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9 Ways To Finance Your Minority-Owned Small Business, Even If You Have Bad Credit

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As much as we may want to pretend otherwise, the business world is not an even playing field. No matter how good of an idea or business plan you have, there can still often be a complex mix of social and financial barriers to getting a loan. And, of course, having bad credit never makes getting a loan easy.

There are, however, ways to circumnavigate racial lending biases and disparities, sometimes even when your credit is shot. We’ll explore some strategies and options below. Note that not every loan service listed below is targeted directly at minorities; however, they all work well with those who have less-than-stellar credit.

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While these microloans aren't explicitly targeted at minorities, they still fit the other half of this article's headline well: those struggling with credit. Personal credit scores as low as 575 have occasionally been approved.

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A CDFI facilitates community growth by financially assisting businesses and consumers in low-income or disadvantaged areas. According to the CDFI Fund, over 400 CDFIs exist and have loaned more than $34 billion to businesses and consumers since 2003.

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Lendio is an online platform that matches businesses with loan providers. Don't expect Lendio to originate loans directly. It instead offers a network of over 75 business funders.

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While not explicitly directed at minorities, LoanBuilder has minimal borrower requirements. You'll simply need to have been in business for at least three months, maintain a credit score above 550, and make $42,000 in business revenue per year.

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In terms of borrower qualifications, Fundbox is relatively lax. The company doesn't require a specific age, nor does it recommend a minimum credit score.

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Other Featured Options:

  • Kabbage: Kabbage offers lines of credit to eligible businesses. The service is known for its convenience: Business owners can usually apply, know their rates and fees, and begin drawing funds, all within minutes.
  • Accion: Accion is a nonprofit company focused on delivering capital to businesses that may not qualify for other lending options. The company offers small business loans for an array of purposes. It works with businesses of all shapes and sizes.
  • Business Center for New Americans: The Business Center for New Americans, a CDFI based in New York City, offers a range of loan services focused on helping US immigrants and refugees gain self-sufficiency.
  • Union Bank: Union Bank, a part of the Japanese-run MUFG Bank, runs its Diversity Lending Program as a way to aid small business owners in underserved communities with capital.

Read more below to learn why we chose these options.

1. SBA Microloans

SBA Microloans



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The Small Business Association Microloan program is designed for small businesses and startups to obtain small loans of up to $50,000. It’s a great choice for businesses that don’t need much capital and simply want a low-interest loan with reasonable repayment terms. Home-based businesses and self-employed workers may especially benefit from this program.

On average, businesses sign up for loans between $13,000 and $14,000 through the Microloan program. Interest rates for SBA Microloans are generally very competitive; however, the lender sets the exact terms, not the SBA.

While these microloans aren’t explicitly targeted at minorities, they still fit the other half of this article’s headline well: those struggling with credit. Personal credit scores as low as 575 have occasionally been approved (although the SBA generally recommends a score of 640 or higher). Note that the SBA doesn’t set the exact credit requirements; instead, the actual lender sets the borrower qualifications.

If you need larger loan amounts, but still want to go through the SBA, there are several other options (including Community Advantage loans, which target underserved communities, such as minorities). However, the SBA’s other loan programs generally require a stronger credit background.

To learn all the ins and outs of SBA Microloans, check out Merchant Maverick’s deep dive on the topic.

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2. Community Development Financial Institutions (CDFIs)

CDFI



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A CDFI facilitates community growth by financially assisting businesses and consumers in low-income or disadvantaged areas. According to the CDFI Fund, over 400 CDFIs exist and have loaned more than $34 billion to businesses and consumers since 2003.

Because CDFIs focus on local community growth, most don’t operate on a national level. That means you’ll need to find a potential lender that operates in your local area. CDFIs come in all shapes and sizes; you’ll often find them in the form of nonprofit organizations operating as banks, credit unions, loan funds, and venture capitalists.

For an institution to be designated as a CDFI, they need to be certified by the CDFI Fund, an arm of the US Department of the Treasury. This fund also operates several financial programs and provides assistance to certified CDFIs.

It’s worth noting that CDFIs are especially friendly towards women and minorities. Additionally, these lenders usually charge lower rates and fewer fees. Because of generally more flexible borrower requirements, you may also have better success qualifying for a loan with a CDFI than you might with a more traditional institution.

For more details about applying for a CDFI loan, check out our in-depth article.

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3. Lendio

Lendio



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Lendio is an online platform that matches businesses with loan providers. Don’t expect Lendio to originate loans directly. It instead offers a network of over 75 business funders designed to be a one-stop financing shop. To take advantage of this network, you’ll share your details with Lendio, and the service will comb through its collections of lenders to find the best fit for you.

With Lendio, you can find short-term loans, merchant cash advances, SBA loans, and more. Lendio won’t charge you a fee 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.

Like many options on this list, Lendio isn’t aimed at minority business owners. However, it’s still an excellent place to hunt for funding because it does the matchmaking for you.

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4. LoanBuilder

LoanBuilder



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Bundled into the PayPal fold in 2017, LoanBuilder delivers short-term small business loans to qualifying companies. Its unique qualities include relatively inexpensive loans, no origination fee, and low borrower requirements. You may also see LoanBuilder marketed as PayPal Business Loans.

With LoanBuilder, you’ll be able to receive loans up to $500,000. Term lengths last between 13 and 52 weeks, and borrowing fees cost a one-time fee of 2.9% to 18.72% of the borrowing amount. This fee is repaid along with the money borrowed.

While not explicitly directed at minorities, LoanBuilder has minimal borrower requirements. You’ll simply need to have been in business for at least three months, maintain a credit score above 550, and make $42,000 in business revenue per year.

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5. Fundbox

Fundbox



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Focused on offering financial products for small businesses, Fundbox has several loan solutions. The company’s product line includes invoice financing (called Fundbox Credit), a line of credit (called Direct Draw), and its B2B payment service (called Fundbox Pay).

Fundbox allows business owners to take out a credit line up to $100,000. You’ll see a term length between 12 and 24 months, and borrowing fees start at 4.66%.

In terms of borrower qualifications, Fundbox is relatively lax. The company doesn’t require a specific age, nor does it recommend a minimum credit score (although you might get a soft pull on your credit during the application process). 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.

That means that while Fundbox isn’t specifically designed for minority-owned businesses, it still makes for a great option if you are struggling with poor credit.

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6. Kabbage

Kabbage



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Kabbage offers lines of credit to eligible businesses. The service is known for its convenience: Business owners can usually apply, know their rates and fees, and begin drawing funds, all within minutes.

However, that convenience comes at a cost. Kabbage’s fees can reach up to 10% of your monthly borrowing amount, which makes these loans among the most expensive you can get. As such, you may want to look elsewhere if you can’t afford Kabbage’s lofty fees.

All told, Kabbage dishes out loans up to $250,000. Draw term lengths range from six to 18 months, and borrowing fees range from 1.5% to 10% monthly. Repayments are made monthly, as opposed to other services that might require daily or weekly repayments. A drawn-out repayment cycle like this may make the potentially high fees worth it.

As with others on this list, Kabbage isn’t marketed directly at minorities. However, it is still very friendly towards those with a poor credit score, as the service doesn’t require a specific score when applying. Note that you will still need to have been in business for one year and do at least $50,000 in annual revenue.

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7. Accion

Accion



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Dating back to 1961, Accion is a nonprofit company focused on delivering capital to businesses that may not qualify for other lending options. The company offers small business loans for an array of purposes. It works with businesses of all shapes and sizes, including startups, minority-owned businesses, and low credit businesses.

You’ll be able to get installment loans through Accion. Available business purposes for these loans vary and include veteran-owned business loans, Native American business loans, minority-owned business loans, and business loans for people with disabilities.

Most of Accion’s loans require a credit score of only 575, and some applicants may see success with a score that dips as low as 550. Accion also doesn’t have a time-in-business requirement, nor a strict revenue one, although you will need enough cash flow to repay the loan.

Accion’s fees vary depending on your business’s type and location. In general, you can expect an APR between 7% and 34% alongside an origination fee of 3% to 5%. The company is open to handing out loans of all sizes, from $300 to $1 million. Loans are repaid in regular installments, although the exact term length will vary from one loan to another.

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8. Business Center For New Americans

Business Center for New Americans



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The Business Center for New Americans, a CDFI based in New York City, offers a range of loan services focused on helping US immigrants and refugees gain self-sufficiency. Included among the center’s services are microloans, business lines of credit, and credit-building loans. The BCNA also offers SBA-backed loans to businesses located in the New York City area.

For microloans, the BCNA does not require a minimum credit score (although you must match 20% of the loan amount with equity, have sufficient cash flow, and not have a pattern of non-repayment of other debts). If you go this route, you might be eligible for a loan between $500 and $50,000 with up to three years to repay.

For a business line of credit, you could receive a credit line ranging from $10,000 to $50,000. BCNA only charges you interest (at a fixed rate of 10%) on the amount you withdraw each month.

For credit-building loans, the BCNA provides a “credit enhancement loan” of $500 to $2,000 alongside a free one-on-one consultation and access to free credit enhancement workshops. These loans have an 8.25% interest rate and six to 12 months to repay.

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9. Union Bank

Union Bank



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Union Bank, a part of the Japanese-run MUFG Bank, runs its Diversity Lending Program as a way to aid small business owners in underserved communities with capital. According to Union Bank’s definition, underserved communities include women, minorities, and veterans.

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

Small businesses interested in applying for one of Union Bank’s diversity loans will need to have been in operation for two or more years; be at least 51% owned, operated, controlled, and actively managed by a US-based minority, woman, or veteran; and have annual sales that do not exceed $20 million.

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Final Thoughts

As significant as the challenges facing minority business owners can be, remember that there are many sympathetic agencies, organizations, and even lenders that exist to help correct lending disparities. Do your research before taking any loan offer, and be sure to check out our more general resources on how to get your business off the ground when you have bad credit as well.

A Last Look At Our Top Picks

  1. SBA Microloans
    Summary - While these microloans aren't explicitly targeted at minorities, they still fit the other half of this article's headline well: those struggling with credit. Personal credit scores as low as 575 have occasionally been approved.
  2. CDFI
    Summary - A CDFI facilitates community growth by financially assisting businesses and consumers in low-income or disadvantaged areas. According to the CDFI Fund, over 400 CDFIs exist and have loaned more than $34 billion to businesses and consumers since 2003.
  3. Lendio
    Summary - Lendio is an online platform that matches businesses with loan providers. Don't expect Lendio to originate loans directly. It instead offers a network of over 75 business funders.
  4. LoanBuilder
    Summary - While not explicitly directed at minorities, LoanBuilder has minimal borrower requirements. You'll simply need to have been in business for at least three months, maintain a credit score above 550, and make $42,000 in business revenue per year.
  5. Fundbox
    Summary - In terms of borrower qualifications, Fundbox is relatively lax. The company doesn't require a specific age, nor does it recommend a minimum credit score.
  6. Kabbage
    Summary - Kabbage offers lines of credit to eligible businesses. The service is known for its convenience: Business owners can usually apply, know their rates and fees, and begin drawing funds, all within minutes.
  7. Accion
    Summary - Accion is a nonprofit company focused on delivering capital to businesses that may not qualify for other lending options. The company offers small business loans for an array of purposes. It works with businesses of all shapes and sizes.
  8. Business Center for New Americans
    Summary - The Business Center for New Americans, a CDFI based in New York City, offers a range of loan services focused on helping US immigrants and refugees gain self-sufficiency.
  9. Union Bank
    Summary - Union Bank, a part of the Japanese-run MUFG Bank, runs its Diversity Lending Program as a way to aid small business owners in underserved communities with capital.
Chris Motola

Chris Motola

Finance Writer at Merchant Maverick
Chris Motola is a writer, programmer, game designer, and product of NY. These days he's mostly writing about financial products, but in a past life he wrote about health care and business. He's a graduate of the University of Central Florida.
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2 Comments

Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Lelan Anderson

    Great and pleasing information!

    I did not see any mention, though, for inventors pursuing a USA Patent at the US PATENT & TRADEMARK OFFICE.

    Young, Poor, Black Inventors work hard, generating low wages, then get older and rely on low fixed-income. This group has massive ideas to “make things better” to reduce their exertion of labor, sweat and fatique. Formerly, Blacks were universally singled out of the Patent Application process by law, and their slave owners and later employers took these peoples’ ideas, creativity and capital gains ideas through the Patent Office creating trillion-dollar corporations of modern times, making the Privileged Class of people, the descendants, alive today, wealthy on the day they were born.

    Question: Are there any institutions addressing loans/gifts to Black People who have “intellectual property” worthy of protecting, and the repayment term is a royalty percentage from profits earned?

      Chris Motola

      That’s a good question. I don’t know of any group with that exact mission off the top of my head, but The Minority Business Development Agency does organize angel investors with funding minority businesses in mind. The exact repayment terms would probably vary depending on the specific investor/program you’re working with. For patent enforcement, you’re probably looking at The Office Intellectual Property Rights. They do a number of “roadshows” around the country each year that dive into the weeds of intellectual property law. It’s not specifically tailored toward any group, but it would probably be the place to point you in the direction of any orgs working specifically to boost and protect Black intellectual property.

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