Business Loans For Minorities

While there are few loans specific to minority businesses, there is much technical assistance available to help find capital.
While there are few loans specific to minority businesses, there is much technical assistance available to help find capital.

Business Loans For Minorities

Business loans for minorities are available but a person does have to seek them out. Allow me to begin by telling you where not to look for business loans for minorities.

The federal government, most state and local governments do not have business loans for minorities. That is the government must be open to all people with their programs and limiting loan dollars for just minorities is illegal. Minority owned businesses may apply for standard business loans like the SBA 7(a) loan, but there are no specific loans for minority businesses. There is, however, technical assistance for minority businesses that can help in the preparation of a business plan and other loans documentation, but the loan itself is not for minorities specifically.

There is one exception for Native Americans, the Bureau of Indian Affairs business loan that is designed to help Native American owned businesses on or near tribal reservations.

Where one could find the most assistance is with local or regional economic development organizations. Often these groups have business loans for minorities and special consideration to make them happen. Special assistance can be no collateralization or creative collateral, acceptance of sub-par credit, and lessened paperwork requirements. The trade-off is often these loans belong in the microloan category, loans under $35,000.

Business loans for minorities outside of the microloan category are hard to find. The economic development organizations are able to develop a loan fund and are willing to risk a certain amount. Outside of that comfort zone, they typically have agreements with standard lenders. The economic development organization will help with technical assistance and possibly have loan products from the lender designed for minority businesses. Although, the requirements for these business loans for minorities will more closely resemble standard loans.

Therefore, a minority business should consider their financial needs, and determine if the need is under or more than $35,000. Above $35,000 then standard rules apply- full business plan with pro forma, superb credit, and full collateralization.

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