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The Best Minority Business Loans & Financing Resources

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.

    Chris Motola
  • UPDATED

Advertiser Disclosure: Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity.

Those seeking minority business loans can face not only the typical challenges of financing, but biases and language barriers that make it harder to secure funding.

The good news is there are now many programs and lenders that 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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  • Best for businesses and entrepreneurs with good credit.
  • Up to $5 million (SBA 7(a))
  • Minimum credit score 640+
  • Best for businesses and entrepreneurs with good credit.
  • Up to $5 million (SBA 7(a))
  • Minimum credit score 640+

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Accion

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  • Best for businesses with poor credit.
  • $5,000 - $100,000
  • No minimum credit score
  • Best for businesses with poor credit.
  • $5,000 - $100,000
  • No minimum credit score

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CDFI

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  • Best for businesses operating in economically distressed communities.
  • Loan amounts vary by institution
  • Qualifications vary by institution
  • Best for businesses operating in economically distressed communities.
  • Loan amounts vary by institution
  • Qualifications vary by institution

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Union Bank

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  • Best for West Coast businesses looking for high borrowing amounts.
  • Up to $2.5 million
  • Must be 51% minority, woman, or veteran-owned
  • Best for West Coast businesses looking for high borrowing amounts.
  • Up to $2.5 million
  • Must be 51% minority, woman, or veteran-owned

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Kiva U.S.

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  • Best for businesses looking to raise small amounts of money with zero interest.
  • $25 - $10,000
  • Applicants must not have any recent bankruptcies
  • Best for businesses looking to raise small amounts of money with zero interest.
  • $25 - $10,000
  • Applicants must not have any recent bankruptcies

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Fundbox

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  • Best for lines of credit.
  • $1,000 - $150,000
  • Minimum credit score 600+
  • Best for lines of credit.
  • $1,000 - $150,000
  • Minimum credit score 600+

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Lendio

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  • Best for businesses short on time.
  • $2,500 - $5 million
  • No minimum credit score
  • Best for businesses short on time.
  • $2,500 - $5 million
  • No minimum credit score

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.

 

1. SBA Loans: Best For Businesses And Entrepreneurs 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

One way to deal with the dysfunctions of the private lending market is to step around them entirely.

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.

Get Started With SBA Microloans

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2. Accion: Best For Businesses With Poor Credit

Accion


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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

In addition to the specific challenges faced by minority business owners, there are also some obstacles that can keep any borrower from getting access to capital, credit being one of the most common. Luckily, there are lenders such as Accion that are willing to work with people whose credit has fallen below the 600 mark.

Accion is a nonprofit organization specializing in lending to underserved communities and borrowers. Around 60% percent of its borrowers are based in minority communities. You can borrow up to $100 with Accion’s small business loans, contingent on your income-to-debt ratio. While the organization de-emphasizes credit, Accion does want to see that you’re not behind on any of your bills and that you don’t have any bankruptcies within the last 12 months. Startups will also have to produce a business plan and a partner referral. Be prepared to offer up a lot of information during the application process.

While Accion’s rates are good as subprime credit goes, they can potentially be a bit expensive, with APRs maxing out just shy of 17%. If your offer falls on the lower end of that scale, there shouldn’t be any issues, but applicants on the higher end may want to make sure they don’t have any better options.

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3. Community Development Financial Institutions (CDFIs): 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

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 rates.

CDFIs usually offer the full-service spectrum of 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.

Get Started With CDFI

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4. Union Bank: Best For West Coast Businesses Looking For High Borrowing Amounts

Union Bank


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Pros

  • High borrowing amounts
  • Multiple lending products available
  • Monthly repayments

Cons

  • Diversity lending program limited to the West Coast
  • Banking products have a lot of fees
  • Funds can take awhile to disburse

Union Bank is a part of the Tokyo-based Mitsubishi UFJ Financial Group, which operates in numerous countries around the world, including the United States. Within the US, Union Bank primarily operates in California, Georgia, Illinois, Oregon, Texas, and Washington, with the majority of its branches located on the West Coast.

You can apply for a fixed-rate loan, either unsecured or secured, with variable repayment terms. You’ll have seven years to repay if you get a UCC- or equipment-secured loan. If you get owner-occupied commercial real estate financing, you’ll have 25 years. Union Bank also provides a variable-rate line of credit, either unsecured or secured. The bank’s line of credit is subject to annual renewal.

While Union Bank’s services and rates are fairly typical for a big bank, the institution does have a well-developed diversity lending program. This program offers up to $2.5 million in funding for businesses owned at least 51% by Hispanic, American Indian, Asian and other groups defined by the Equal Employment Opportunity Commission and businesses owned by women and veterans. The program is available only on the West Coast — California, Oregon, and Washington.

In addition to the qualifications above, qualifying businesses need to have been in operation for at least two years, have annual sales of $20 million or less, and the owners must be American citizens.

 

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5. Kiva U.S.: Best For Businesses Looking To Raise Small Amounts Of Money At 0% Interest

Kiva U.S.


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Pros

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

Cons

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

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, Kiva can potentially get funds into your hands, interest-free.

Kiva lends based on metrics it calls “social underwriting,” which attempts to measure your overall character and standing within your community. Kiva is a form of crowdfunding, so you’ll likely have the most success if you’re a known quantity. Kiva has both a public and private funding period, during which individuals and entities can invest in your business. Funding amounts range from $25-$10,000.

Keep in mind that while Kiva uses crowdfunding to source your interest-free loan, it is still a loan that you have to pay back. Term lengths range from six to 36 months.

 

Get Started With Kiva U.S.

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6. Fundbox: Best For Lines Of Credit

Fundbox


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Pros

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

Cons

  • Rates can be expensive
  • Repayments are required frequently

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.

Focused on offering financial products for small businesses, Fundbox has several loan solutions.  Fundbox allows business owners to take out a credit line of up to $150,000. You’ll see a term length between 12 and 24 months, and borrowing fees start at 4.66%.

Fundbox doesn’t use the typical standards for lending. You don’t have to have been in business for a specific amount of time, and your credit score just needs to be over 600. If applying for Fundbox Credit, you’ll need to have been using compatible accounting or invoicing software for at least two months. If applying for Direct Draw, you’ll need to have a compatible bank account that’s been open for at least three months.

Get Started With Fundbox

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7. Lendio: Best For Businesses Short On Time

Lendio


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Pros

  • Lower borrower qualifications than banks do
  • 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

Another strategy for getting around lending gatekeepers is simple brute force — apply to a large number at once to find the ones willing to cut you a decent deal. One of the easiest ways to do this is to use a loan aggregator such as Lendio.

Lendio allows applicants to apply to its entire network of lenders with a single application. Available products include short-term loans, merchant cash advances, SBA loans, and more. Lendio won’t charge you directly for using its service (the company gets its cash from partner lenders). Other fees can vary depending on whom you get your loan from.

Lendio has three recommended eligibility requirements for business applicants: six months in business, a credit score of at least 550, and $10,000 per month in revenue. While these suggested qualifications aren’t hard and fast, you may want to look elsewhere if you don’t meet them.

Get Started With Lendio

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Why We Recommend These Lenders For Minority-Owned Businesses

While the causes are numerous and complicated, there’s no doubt that minority-owned businesses collectively face challenges beyond those of the average white-owned business.

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. In 2017, approximately 55% of white-owned businesses were profitable, compared to 51% of Asian-owned businesses and 46% or Black-owned businesses. Revenue growth of Black-owned businesses also lagged behind that of white-owned businesses, with 49% of the former reporting revenue growth compared to 58% of the latter. Data isn’t yet available on how the COVID-19 pandemic has affected small businesses, but it’s probably not a stretch to say that minority-owned businesses may be more vulnerable to disruption.

Low credit scores remain one of the bigger barriers to funding, with Black and Hispanic owners more likely to have to rely on personal funds to finance their businesses. Twenty percent of Black and 15% of Hispanic business owners have credit scores below 620 (often the cutoff rate for attaining financing from traditional lenders), compared to 9% of Asian and 7% of white business owners.

In terms of applications, business lenders denied 38% of Black applicants, 33% of Hispanic applicants, 24% of Asian applicants, and 20% of white applicants. Of successful applicants, 49% of white applicants received the full amount of financing asked for, compared to 39% of Asian, 35% of Hispanic, and 31% of Black applicants. Reported dissatisfaction with lenders was also higher for Black and Hispanic borrowers.

 

Organizations That Help Minority-Owned Businesses Get Financing

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

Programs such as New York’s Minority and Women Revolving Loan Trust Fund 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.

The 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 a number of perks, including preferential treatment for government contracts.

Other Resources For Minority-Owned Businesses

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 targeted specifically 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.

 

Minority Business Loan FAQs

Where can I get a minority business loan?

Our list above, while not exhaustive, is a great place to start. I’d also recommend looking into any organizations operating within your locality that are dedicated to helping minority-owned businesses. Failing that, try contacting your local chamber of commerce or state business development agency and asking what programs are available in your region.

Are there grants for minority-owned businesses?

Yes, and quite a few. Grants can be an excellent way to finance your businesses without accruing any debt, though they are highly competitive. Check out our guide to grants for minority-owned businesses.

Can minorities still get PPP loans?

No, the PPP loan program has ended and has not been renewed.

What is minority lending?

Minority lending refers to financing that is available either exclusively to minorities and other disadvantaged populations, or others preferential treatment for applications submitted by minority-owned businesses.

In Summary: The Best Minority Business Loans

  1. SBA Microloans:
    • Best for businesses and entrepreneurs with good credit.
    • Up to $5 million (SBA 7(a))
    • Minimum credit score 640+
  2. Accion:
    • Best for businesses with poor credit.
    • $5,000 - $100,000
    • No minimum credit score
  3. CDFI:
    • Best for businesses operating in economically distressed communities.
    • Loan amounts vary by institution
    • Qualifications vary by institution
  4. Union Bank:
    • Best for West Coast businesses looking for high borrowing amounts.
    • Up to $2.5 million
    • Must be 51% minority, woman, or veteran-owned
  5. Kiva U.S.:
    • Best for businesses looking to raise small amounts of money with zero interest.
    • $25 - $10,000
    • Applicants must not have any recent bankruptcies
  6. Fundbox:
    • Best for lines of credit.
    • $1,000 - $150,000
    • Minimum credit score 600+
  7. Lendio:
    • Best for businesses short on time.
    • $2,500 - $5 million
    • No minimum credit score
Chris Motola

Chris Motola

Expert Analyst & Reviewer at Merchant Maverick
An expert in personal and business loans and financial health, Chris Motola has been writing about small business finance and payments for over 5 years. He has been cited in various industry publications, including Forbes Advisor, GoBankingRates, and Medium. Chris is a graduate of the University of Central Florida.
Chris Motola
View Chris Motola's professional experience on LinkedIn.

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