The Small Business Administration (SBA), community lenders and other nonprofits are a great place to look for minority business loan programs. These programs can be particularly helpful if you’ve struggled to find affordable financing at a bank — or just want a loan that’s tailored to members of your community.
Because minority isn’t a well-defined term, it doesn’t necessarily include the same marginalized groups across all programs. Carefully read the eligibility requirements for the loan or program before applying. And because some programs require it, look into certifying your business as a minority business enterprise (MBE) with your state or local government.
A minority business loan is a type of business financing designed for companies that are majority-owned by members of a historically marginalized community. This most often includes business owners who are Black, Indigenous or people of color. It can sometimes include members of other groups, like members of the LGBTQI community. In a few cases, it also includes women.
Minority business loans exist because minority-owned businesses are financially underserved compared to their white counterparts. For example, a 2021 Federal Reserve report on BIPOC businesses found that only 13% of Black-owned businesses were approved for all of the financing they applied for in 2020, compared to 40% of white-owned businesses. And only 43% of Black-owned businesses received the full amount of Paycheck Protection Program (PPP) funding they applied for, compared to 79% of white-owned firms.
While it’s illegal for lenders to reject applicants on the basis of race alone, the factors they traditionally consider tend to favor white-owned businesses. This is especially true when it comes to credit scores, which disproportionately favor white Americans as a group.
To qualify for a minority business loan, your company must be at least 51% owned and controlled by a member or members of an eligible marginalized community. Some programs might require you to become a certified Minority Business Enterprise first — though not all do.You and your business must also meet other requirements. For your standard business loan, your company typically must be in business for at least three years, have an annual revenue of around $100,000 and you must have a good personal credit score of at least 670.
But this type of criteria is one of the reasons BIPOC-owned businesses struggle to access financing in the first place. Therefore, minority business loan programs often offer options for startups, companies that have low revenue and business owners with poor credit.
Who qualifies as a minority?
Who qualifies as a “minority” can vary by program. But the SBA’s definition of “socially disadvantaged individuals” is one of the most common criteria you’ll see. It uses the following terms to define who is automatically included in this group:
- Black Americans
- Hispanic Americans
- Native Americans
- Asian Pacific Americans
- Subcontinent Asian Americans
Anyone else who has “been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as a member of groups without regard to their individual qualities” can also make the case that they’re a socially disadvantaged individual.
Other programs may be more specific about who can qualify, however. Make sure you meet the lender’s criteria before you apply.
Have a minority-owned business? You might want to consider the following types of loan programs and lenders.
SBA Community Advantage loan program
SBA Community Advantage loans, or CA loans, offer government-backed business loans up to $350,000 with businesses in underserved communities in mind. CA lenders typically have lower credit, revenue and time in business requirements compared to other SBA programs. And they often only serve their local community.
CA loans aren’t exclusively available to minority-owned businesses. But they’re designed to make it easier to overcome hurdles that minority business owners have faced due to discrimination. And many CA lenders specialize in serving BIPOC communities.
Accompany Capital microloans
Formerly the Business Center for New Americans (BCNA), Accompany Capital is a good example of a local SBA CA lender nonprofit lender. It specializes in serving immigrant communities in New York City, with representatives speak languages that include Hindi, Kannada and Spanish. You can find microloans if you're just starting out, or SBA CA loans if your business needs funding to grow. CA loans range from $75,000 to $350,000 with interest rates set at the
Wall Street Journal Prime Rate plus 3% and a term as long as 10 years.
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Pros
- Rates fixed at 3% for microloans
- No minimum credit score
- No fixed revenue requirements
Cons
- Borrowers must be 21 years old
- Might require a guarantor
- Only available in New York City
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| Loan amount | $500 – $50,000 |
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| APR | 3% |
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| Min. Credit Score | 350 |
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| Loan term | 6 to 36 months |
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| Loan amount | $500 – $50,000 |
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| APR | 3% |
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| Min. Credit Score | 350 |
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SBA microloans
The SBA microloan program offers up to $50,000 through nonprofit intermediary organizations that offer loan, as well as management and technical assistance. These may be easier to qualify for than other types of SBA loans — though harder than your typical microloan. And they may have higher interest rates than other SBA loans, depending on the intermediary.
These can be a good alternative to SBA CA loans if your business doesn’t need much financing, and may be available to startups. But the SBA CA loans aren’t exclusively available to minority-owned businesses.
SBA 7(a) loans
The SBA 7(a) program gives established small businesses low-cost funding if they’ve struggled getting a bank loan in the past, thanks to government backing. You can borrow as much as $5 million through this program, which comes with federally-mandated caps on interest rates and fees.
It’s harder to qualify for than a CA loan or SBA microloan — and requires more paperwork than your average lender. For example, many lenders require a 620 credit score or higher. But it can be a good next step after receiving a loan through one of these SBA loan programs.
The SBA has a wide variety of loan options for minority-owned businesses, and Smartbiz can connect you to a lender that will guide you through the process. It takes only a few minutes to fill out its form, and it could cut the processing time down from a few months to a few weeks. But you'll still need to pay referral and packaging fees to Smartbiz for connecting you to a lender.
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Pros
- Reduces turnaround time by weeks
- SBA and non-SBA options available
- Simple form to start
Cons
- SBA referral and packaging fees
- Must borrow at least $30,000
- Requires 650 credit score
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| Loan amount | $30,000 – $500,000 |
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| APR | Prime Rate, plus 2.75% to 3.75% |
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| Min. Credit Score | 650 |
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| Loan term | 10 years |
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| Requirements | 650+ credit score, 2+ years in business, $50,000+ in annual revenue, no bankruptcies or foreclosures in past 3 years |
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| Loan amount | $30,000 – $500,000 |
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| APR | Prime Rate, plus 2.75% to 3.75% |
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| Min. Credit Score | 650 |
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Microloans
Microloans are small-dollar business loans, usually from local nonprofits. You can usually borrow up to around $50,000 with bad credit and little or no time in business. While rates are often higher than your average business loan, they’re cheaper than other bad-credit alternatives, like merchant cash advances or factoring.
Microlenders also typically offer advice, technical assistance and training to small business owners, sometimes as a requirement for receiving a loan. And many have a mission to serve BIPOC communities — though they aren’t explicitly business loans for minorities.
Kiva is a nonprofit with the aim of helping entrepreneurs in underserved communities — though your business doesn't need to be minority-owned to qualify. Kiva offers 0% APR microloans that are partially crowdfunded. There are no credit or revenue requirements, but your business won't qualify for funding if you can't raise donations from between five and 35 individuals first.
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Pros
- No interest or fees
- No minimum credit score or residency requirement
- Loans start at $25
Cons
- Requires strong social network
- Loans capped at $15,000
- Can take 45 days to receive funds
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| Loan amount | $1,000 – $10,000 |
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| APR | 0% |
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| Loan term | 6 months to 3 years |
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| Requirements | Have at least ten friends and family members willing to contribute to your loan, live in the US, ages 18+, not in bankruptcy or foreclosure, not under any liens, not engaged in: multi-level marketing, direct sales, pure financial investing or illegal activities |
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| Loan amount | $1,000 – $10,000 |
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| APR | 0% |
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Camino Financial small business loans and microloans
Camino Financial is a nationwide CDFI that specializes in the needs of the Latinx business community, with services in Spanish and English. It offers microloans from $5,000 to $75,000 and small business loans starting at $10,000. And it's one of the few microlenders — or CDFIs — that can provide funding within two days. But while interest rates for business loans are relatively low for a bad credit lender, microloan rates start at a high 25.5% APR. This, combined with terms as long as three years, can make for a high loan total cost.
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Pros
- Services in Spanish
- Online application
- Two-day turnaround
Cons
- High starting APR for microloans
- Long terms can lead to high total cost
- No funding to start a business
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| Loan amount | $5,000 – $400,000 |
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| APR | 18.75% to 24.75% |
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| Min. Credit Score | 550 |
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| Loan term | 24 to 60 months |
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| Requirements | $2,500+ in monthly revenue or $30,000+ in annual revenue, 9+ months in business, current on all debts, 550+ credit score |
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| Loan amount | $5,000 – $400,000 |
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| APR | 18.75% to 24.75% |
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| Min. Credit Score | 550 |
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Read review
CDFIs
Community development financial institutions, or CDFIs, are nonprofits certified by the US Treasury Department with a mission to offer affordable products and services to traditionally under-banked communities. CDFIs often have access to funds from federal programs that are reserved for minority-owned businesses — including USDA and SBA loans. These tend to be hyper local, so you’ll need to find one in your area.
Grameen America business loans
This CDFI and microlender specializes in financing minority women who own businesses — or have plans to start one — and live below the poverty line. In addition to offering loans, this nonprofit offers training to its borrowers and reports repayments to Equifax and Experian to build your credit. But it's only available in 15 cities in 10 states, has a long turnaround and is better suited as a tool to build a business than fund a one-off expense.
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Pros
- Offers money to start a business
- Offers training and credit-building programs
- No fees
Cons
- No online application
- Only available in 15 states
- First-time loan capped at $15,000
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| Loan amount | $2,000 – $15,000 |
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| APR | 15% to 18% |
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| Requirements | Entrepreneur or business owner, live below the poverty line, live near a branch |
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| Loan amount | $2,000 – $15,000 |
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| APR | 15% to 18% |
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Accion Opportunity Fund business loans
Accion Opportunity Fund offers a combination of funding and training to its borrowers, but it's focused on a broader group of entrepreneurs than Grameen America. Even so, Accion claimed that more than 60% of its borrowers come from minority communities before its merger with Opportunity Fund. Its revenue requirements are lower than your average term loan provider and it works with bad credit borrowers. But both Accion and Opportunity Fund receive mixed reviews when it comes to the quality of customer service.
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Pros
- Low rates for a microloan
- Accepts bad credit
- No prepayment penalties
Cons
- High fees
- Slow turnaround
- Poor reputation for customer service
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| Loan amount | $5,000 – $250,000 |
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| APR | 8.49% to 24.99% |
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| Min. Credit Score | 570 |
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| Loan term | 12 to 60 months |
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| Requirements | 12+ months in business, $50,000+ in annual revenue, must own 20% of the business, must be based in the US |
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| Loan amount | $5,000 – $250,000 |
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| APR | 8.49% to 24.99% |
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| Min. Credit Score | 570 |
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MDIs
Minority depository institutions are federally-insured banks and savings associations that are at least 51% owned by BIPOC shareholders and serve areas with a majority BIPOC population. Like CDFIs, these institutions frequently offer low-cost financing with fewer requirements than your typical bank. And they are a great place to access federal loan programs earmarked for minority-owned businesses.
You can find an MDI near you on the Federal Depository Insurance Corporation (FDIC) website.
Online lenders
Online lenders offer small business loans using an algorithm to determine your eligibility and loan terms. Many have low time in business, revenue and credit score requirements compared to a bank. Instead, they rely on alternative data, such as shipping records and daily deposits.
Online lenders often claim they can avoid human biases in banking by using an algorithm to underwrite a loan. And they’re partly right. Online lenders discriminate against BIPOC borrowers around 40% less than face-to-face lenders, according to a 2019 University of California Berkeley study.
But these lenders also tend to charge more in interest and fees than any other lender. They also face fewer regulations than banks and have lower customer satisfaction among business owners, according to a 2021 Federal Reserve report.
FundBox is an online lender that offers short-term loans and lines of credit to small business owners. Rather than requiring paperwork, it connects with your business's accounting software to take a holistic look at its finances and fund your loan as soon as the next day. You can qualify with fair credit and as little as six months in business. But it charges a weekly financing fee. Starting at 4.66% per week, FundBox can be expensive.
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Pros
- No paperwork
- Fair credit OK
- No draw fees on credit line
Cons
- Weekly payments
- Long terms have higher rates
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| Loan amount | $1,000 – $150,000 |
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| APR | 4.66% for 12-week terms and 8.99% for 24-week terms |
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| Min. Credit Score | 600 |
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| Loan term | 12 or 24 weeks |
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| Requirements | $30,000+ in annual revenue, 3+ months in business, 600+ FICO credit score, business checking account |
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| Loan amount | $1,000 – $150,000 |
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| APR | 4.66% for 12-week terms and 8.99% for 24-week terms |
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| Min. Credit Score | 600 |
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Read review
National Funding business loans
National Funding is an online lender that offers short-term working capital loans and long-term equipment financing. It has a higher minimum credit score on equipment loans but can connect your business with another lender if your business doesn't make the cut. It also works with industries that banks consider to be high risk. But it's not transparent about costs on its website and short-term loans can come with inflexible daily payments.
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Pros
- Competitive interest rates
- Easier credit requirements for short-term loans
- Funding as soon as next business day
Cons
- Daily payments on working capital
- Might not fund your loan
- Doesn't disclose costs online
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| Loan amount | $5,000 – $500,000 |
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| APR | Starting at 6.25% |
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| Min. Credit Score | 600 |
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| Loan term | 24 to 60 months |
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| Requirements | In business 6+ months and make at least $250,000 in annual sales. Other loan types have additional requirements. |
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| Loan amount | $5,000 – $500,000 |
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| APR | Starting at 6.25% |
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| Min. Credit Score | 600 |
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State and local government programs
Several states and local governments also offer loan programs specifically for minority business owners. These often come with reduced rates and flexible requirements — and may work with startups or bad credit borrowers. You can find out what’s available in your area by reaching out to a local business center or your local government’s business department.
Community banks
While it’s not common, some banks have lending programs specifically for minority-owned businesses with lower rates than you might find elsewhere — aside from a government program — and requirements that might overlook poor credit or limited experience. These are usually available in small banks that serve a specific community. Ask around your area’s community banks to find out if there’s a program that’s right for your business.
Union Bank business term loans
Union Bank is among the only banks with a dedicated small business loan program for minority-, women- or veteran-owned businesses. It offers business loans in California, Oregon and Washington. To qualify as a minority-owned business by Union Bank's standards, it must be at least 51% owned by a minority as defined by the Equal Employment Opportunity Commission. Your annual sales also can't top $20 million.
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Pros
- One of the few bank loans exclusively for MBEs
- No minimum credit score
- Funding of up to $2.5 million
Cons
- Only available in California, Oregon and Washington
- No online application
- Can take up to seven business days
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| Loan amount | Up to $2.5 million |
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| APR | Not stated |
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| Loan term | 12 to 84 months |
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| Loan amount | Up to $2.5 million |
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| APR | Not stated |
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Farm credit services
Farm credit services are co-op lending institutions that specifically serve rural America — similar to a credit union. They can be a good resource for minority business owners in the agriculture industry. The American Rescue Plan Act set aside $10.1 billion in funds to develop the farm credit system and help support socially disadvantaged farmers when it was passed in March 2021.
You can find a farm credit service lender near you on the Farm Credit website.
The USDA FSA
The US Department of Agriculture’s Farm Service Agency (USDA FSA) offers guaranteed loans and grants for farm ownership and operations, similar to an SBA loan. The FSA guarantees 90% of these loans with interest rates set by the government. And each year sets aside a portion of funds specifically for farmers from socially disadvantaged groups.
You can apply through your local FSA office — which you can find on the USDA website.
A wide range of nongovernmental resources and programs can help you start or grow your business — or access free money.
Minority business grants
There are grants available to minority-owned businesses through nonprofit organizations and the federal government. These offer free money and are a great source of business funding. Like with other grant programs, local small business grants are often easier to qualify for — though they come with less funding.
Some COVID-19 grant programs are also specifically available to minority business owners. You can learn about the options available to you by setting up an appointment with an SBA resource partner.
SBA 8(a) business development program
The SBA 8(a) business development program sets aside federal contracts and offers training to business owners from what it refers to as economically and socially disadvantaged groups. To qualify, you’ll first need to become certified as 8(a) eligible, which starts with registering on the government’s System Awards Management (SAM) website.
SBA Mentor-Protege program
Formerly a part of the SBA 8(a) program, the Mentor-Protege program connects small business owners with mentors who can help grow their business. Mentors also help business owners take advantage of federal programs set aside for socially disadvantaged individuals — specifically such as set-aside contracts.
Like other non-loan SBA programs, you can get started on your application on the SAM website.
HUBZone program
The federal government also sets aside 3% of federal dollars contracts for businesses located in HUBZones, which are typically low-income areas that often have a high concentration of minority-owned businesses. You can get started by signing up to have your business become a HUBZone-certified company after registering with the SAM website.
SBA resource partners
The SBA also works with several organizations to offer free training and counseling to small business owners — many of which are located in historically back colleges and universities. These include the following:
- Small business development centers
- Women’s business centers
- Veterans business opportunity centers
- Service Corps of Retired Executives (SCORE) mentorship programs
You can find an SBA resource partner on the SBA website.
The MBDA
The Department of Commerce’s Minority Business Development Agency (MBDA) offers grants and provides a wide range of resources for minority-owned businesses, which you can find at your local MBDA business center. They can help connect you with capital and other programs designed for supporting your local community.
The NMSDC
The National Minority Supplier Development Council offers MBE certification, networking events and training to its members. Its business consortium fund offered minority business loans in the past, though that program appears to be discontinued.
MWBE Enterprises
Minority Women Business Enterprise Enterprises specializes in helping minority and women-owned businesses owners qualify for:
- Minority Business Enterprise certification
- Women Business Enterprise (WBE) certification
- SBA 8(a) certification
- Disadvantaged Business Enterprise (DBE) certification
It also offers resources to help your business grow after it’s certified, like marketing plans and targeted business development.
Minority business enterprise (MBE) certification is an official government status indicating that your business is 51% owned, operated, capitalized or controlled by a member of what the government calls a “presumed group,” identified as:
- Black American or any Black racial group originating in Africa
- Hispanic with origins in Mexico, Puerto Rico, Cuba, Central and South American or other Spanish or Portuguese cultures
- Native American or certified member of a federal or state recognized Indian Tribe
- Asian Pacific with origins in the Pacific Islands, China, Taiwan, Korea, Japan, Thailand, Burma, Cambodia, Vietnam, Malaysia, Indonesia, Singapore or Philippines
- Subcontinent Asian with origins in India, Pakistan, Bangladesh, Bhutan, the Maldives Islands, Nepal or Sri Lanka
The main benefit of getting MBE certification is that it’s required for some government and private financing programs focused on minority-owned businesses. It can also open you up to more training and networking opportunities.
Many state and local governments offer MBE certification programs. You can also get certified through private organizations like the National Minority Supplier Development Council. Different programs might require different types of certification — and may have different definitions of what qualifies as an MBE.
Under the Equal Credit Opportunity Act, it’s illegal for a lender to discriminate against you on the basis of race, religion, sex or national origin — among other factors. Creditors can’t discourage you from applying or set different terms if you would otherwise qualify for a loan.
You also have rights under the Fair Credit Reporting Act. When you apply for a loan or other form of credit, you have the right to know if your credit history was used to deny your application. If a creditor has submitted inaccurate, incomplete or false information to a credit bureau, you can have it removed or corrected, typically within 30 days.
Unfortunately, these rights do not extend to businesses. That said, antidiscrimination laws likely apply to you as the business owner. Contact an attorney or other legal professional with complaints of discrimination or harassment to receive the best advice for you and your business.
A first step is to reach out to your creditor and confirm why your business was denied a loan. If you’re unable to get answers — or feel you aren’t being told the truth — reach out for help:
- Submit a complaint. Start a complaint with the Consumer Financial Protection Bureau (CFPB) if you believe a lender has discriminated against you. Because the CFPB is a government agency, companies take it seriously — the CFPB states that most complaints are responded to within 15 days.
- Contact your state attorney general. Your state may have its own consumer reporting laws that offer further protection for borrowers the federal government may not cover. Reach out to your state’s attorney general to discuss the laws and legal options that might be available to you.
- File a lawsuit. If you believe a creditor denied your application because of discriminatory practices, you have the right to sue the creditor in a federal district court. If the creditor has denied multiple business owners, you are also able to file a class action lawsuit against the creditor. Speak with a lawyer or attorney for your best options and to ensure you have solid grounds for a lawsuit.
If you’re just starting out or have struggled to qualify for funding elsewhere, you might want to consider a loan or grant program specifically for minority-owned businesses.
These often have more flexible requirements and are designed to help build your business and your credit to make it easier to qualify for a low-cost bank loan in the future. Read our guide to business loans to learn about other financing and funding options available to your business.
