly “Black American, Asian American, Hispanic American, or Native American.”

Working with one of these institutions — as long as your business is operating within a qualifying community — can help you circumvent some of the racial biases that plague lending. You can find them in most major and secondary cities.

State Programs & Nonprofits

State programs and nonprofit organizations often offer small, low-interest loans to resident business owners. These funds are provided without a profit motive, so they tend to have lower interest rates than comparable bank loans. On the other hand, programs of this sort generally don’t have deep pockets, making them less ideal for businesses seeking large amounts of money.

SBA 8(a) Program

You may have heard of the SBA 7(a) loan. Counterintuitively, the 8(a) program isn’t a loan at all. It’s a business development program designed to help business owners who are minorities and/or have an average gross income under $250,000 for the last three years and assets worth less than $4 million. SBA 8(a) certification qualifies businesses for numerous perks, including preferential treatment for government contracts.

Small Business Grants

Financial assistance doesn’t only come in the form of loans. Minority business owners frustrated with the lending scene may want to look into grants. For the unfamiliar, grants are “free money” offered by entities ranging from federal, state, and local governments to nonprofits and private corporations.

Some of these are grants targeted at minority-owned businesses.

While grants don’t have to be paid back, they are often extremely competitive, so be prepared to spend some time and effort getting your application to stand out amongst the crowd. Check out some grant writing tips to get started.

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Erica Seppala

Erica Seppala

Editor & Senior Staff Writer at Merchant Maverick
Erica began writing on small business topics in 2008. She joined Merchant Maverick in 2018 and focuses on loans, accounting, and POS. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll. She has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a graduate of Limestone University and resides in Greenville, South Carolina.
Erica Seppala
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