All the latest data on new business indicate that minority-owned businesses are growing at a faster pace than overall U.S. businesses. According to the U.S. Census Bureau, Minority entrepreneurs owned 8 million, or 29%, of the nation’s nearly 27.6 million businesses as of 2012, up from 5.8 million in 2007. But even with all this good news, it can still be a challenge for a minority owned business to get loan.
According to the federal Minority Business Development Agency, minorities may have a hard time securing loans for several reasons. Minority entrepreneurs may have lower credit scores and fewer assets to secure loans than other business owners. The average credit score of a minority small-business owner is 707, which is 15 points lower than the average of all small-business owners in the U.S., according to a 2016 study by credit bureau Experian.
But there are financing opportunities that minorities can take advantage of. There are also grants and awards that are available. The Small Business Administration has a variety of programs designed specially to help minority owned businesses.
If you need $250,000 or less for your business there’s the SBA Community Advantage loan program. The program helps fund loans for businesses that are located in underserved communities.
There are also SBA micro loans of up to $50,000 through nonprofit organizations. Interest rates range from 8% to 13%, and there’s a maximum repayment term of six years, according to the SBA.
Small business loans from banks are still the best deal with the lowest interest for those who meet the qualifications. But there are still alternative funding sources for those who lack the credit needed for a traditional bank loan.
For those with a 500+ credit score there are finance companies that will give you a chance, but the interest rates may be high.
There are loan programs for every situation. The good news is that most of these programs are available on line.