SBA Minority Loans and Other Funding Options
Of the two million new businesses launched in the U.S. over the past decade, over 50% are owned by minorities. Despite this increasing trend, many minority-owned businesses need help accessing the capital needed to start or grow their companies.
SBA minority loans are one popular option due to their relatively low-interest rates and flexible amounts. You can also consider a range of minority business grants and small business loans.
On this page
|Lender||Loan type||Maximum loan amount||Starting interest rate||Minimum credit score|
|Community Advantage loan||$350,000||Prime + 4.50%||Varies based on lender|
|7(a) loan||$5,000,000||Prime + 3.00%||155 SBSS Score|
|Working capital loan||$400,000||Factor rates starting at 1.11||500|
|Business line of credit||$250,000||660|
|Term loan||$250,000||Starting at 35.40% APR||625|
|Merchant cash advance||$1,000,000||Starting at 1.24 factor rate||No credit check|
Learn more about how we chose our picks.
SBA loans for minorities
The U.S. Small Business Administration (SBA) is committed to helping minority-owned businesses and underserved entrepreneurs develop and grow their companies.
When looking for business loans for minorities, a few SBA loans to consider include:
SBA Community Advantage loan
|Term length||Not specified|
|Est. interest rate|| |
|Min. credit score||Varies based on lender|
|Min. time in business||New businesses (less than two years)|
Focuses on small businesses in underserved markets
SBA guarantee of at least 75%
Only available for a limited time (unless made into a permanent SBA product)
Lack of information on minimum credit score requirements and term lengths
SBA 7(a) loan
|Term length||Up to 300 months|
|Est. interest rate||Varies (not to exceed the current SBA maximum of Prime + 5.00%)|
|Min. credit score||155 SBSS Score (see below for more details)|
|Min. time in business||Typically two years|
High loan amounts
Up to 85% SBA guarantee
Collateral may be required for loans above $350,000
Not ideal for startups
|Term length||72 months|
|Est. interest rate||8.00% to 13.00%|
|Min. credit score||620|
|Min. time in business||Not specified|
Credit requirements tend to be less strict than other providers
Typically requires some form of collateral plus a personal guarantee
Small loan amounts
Online business loans for minorities
While the following small business loans aren’t only for minority borrowers, they show a sampling of what’s available.
Credibly: Working capital loan
|Term length||3 to 15 months|
|Est. interest rate||Factor rates starting at 1.11|
|Min. credit score||500|
|Min. time in business||6 months|
Low minimum credit score requirement
High monthly revenue requirement ($15,000)
Factor rates can be confusing
American Express Business line of credit
|Term length||6, 12 or 18 months|
|Est. interest rate|| |
|Min. credit score||660|
|Min. time in business||12 months|
Quick, online application
Only pay for what you use
Confusing fee structure
Requires a personal guarantee
OnDeck: Term loan
|Term length||Up to 24 months|
|Est. interest rate||Starting at 35.40%|
|Min. credit score||625|
|Min. time in business||12 months|
Fair to low credit accepted
High starting interest rate
Includes an origination fee and monthly maintenance fee
Loans not available in Nevada, North Dakota or South Dakota
Uplyft Capital: Merchant cash advances
|Term length||Up to 12 months|
|Est. interest rate||Starting at 1.24 factor rate|
|Min. credit score||No credit check|
|Min. time in business||Three months|
No credit check
Daily or weekly payments required
Maximum interest rates not disclosed
What is a minority-owned business?
The SBA defines a minority-owned business as a firm either wholly or equally (at least 51%) owned and run on a daily basis by one or more members of an ethnic or racial group.
For example, the following ethnic and racial groups may be eligible for an SBA loan for minorities:
- Asian-Indian Subcontinent
- Native American
- Alaskan Native
Where to get minority business loans
Minority business owners can explore the following options when looking to finance their small business’s needs. Eligibility requirements may vary based on the lender.
- Online lenders: Alternative online lenders typically have easy application processes, along with more flexible requirements and faster funding times.
- SBA lenders: Backed by the U.S. Small Business Administration, many SBA lenders work with underserved markets.
- Community Development Financial Institutions (CDFIs): CDFIs are mission-driven, privately owned financial institutions that provide economic opportunities for minority-owned businesses. You can search the CDFI Fund’s database to find an award that fits your needs and criteria.
- Banks and credit unions: If you have an existing relationship with your local bank or credit union, reach out to them to see what loans they can offer.
- Microlenders: If eligible, your small business could borrow up to $50,000 with an SBA microlender. Although these loans come in small amounts, they also come with short repayment terms.
- Peer-to-peer business loans (P2P lending): With P2P lending, you can connect with individual investors via P2P lending platforms. Rates and terms vary, but it can be a great way to access the funds you need to push your business to the next level.
Small business grants for minorities
In addition to loans for minority owned businesses, there are minority grants for small businesses. Here’s a few starting points:
Other small business resources for minorities
Consider these resources as a way to stay connected with upcoming opportunities and support for minority-run businesses.
SBA 8(a) Business Development program
The SBA’s 8(a) Business Development program is designed to benefit small, disadvantaged businesses, including those owned by minorities. The federal government aims to award 5% of federal contract dollars on a yearly basis to businesses that are at least 51% owned and operated by economically or socially disadvantaged U.S. citizens.
To qualify, you must get certified as a minority-owned business through an online application with the SBA. Once approved, the designation lasts up to nine years depending on your business’s standing. Qualified applicants can access business counseling and technical support, as well as bid on government contracts as a sole source or as part of a joint venture.
Minority Business Development Agency
As its name suggests, the Minority Business Development Agency (MBDA) — part of the U.S. Department of Commerce — works to promote the growth of minority-owned businesses.
Business owners can get advice from experts at MBDA Business Centers nationwide, including how to find capital. The MBDA also advocates for the interests of minority-owned businesses while administering public and private sector programs.
National Minority Supplier Development Council
The National Minority Supplier Development Council (NMSDC) focuses on boosting minority-owned suppliers’ opportunities and market access. From its national office in New York and 23 affiliate regional councils nationwide, NMSDC helps its 1,500 corporate members integrate into supply chains, access programming and educational opportunities and network with others in their fields.
The Service Corps of Retired Executives (SCORE) is a valuable source of free business mentoring and education for minority-owned and non-minority-owned businesses. A resource partner of the SBA, SCORE has offered mentoring, workshops and educational resources to more than 11 million entrepreneurs since 1964 via 10,000-plus volunteers across the U.S.
The organization also provides webinars and courses specific to minority-owned businesses, including options in Spanish.
Small Business Development Centers
The Office of Small Business Development Centers (SBDC), part of the SBA, makes a special effort to reach minority members of socially and economically disadvantaged groups. It is dedicated to supporting entrepreneurship, small business development and the U.S. economy through funding and overseeing a nationwide network of development centers.
Alternative funding options to minority small-business loans and grants
Minority business grants often have specific criteria and strict eligibility requirements, making it hard to qualify. Additionally, small business loans typically require a minimum FICO Score or a certain number of years in business to apply.
Consider the following options for other ways to help fund a minority-owned business.
- Small business startup loan: A loan designed for startups might help you launch your entrepreneurial ideas.
- Small business credit cards: Although funding your entire business with credit cards is not a good practice, using them for a few low-cost expenses can be helpful. Some business credit cards offer incentives and rewards, which can help offset the cost of the high interest rate.
- Crowdfunding: You can raise money from friends, family and other supporters via platforms such as GoFundMe. Crowdfunding can be a great way to fundraise for a specific purpose, such as purchasing new equipment, since you don’t need to repay the funds.
How we chose our picks
In addition to featuring SBA loan options for minority-owned businesses, we highlighted online lenders who met the following criteria:
- High loan amounts ($250,000 to $1 million)
- Low credit-score requirements or no credit check required
- Options for businesses with less than one year in operation
- Flexible repayment terms
- Competitive interest rates
- Choice of multiple loan products
- Lender offers some form of business support and coaching