Business Loans For Minority Business Owners: How To Get One
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Women and minority-owned businesses are vital to our economy. In the past decade alone, these businesses made a huge impact on our nation's economy and touched the lives of many more than ever before. However, women and minority-owned businesses struggle receiving business loans. How is this possible?
According to a study by The Business Journals, the number of minority-owned businesses surpassed the 10 million mark in 2017. These establishments employ more than 6 million Americans and generate over $1.8 trillion in revenue annually.
But despite this tremendous growth, these businesses face a major hurdle-access to loans. The National Association of Women Business Owners (NAWBO) reports that women and minority-owned businesses are less likely to get funding. And when they do, they get low amounts with high-interest rates. But all is not lost.
A growing number of governments, organizations, and private entities are offering programs aimed at providing loans for minority business owners. So if you're looking for them, here are some of the best options to consider.
5 Best Loans For Minority-Owned Businesses
1. SBA Loans
The U.S. Small Business Administration (SBA) is a federal agency created to help small businesses grow. They guarantee loans offered by several lenders to meet the needs of small businesses. Some of these loans include:
SBA 7(a) Loans
2. Nonprofit Loans
3. Union Bank Diversity Lending Program
4. Business Center For New Americans (BCNA)
The BCNA helps minority entrepreneurs particularly refugees, women, and immigrants who have been turned down from conventional financing options. They provide low and fix-interest loans for minority-owned businesses that must be repaid between 6 and 3 years.
5. U.S Department of Agriculture Business Loans (USDA)
USDA targets minority-owned businesses located in rural areas or a town with less than 50,000 residents. The Department of Agriculture guarantees loans of up to $25 million that can be used for various businesses, such as working capital, debt refinancing, real estate, and expansion. Other business loans and programs to consider include:
● SBA 8(a) Business Development Programs
How To Get Business Loans
For Minority Business Owners Knowing what loans to apply for is just a part of the puzzle. Getting your application approved can be an uphill task if you don't have all your ducks in a row.
And to increase your chances of success, here are five tips to follow:
Start The Process Early
You can't walk into a financial institution, fill out an application, and leave with the funds. The approval process usually takes several weeks to unfold. As such, it's wise to start the process as soon as possible. Don't wait until you need the money.
Work On Your Credit History
Most lenders will look at your creditworthiness when determining your risk level. If this part of the process gives you sleepless nights, find ways to improve your credit score. Credit ratings are usually made up of the following indicators: Credit inquiries (10%), credit age (15%), credit utilization (30%), payment history (35%), and account mix (10%). Evidently, credit utilization and payment history have a huge impact on your rating. So be sure to use less credit and pay your bills on time to boost your score.
Have A Clear Plan For The Money
Lenders want to know how you will use the money. If you give vague or general responses, you increase your chances of getting denied.
Although businesses are different, most loans are used for inventory purchases, capital investments, business expansion, and administrative expenses. Lending institutions will be looking at these when determining the feasibility of your application.
When looking for small business loans, organizational skills play a vital role. If lenders ask for information, you must be able to provide it on time. Failure to do so might show you're unprepared and high-risk. The surest way to over-prepare is by going through the information requested by the lender.
Have A Support Network
Apart from looking for a specific plan, lenders today want to know that you're not a lone ranger. They like to see that you're working and communicating with experts in your field. This shows you fully understand the situation. It can be difficult securing business loans for minority business owners.
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