9 Loans Your Minority-Owned Small Business Or Startup Can Get, Even With Bad Credit

SBA Microloan Features

The Small Business Association Microloan program (read our guide to its terms, rates, and eligibility) is designed for small businesses and startups to obtain smaller loans for business purposes. While this microloan program isn't explicitly targeted at minorities, it is intended to provide equitable access to business credit for all small business owners, including those struggling with credit.

• SBA-backed small business loans up to $50,000
• The average SBA Microloan size is about $13,000

SBA Microloan Rates & Fees

SBA Microloans generally sport interest rates between 8% and 13%, according to the SBA's Microloans page. These SBA-backed loans are offered by lending institutions and not the SBA itself, so the lender sets the exact terms, not the SBA.

SBA Microloan Eligibility Requirements

According to the SBA, while each intermediary lender has its own lending & credit requirements, these lenders generally require some type of collateral & a personal guarantee. As for credit, personal credit scores as low as 575 may be approved, though the SBA generally recommends a score of 640 or higher.

SBA Microloan Application Process

While the process of applying for an SBA Microloan will vary depending on the intermediary lender, you can expect the process to take from one to three months.

Qualifiers/Warnings

As you can see, the SBA Microloan program isn't a fast-funding option -- it will take a while before you see any money. Furthermore, in most cases, you'll need at least two years of business history, and you may need to put up collateral.

Where SBA Microloans Really Shine

Minority-owned businesses needing $50,000 or less will stand to benefit from the low interest rates and long repayment terms (up to six years) of an SBA Microloan. Though the application process is long, it's a good option to consider, particularly for those who have had trouble obtaining a bank loan.

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

CDFI Features

A CDFI is a not-for-profit institution that facilitates community growth by financing businesses and consumers in low-income or disadvantaged areas.

• For an institution to be designated as a CDFI, it needs to be certified by the CDFI Fund, an arm of the US Department of the Treasury
• According to CDFI.org, there are currently over 950 CDFIs certified by the CDFI Fund
• CDFIs operate on the local community level, not on the national level
• CDFIs include banks, credit unions, loan funds, and venture capitalists

CDFI Rates & Fees

Interest rates and origination fees for CDFI loans vary by institution. However, CDFIs typically offer lower rates than most sources and types of business financing. And while CDFI loans sometimes sport rates higher than those of non-CDFI bank loans, CDFI loans are easier to obtain than regular bank loans in most instances.

CDFI Eligibility Requirements

Because they are offered by hundreds of individual institutions, eligibility requirements for a CDFI loan will vary depending on the lender. However, as the CDFI program was created for the purpose of funding businesses in low-income and minority communities, eligibility requirements will be less stringent than those of typical lenders.

CDFI Application Process

The application process for a CDFI loan can take anywhere from a week to two months. As for what you'll need to provide, each CDFI lender has different requirements, but be prepared to provide the following:

• Bank statements
• Tax returns
• Legal documents
• Profit and loss statements
• Balance sheets
• Debt schedule
• A/R aging report
• Business plans

Qualifiers/Warnings

Though CDFI loans can be ideal for borrowers struggling to access business funding, the application process will often be longer than that of a typical loan. Additionally, the number of CDFIs serving your area will vary depending on your location, though the odds are that you'll be able to find a few that serve your community.

Where CDFIs Really Shine

CDFIs are particularly friendly towards women and minorities, having been established to support business activity in underserved communities. Additionally, these lenders usually charge lower rates and fewer fees than most sources of accessible funding. And with borrower requirements that are intended to be flexible, you may have more success qualifying for a CDFI loan than for a loan with a more traditional lender.

Lendio Features

Lendio is an online platform that matches businesses with loan providers in its financing network. To take advantage of this network, you'll share your details with Lendio, and the service will comb through its lender network to find the best fit for you. Here's what you can find through Lendio:

• Short-term loans
• Term loans
• Lines of credit
• Merchant cash advances
• SBA loans
• Equipment financing loans
• No fee from Lendio itself

Lendio Rates & Fees

• Short-term loans: Starts at 8%
• Business term loans: Starts at 6%
• Business lines of credit: 8%-24%
• Merchant cash advances: Starts at 18%
• Equipment financing loans: Starts at 7.5%
• SBA loans: Varies

Lendio Eligibility Requirements

Lendio no longer publishes eligibility requirements on its site. Until recently, Lendio had listed the following recommendations:

• 6 months in business
• A credit score of at least 550
• At least $10,000/month in revenue

Lendio Application Process

After you create a free Lendio account, you'll be asked to provide some basic information about yourself and your business. Lendio then works to match you to lenders whose products your business may be suited for -- a process that takes no longer than 72 hours. Once you accept a loan offer, you can get your funding in as little as 24 hours.

Qualifiers/Warnings

You may qualify for a number of loan products, but depending on your credit, the options you get may come with expensive rates.

Where Lendio Really Shines

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, so you're not placing yourself at the mercy of a single lender.

LoanBuilder Features

PayPal-owned LoanBuilder delivers short-term small business loans to qualifying companies. Its details include:

• Loans up to $500,000
• Term lengths between 13 and 52 weeks
• Fixed fee ranging from 2.9% to 18.72%

LoanBuilder Rates & Fees

With LoanBuilder loans, you'll pay a one-time fixed fee of 2.9%-18.72% of the borrowing amount. There is no origination fee.

LoanBuilder Eligibility Requirements

LoanBuilder's eligibility requirements are thus:

• 9+ months of business history
• $42K/year of business revenue
• 620+ personal credit score
• Some industries are ineligible (including attorneys, nonprofits, car dealers, and agents)

LoanBuilder Application Process

First, you fill out an online prequalification form with some basic personal & business information. You'll then be evaluated to see if you prequalify. If you do, you'll be able to set your borrowing amount & term length, after which you'll complete the full application, provide more business info, and undergo a hard credit check. The whole process is quick and not especially tough.

Qualifiers/Warnings

Business in a number of industries (not just those typically considered high-risk) are ineligible to receive LoanBuilder loans. What's more, there are no long-term financing options, and a UCC blanket lien is required.

Where LoanBuilder Really Shines

While not explicitly directed at minorities, LoanBuilder has lower borrower requirements than many lenders. You'll simply need to have been in business for at least nine months, maintain a credit score above 620, and make $42,000 in business revenue per year.

Fundbox Features

Focused on offering financial products for small businesses, Fundbox offers lines of credit.

• Lines of credit up to $150,000
• 12 & 24-week term lengths for lines of credit
• Make draws from the Fundbox app with a line of credit

Fundbox Rates & Fees

• Fundbox Line Of Credit: Starts at 4.66%

Fundbox Eligibility Requirements

• 6+ months of business history
• $100,000+/year in annual revenue
• 600+ personal credit score

Fundbox Application Process

Fundbox's automated application process can see you approved (or rejected) in just a matter of minutes. If you're approved, you may be able to receive your funds the next business day.

Qualifiers/Warnings

With Fundbox's lines of credit, weekly repayments are required. And while the other eligibility requirements are fairly lax, the $100K/year revenue requirement is pretty significant.

Where Fundbox Really Shines

While Fundbox isn't specifically designed for minority-owned businesses, it still makes for a great option if you are struggling with iffy credit. It's also one of the quickest possible ways to get funding if your application is approved by Fundbox's automated system.

Kabbage Features

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, the fees can be high, so Kabbage shouldn't be your first choice if you're looking for the lowest rates possible.

• Lines of credit up to $250,000
• Term lengths of 6, 12, and 18 months
• No draw fee

Kabbage Rates & Fees

You'll be paying 1.5%-10% of the borrowing amount each month in fees.

Kabbage Eligibility Requirements

• 12+ months of business history
• $3,000+/month in revenue ($36,000+ annually)
• 640+ personal credit score

Kabbage Application Process

Besides providing the usual personal & business information, Kabbage requires read-only access to your business bank account and any other data channels you use (Amazon, PayPal, QuickBooks, etc.). Kabbage uses this information to determine your monthly fee and maximum credit line. Approval or denial of your application may come within minutes. If approved, funding should come within three days.

Qualifiers/Warnings

Kabbage's fees can reach up to 10% of your monthly borrowing amount, which makes these loans among the most expensive you can get. However, repayments are made monthly, as opposed to other services that require daily/weekly repayments. A drawn-out repayment cycle like this may make the potentially high fees worth it.

Where Kabbage Really Shines

As with others on this list, Kabbage isn't marketed directly at minorities. However, it is still very friendly towards those with fair credit. Additionally, those with smaller businesses should note that the $3,000 monthly revenue requirement is lax relative to many competing lenders.

Accion Features

Accion is a nonprofit company focused on lending to businesses that may not qualify for other loan options. Offering small business loans for an array of purposes, Accion works with businesses of all shapes and sizes, including minority-owned businesses, startups, and low credit businesses. Accion's installment loans are tailored to the following groups:

• Minority-owned businesses
• Native American businesses
• Veteran-owned businesses
• Business loans for people with disabilities

Though Accoin's loans vary by location and business type, here are the most common terms:

• Borrow up to $100K
• 12, 24, 36, or 60-month terms

On Accion's website, the company states the following: "Our client base is over 90% women, people of color, and/or low-to-moderate income."

Accion Rates & Fees

Accion's loans usually sport an APR from 4%-16.99%. There may be an origination fee of 3%-5%. A personal guarantee and other collateral may be required.

Accion Eligibility Requirements

The eligibility requirements of an Accion loan vary by state, but here are the requirements you'll generally have to meet:

• 12+ months of business history
• $50,000+/year in business revenue
• Credit score requirements vary, but low scores (550-575) may be accepted
• Must be 18+ and own at least 20% of the business in question

Accion Application Process

Accion has a more involved loan application process than many online lenders. The initial online application takes about 15 minutes to fill out, but the subsequent step -- working with an Accion representative to put together the documents you'll need to submit -- will take longer.

Qualifiers/Warnings

Accion isn't offering loans in a few states (MT, ND, SD, TN, VT). In other states, there may be restrictions on the types of businesses that can apply and/or higher minimum borrowing amounts than the standard $5,000.

Where Accion Really Shines

Accion's mission -- providing loan opportunities to underserved communities, including minorities -- makes it a valuable resource to minority-owned businesses having difficulty securing financing from other sources. With relaxed borrower qualifications and helpful customer service, Accion is worth your consideration.

In addition to the above, Accion is currently offering loans through the SOAR Fund to the following businesses:

• Located in a southern state
• In operation since September 2019
• Experienced hardship due to COVID-19
• Employs 50 or fewer full-time employees

Accompany Capital Features

Accompany Capital, a CDFI based in New York City, offers a range of loan services focused on helping US immigrants and refugees in the New York City area gain self-sufficiency. Included among the center's services are:

• Microloans (up to $50,000)
• SBA-backed small business loans ($75,000 to $250,000)
• Credit-building loans (up to $2,000)

Accompany Capital Rates & Fees

Here are the rates & fees for Accompany Capital's SBA-backed small business loans:

• Interest rate: Prime + 3.25%
• Term: Up to 10 years
• Personal guarantees & collateral required
• $50 loan application fee
• A fee of 2% of the loan amount (up to $2,500) is payable upon submission of complete loan application

For microloans & credit-building loans:

• Fixed 8% interest rate
• Term: Up to 3 years
• Application fee for loans up to $3,000: $25
• Application fee for loans over $3,000: $50
• Closing fee: 1% of the loan amount

Accompany Capital Eligibility Requirements

Accompany Capital doesn't list any credit score or revenue requirements for its loans, but applying businesses do need to be located within the NYC area. Other requirements may apply.

Accompany Capital Application Process

Accompany Capital emphasizes the personal touch. After submitting a prequalification form online, a representative will work with you to discuss your loan options and the paperwork you'll need to submit. This means that the process will take longer than with many online lenders.

Qualifiers/Warnings

The biggest and most obvious drawback associated with Accompany Capital's loans is that they are only available to businesses in the NYC area. Of course, given the concentration of immigrants and refugees in NYC, this encompasses a lot of immigrant-owned businesses.

Where Accompany Capital Really Shines

Accompany Capital's accessible loans, lax eligibility requirements, and personal service make it an excellent option for immigrant & refugee-owned businesses in the NYC area.

Union Bank Features

Union 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.

Up to $2.5 million in funding is available to minority-owned small businesses. Unfortunately, Union Bank doesn't disclose a lot of other information about these loans.

Union Bank Rates & Fees

No information is given by the company about diversity loan interest rates. Union Bank offers the following information about these loans:

• Fixed-rate, unsecured, & secured term loans with repayment terms of up to 7 years for UCC- and equipment-secured loans & up to 25 years for owner-occupied commercial real estate financing
• Business lines of credit (variable-rate, unsecured, & secured) also available

Union Bank Eligibility Requirements

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 and must be at least 51% owned, operated, controlled, and actively managed by a US-based minority, woman, or veteran. Also, your annual sales cannot exceed $20 million.

Union Bank Application Process

Union Bank doesn't offer much information about its application process, but you'll need to contact one of the company's bankers to get the process started. Expect the process to take longer than that of many online lenders.

Qualifiers/Warnings

Since the company doesn't list any rate information for its diversity loans, make sure that the rate offered to you by a Union Bank representative fits your business model.

Where Union Bank Really Shines

Union Bank is one of the few institutions offering business loans specifically to minority-owned businesses on a national scale. We just wish the company offered further details concerning rates and the like.