Diversity defines America’s bustling small business world as much as it does our communities. As of 2018, minority-owned businesses accounted for 8 million of the total 33.2 million small businesses in the country. With small businesses growing all the time, many consistently seek out federal small business loans for minorities for the necessary cash.
Sufficient access to funding can make the difference between surviving and thriving. However, minority-owned businesses can sometimes miss out on a lack of equal funding opportunities or resources.
Here’s how you can find federal small business loans for minorities, along with other funding options to grow your business.
The Benefits of Certifying Yourself as a Minority-Owned Business
Wondering how to get certified as a minority-owned business?
You may qualify for federal small business loans for minorities and other unique programs, but you also may not be able to access them right away. For many small business owners, the first step is applying for and receiving a minority-owned business certification.
Obtaining a minority-owned business certification sets you apart from the pack and could open new doors. In addition to resources like cash and competitive interest rates, you can also compete for corporate and government contracts, awards, training, marketing advice, and more.
Depending on the certification or organization you apply through, the qualifications can be different. The bottom line, however, is ownership: minorities must own 51% of your business. There are also unique certifications and funding options for minority females.
As your business grows, you may find these resources incredibly valuable.
Federal Loans and Programs to Combat COVID-19 Slowdowns
Small businesses across the country were hit hard by COVID-19. Many federal small business loans for minorities and other business owners were created to help resolve the lack of cash flow, keeping the growth momentum going.
While these aren’t exclusively federal small business loans for minorities, many can be quite helpful due to low cost and easy requirements, especially with other options off the table for the time being.
1. Economic Injury Disaster Loan (EIDL) Program
Toward the beginning of the outbreak, the Economic Injury Disaster Loan Advance Program gave small business owners fast cash at no cost. While the advance program’s funding has been depleted, the EIDL program was continued.
Through the EIDL program, small business owners can qualify for financing at the low rate of 3.75%. This funding can go toward growing your business, especially as you get back on track after COVID-19. You won’t get loan forgiveness, but these low rates can go a long way.
As of January 1, 2022, the Small Business Administration stopped processing applications for the EIDL.
2. Paycheck Protection Program
The Paycheck Protection Program, also called the PPP, gave small business owners the cash to keep employees on while weathering this crisis.
The time window for applying closed, but some believe that the next coronavirus stimulus package will include funding for a second round of PPP loans.
The Paycheck Protection Program (PPP) ended on May 31, 2021
Types of Federal Small Business Loans for Minorities
The SBA, or the Small Business Administration, offers multiple financing programs through which your business can grow. Because they’re geared toward businesses of different sizes and ages, though, you may not qualify for all of them.
These are the best federal small business loans for minorities offered through the SBA.
| Type of Loan | Description |
| SBA 7(a) Program | SBA loans are one of the most desirable federal small business loans for minorities out there. They may not be exclusively for minorities, but with low rates and long terms, this program can help all small businesses. Specifically, these longer-term products benefit established minority businesses that need large financing amounts to grow.
With these benefits comes a few restrictions. Qualifying can be difficult—you’ll normally need a great credit score and financial history. Additionally, you’ll need to prove (through revenue) that you’re on track to continue growing. Completing the SBA loan application can be time-consuming as well. If you can qualify, though, this may be the best of the federal small business loans for minorities. |
| SBA Community Advantage Loans | Another federal small business loan for minorities that can be helpful is the Community Advantage program. Operating through a network of nonprofits, Community Advantage Loan funding is backed by the federal government.
With the SBA guaranteeing up to 85% of the total loan, you can qualify for up to $250K. This funding is also made available to others who struggle to obtain funding, including women and veterans. While you will have to pass a credit check, you won’t need to secure this loan with collateral. |
| SBA Microloan | If you need a federal small business loan for minorities, but don’t need substantial funding, then the SBA Microloan program may be for you.
Through this program, you can’t qualify for sky-high amounts. At most, you can receive up to $50K. However, for new or start-up minority business owners, this can be significant. |
Small Business Grants for Minorities
Why find federal small business loans for minorities when you don’t have to pay?
Free money for minorities who own businesses can help you grow through marketing, hiring, and more. Most grants will require an application and have limited winners. The potential funding available is much lower, too.
Before you spend time applying, though, be sure that you’re eligible for the program.
These are some of the most popular small business grants available to minorities:
- Grants.gov: This database for grants contains program details for over 1000 programs across the federal government.
- National Association for the Self-Employed: As a dues-paying member, you can apply for a grant of up to $4,000. Membership also includes other perks, such as resources, networking opportunities, and more.
- Minority Business Development Agency: This federal agency, operated by the Department of Commerce, helps minority small business owners find new opportunities, including financing.
- Operation Hope Small Business Empowerment Program: Dedicated to closing the funding gap for business owners in neighborhoods with low wealth (including minorities), this program offers access to funding, business courses, and more
- SBA Grants: Partnering with various organizations, the SBA offers several grants that help entrepreneurs obtain funding.
Small Business Loan Options for Minorities
Federal small business loans for minorities can be your best option, but you may find better funding elsewhere.
If your business is seeking capital right away for a new growth opportunity, then federal timelines might not be in your favor. Other small business loans and financing programs can be slightly more expensive, but in the end, they give you the resources you need right away.
CEO Joseph Camberato states, “SBA loans are attractive for a good reason, but the timeline doesn’t work with everyone’s schedule. If you’re looking for fast access to capital and can stand a bit more interest, you should consider non-bank lending options.”
Online lenders tend to have a fast and easy process for qualifying, including options for minorities with bad credit. Banks, on the other hand, approve only the healthiest businesses and take weeks or months to review and approve applications.
| Type of Financing | Description |
| Small Business Loans (Term Loans) | The most straightforward option available, small business loans give you cash that you’ll pay back at a set rate. Before agreeing to an offer, be sure to research your lender and ask questions. You can calculate your total payback amount (including interest) using a business loan calculator. |
| Equipment Financing | Need new equipment for your business? Rather than searching for federal small business loans for minorities, equipment financing helps you purchase new equipment right away while paying it back over time.
You’ll own the equipment rather than renting it. Equipment financing programs also offer excellent tax benefits, as you can write off the entire cost in year 1. |
| Business Lines of Credit | A business line of credit is the best flexible financing option around. It’s not technically a loan. Instead, you can draw cash from a total approved amount as you need it and only pay interest on what you take.
Through revolving lines of credit, you can draw more as you pay it down. This financing option helps you get cash immediately during growth periods and through slowdowns. |
Difference Between Federal Business Loans and Small Business Loans for Minorities
SBA loans and small business loans are very similar but come with a few unique features that set them apart. Let’s break down each option, so you can see the difference.
| Criteria | SBA Loans | Small Business Loans |
| Accessibility | SBA loans carry rigid eligibility criteria. According to the SBA, businesses must operate for profit, be located in the United States, fall under the SBA’s size requirements, not be an ineligible business, and be unable to obtain funding on reasonable terms from traditional sources, among a few other factors. | Qualifications vary from lender to lender but can range widely. Banks and credit unions require more robust qualifications, whereas non-bank lenders will work with almost any type of business, regardless of their credit score, annual revenue, or time in business. |
| Offered Products | Entrepreneurs can choose from:
|
Entrepreneurs have a variety of financing options and structures to choose from. |
| Use of Funds | Some usage restrictions. You’ll also need to come prepared with a detailed plan of how you intend to use your funds when applying. | Usage restrictions vary by lender but are generally less intensive than SBA restrictions. |
| Processing Speed | Notoriously long. Some SBA loans take 6+ months to process. | If leveraging a non-bank option, you can access funds on the same day. Banks and credit unions take a bit longer, with most averaging a 30 to 90+ day window of response time. |
| Repayment Terms | Can extend up to 25 years, if needed. | Vary depending on the lender, financing product, and other factors. Asset-backed financing tends to carry longer repayment terms than cash flow loans. |
| Cost of Capital | Some of the lowest interest rates available. | Vary depending on the lender, financing product, and other factors. Banks and credit unions carry lower interest rates than non-bank lenders. |
| Down Payment/Collateral | Down payment could be required if leveraging a 7(a) or 504 loan. Collateral may also be required. | Vary depending on the lender, financing product, and other factors. Banks are more likely to ask for collateral, although non-bank lenders can also require it for some products. |
| Restrictions | The SBA won’t work with specific industries, nor will they allow some specific uses of funds. | Banks carry some industry and usage restrictions, while non-bank lenders are much more lenient. |
Federal Small Business Loans for Minorities: Eligibility Criteria
Looking to access capital through a federal small business loan for minorities program? Here are the eligibility requirements you’ll need to meet:
- 2+ Years in Business
- $500,000+ in Annual Revenue
- 685 FICO
The abovementioned criteria are specific to federal business financing programs. For those looking to explore options outside of the SBA and federal programs, here’s the qualifying criteria:
- 1+ Year in Business
- $500,000 in Annual Revenue
- No Minimum FICO
National Business Capital can help you compare the federal, bank, and non-bank financing options your business qualifies for. With one application, our Business Finance Advisors can bring back multiple offers from our diverse lender network and help you select the one that best aligns with your business.
How to Apply for Federal Business Loans for Minorities
Different lenders have different application processes. If you want the fastest and most efficient avenue to find the right financing offer for your minority business, consider working with National Business Capital.
Here’s what to expect from our process.
- Apply Securely Within Minutes – Move through our streamlined application within minutes and upload your business documents with zero risk.
- Review Your Offers – Compare your offers with expert advice from our team and select the best one for your specific circumstances.
- Receive Your Money – Seize an immediate opportunity to grow your business or tackle a new challenge with confidence.
We aim to form a long-term financing relationship with each client. As you grow, opportunities and challenges will cost more, and you don’t want to miss out on a game-changing revenue stream because your lender won’t recognize your updated qualifications. With National Business Capital, you have a team of experts who will always advocate for what your business deserves.
Access Fast Funding and Take Your Business to the Next Level
When your business needs funding, it’s important to take action right away.
At National Business Capital, our Business Finance Advisors work in real-time to get you the funding you need. Through our diverse lender network, you’ll gain access to the best rates, terms, and amounts.
Get started finding capital for your business today. Apply now for federal small business loans!
Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advice from National Business Capital and the author. Do not rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely on this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there may be errors, omissions, or mistakes.
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Joseph Camberato
Joe Camberato is the CEO and Founder of National Business Capital. Beginning in 2007 out of a spare bedroom, Joe and his team have financed $2+ billion through more than 27,000 transactions for businesses nationwide. He’s made it his calling to deliver the educational and financial resources businesses need to thrive.
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