Best Business Loans for Minorities in 2022 – Forbes Advisor
Many lenders offer loans specifically for minority-owned businesses. These lenders typically have programs that offer lower interest rates, more flexible terms, or more accessible qualification requirements.
Online lenders often have less stringent requirements than traditional banks and can provide financing more quickly. Additionally, minority-owned businesses often experience higher approval ratings from online lenders than from traditional banks. Loan amounts can vary from $1,000 to $500,000, with interest rates typically as high as 99%.
Loans backed by the US Small Business Administration (SBA) can help minority-owned businesses get the financing they need through the agency’s network of approved lenders. For example, the SBA’s Community Advantage loan program is tailored for companies in underserved markets. Loans are available for up to $350,000, with interest rates ranging from 4.5% to 6.5% above the prime rate.
Financial institutions for the development of the community
Community Development Financial Institutions — or CDFIs — are private financial institutions that provide banking and investment services in traditionally underserved communities. Loans may be available to minority-owned companies through a Community Development Loan Fund (CDLF) or Community Development Venture Capital (CVDC) fund. Find a local CDFI by searching the CDFI Fund’s searchable awards database.
Local banks and credit unions
Minority-owned companies often have greater difficulty obtaining credit from traditional banks. However, business owners who have an existing relationship with a local bank or credit union may be able to access competitive interest rates and flexible loan terms for their business loan needs.
Eligible small businesses can receive loans up to $50,000 under the SBA microloan program. Not only are microcredits limited to smaller amounts, they also have shorter repayment terms than traditional loans – up to six years. Interest rates ultimately vary by SBA-approved lender, but range from 8% to 13%.
Microcredit is available through a network of intermediary lenders, but the SBA provides a list of lenders for potential borrowers to search by state. A number of nonprofit organizations that aim to help minority-owned businesses thrive also offer this type of business financing.
Peer-to-peer lending — also known as P2P lending — involves borrowing money from individuals instead of banks or other financial institutions. This type of business loan typically has less stringent credit requirements and a leaner and more accessible application process.
Loan amounts and interest rates can be more competitive than at a bank or credit union, but some private lenders charge significant fees in exchange for this convenience.