The Best Small Business Loans For Minorities

Accion: Best For Borrowers With Poor Credit

Accion

Total Rating	3.8
Rates & Fees5.0 Pricing 5.0 Affordability 5.0
Services2.1
Eligibility Requirements4.1
Application3.5
Sales & Advertising Transparency4.8 Sales Practices 5.0 Web Presence 4.5
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

CDFI: Best For Businesses In Economically Distressed Communities

CDFI	Visit Site

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

Kiva U.S.: Best Crowdfunded Loans

Kiva U.S.

Get Started With Kiva U.S.

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

Fundbox: Best For Lines Of Credit

Fundbox

Total Rating	3.8
Rates & Fees3.1 Pricing 2.3 Affordability 3.8
Services3.6
Eligibility Requirements4.5
Application4.8
Sales & Advertising Transparency3.8 Sales Practices 4.0 Web Presence 3.5
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

Lendio: Best Marketplace To Compare Loan Offers

Lendio

Total Rating	4.8
Rates & Fees5.0 Pricing 5.0 Affordability 5.0
Services5.0
Eligibility Requirements4.9
Application4.5
Sales & Advertising Transparency4.4 Sales Practices 4.0 Web Presence 5.0
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

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.

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.

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.

Bio
LinkedIn
Latest Posts

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.

View Erica Seppala's professional experience on LinkedIn.

Latest posts by Erica Seppala (see all)

Paychex ERTC Service Review - February 6, 2024
Venmo Taxes: When To Expect Form 1099-K - February 2, 2024
The Complete Guide To Filing Self-Employment Taxes - February 1, 2024
The Complete Guide To Filing Small Business Taxes For The First Time - January 31, 2024
The Beginner’s Tax Guide For Small Business - January 31, 2024

Show less

1. SBA Microloans

❮ ❯

Term loans
FICO: Varies
APR: 8%+

2. Accion

❮ ❯

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

3. CDFI

❮ ❯

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

4. Kiva U.S.

❮ ❯

Crowdfunded loans
FICO: N/A
APR: 0%

5. Fundbox

❮ ❯

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

6. Lendio

❮ ❯

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