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Minority Small Business Loan
Minority Small Business Loan
A minority business enterprise (MBE) has a number of options available to them when seeking financing. Finding a minority small business loan is not difficult if a business has options in conventional financing. The further one gets away from conventional financing the more difficult business loans for minorities get. The reason is that loan programs still are based on conventional means. Also, organizations that may help a minority business get farther apart, meaning minority-centric lending may not be available.
All MBE's should consider pursuing conventional commercial financing. There is little benefit to being a big fish in a small pond if a small business has other options. A small business could avail itself to new networking opportunities as it grows its lenders. Knowing a banker could possibly give a business access to the banker's contacts, new introductions to what could be significant contacts.
Getting help for a loan package is usually readily available. Specific minority help can be found in local minority business assistance centers. Sometimes minority chambers of commerce will have a business center. And the Minority Business Development Agency (MBDA), a US Department of Commerce agency, has a number of small business development centers throughout the nation with the specific task of finding funding for minority businesses. The centers will counsel and help develop a local package.
One of the better advantages of the business resource centers is their financial contacts. The centers will have long relationships with lenders. They will also know which lenders are best suited for your needs. If a business needs start-up capital the small business centers will know which lenders are most open to start-ups. They will also have contacts for special needs like contract financing, factoring, or construction bonding.
A little known fact is that banks are also required to do a certain amount of lending to the community. Meaning that certain requirements may be more lax to help fill those lending quotas and that will be seeking to offer minority small business loans. A small business center will know which banks are taking their community requirements seriously and have the contacts to make it happen.
Minority Based Loans
Certain community organizations do have minority small business loans. Just like banks with their community lending but open to minorities and women owned business. They also have less stringent lending requirements. Being community based they know who they serve and also know they are lending to those who may not be able to get conventional financing.
Therefore, they may or may not collateralize the loan. They also can be creative in how they collateralize. Some may offer a certain portion of debt forgiveness after a percentage of timely repayments. Others can be creative on the payment terms with a sliding scale of repayment, the front-end lighter than the backend or they could have balloon payments scheduled in.
The downside is that these type of lenders are small in number. Being community based they only serve their communities and may not be available in all communities. Being that these organization are a labor of love keeps them from growing in number or scale. Also, they can only lend small amounts. Micro-loans may be good for some businesses but as they fill a niche, they are best suited to lending under $50,000. Typically, above that amount they have arrangements with commercial lenders and may help out with a loan guarantee type program.
Real Life Examples
An example of a community based lending organization is Accion in Albuquerque, NM. Though their loans are not strictly minority small business loans, their clientele does often (mostly?) falls into the minority owned category. Accion is unique in many facets, but one of my favorites is that their micro-lending starts at $200 and they take anything of value to collateralize a loan. They keep a secured area to secure personal property. Then after the initial loan has established a repayment history and been repaid, a business can get another loan possibly unsecured having established a credit history.
Another example is the Citizen Potawatomi tribe in Shawnee, Oklahoma. Utilizing their success in gaming they are looking to expand the number of Native entrepreneurs. This minority small business loan is from the Citizen Potawatomi Community Development Corporation. The group works with lenders to provide loans to Native American entrepreneurs. This organization is award winning and has loans in a multi-state area. They are also a member of the Opportunity Finance Network, a network of community lenders.
Regardless of what manner or amount of financing desired, the first stop for a minority small business loan should be the nearest business development center.
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