Financing Guide

Small Business Loans for Minorities: Top 10 Options

15 Min Read

According to a 2017 study from The Business Journals (via Small Business Labs), minorities own around 40% of small businesses nationwide, up 79% in a 10-year span. Still, minority business owners have a harder time finding and receiving the funding they need to run their business.

Small business loans provide an opportunity for minority business owners to secure financing. While there are a few minority business funding programs available, others increase accessibility to small business financing in general.

  • SBA 7(a) Loans

    Partially guaranteed by the SBA and used for almost all business purposes


  • SBA Express Loans

    Smaller 7(a) loans with faster turnaround times


  • SBA 504/ CDC Loans

    40% backed by SBA partners; for large fixed assets like commercial real


  • SBA Microloans

    Smaller business loans perfect for minority startups


  • SBA Community Advantage Loans

    Targeted towards minority business owners in underserved communities


  • Accion Network

    Network of lenders aiming to help minority business owners


  • Union Bank

    Both secured and unsecured loans for small businesses


  • BCF Direct Lending Program

    Loans up to $1.125 million with 7 year terms


  • BCF Loan Participation Program

    Similar structure to SBA 504 loans, but can be used to finance outstanding


Did You Know?

According to a Fed Small Business survey, minorities are 10% more likely to apply for business financing but are 19% less likely to be approved than their non-minority counterparts.


For minority business owners who don’t apply, 26% cite a lack of credit and a perceived stigma against them as reasons for why they don’t seek funding.

The 4 Best Minority Business Loan Options

Today, you can find the funding you need with help from multiple organizations, including the federal government.

1. SBA Loans for Minority Business Owners

As of August 2019, the SBA guaranteed over $20 billion through its 7(a) loan program for the fiscal year 2019. Of that total, 32% percent went to minority business owners.

There are no minority business loan programs backed by the SBA. However, SBA loans are geared to applicants who don’t qualify for traditional bank loans, making them a great option for minority owners facing these financial challenges.

Standard SBA 7(a) Loans

SBA 7(a) loans offer up to $5 million for borrowers, meaning you can use them for projects large or small. The SBA guarantees up to 85% of your loan, reducing the risk for lenders and opening access to affordable long-term financing to candidates previously disqualified.

Interest rates depend on your creditworthiness but are generally not far from what banks offer. Terms range from 7-25 years, depending on the amount you borrow and the use of the funds.

Although they’re flexible, it takes a few weeks to a month to receive an approval, and even longer to get the funding.

SBA Express Loans

SBA Express Loans can have capital in your bank account in as little as 30 days.

There’s a catch, however. In exchange for the expedited process, you’ll be charged slightly higher interest rates and have a lower maximum borrowing potential. You can borrow up to $350,000 over a 5- to a 10-year term.

The SBA only guarantees up to 50% of these deals, making them more risky for lenders, which can impact your terms and chances of approval.

SBA 504/ CDC Loans

The SBA 504 loan program is great if you need to purchase major fixed assets such as equipment, commercial trucks and real estate.

They are partially funded by Certified Development Companies (CDC), nonprofit partners of the SBA that aim to help build up America’s small business infrastructure.

The breakdown looks like this:

  • Bank loan: 50% (or more)
  • CDC loan: 40%
  • Down payment: 10% (or more)

The CDC-backed portion of the loan is capped at $5 million. There is no cap for the bank-serviced portion of the loan. In general, interest is not much higher than what banks offer, about 3-5%, and terms go up to 20 years for the CDC portion of the loan.

SBA Microloans

SBA microloans are a great option to secure minority business funding.

Microloans are issued by third-party lenders, which in most cases, are nonprofit, community-based organizations. While the maximum funding amount available to applicants is $50,000, the average loan is $13,000. You can expect an interest rate between 8-13%.

Microloans can be used for working capital, inventory or supplies or purchasing machinery, among other purposes, but they cannot be used for real estate purchases or debt refinancing. If you’ve been seeking minority business loans or grants for your startup, microloans are a great option for entrepreneurs who might have limited financing options when opening a new company.

SBA Community Advantage Loans

The SBA Community Advantage Loan Program opens access to financing options that some minority business owners might not otherwise qualify for. The program encourages local lenders, nonprofits and even mission-focused organizations to issue SBA 7(a) loans to businesses owned by minorities, women and veterans, as well as those in underserved communities.

Underserved community:

Typically inner-city and rural areas, any low-to-moderate-income community is considered underserved by the SBA. If your business has at least 50% of its employees residing in one of these areas, you may qualify for the Community Advantage Loan Program.

The SBA guarantees up to 85% of the amount (maximum of $250,000), making this an excellent option for you if you’ve had trouble qualifying for traditional term loans.

Term length maximums are 10 years for working capital and equipment and 25 years for commercial real estate.

Interest rates are comparable to 7(a) program loans, around 7-9%.

2. Accion Network

The Accion Network’s goal is to give underserved minority businesses funding across the United States. In fact, over 60% of their borrowers come from minority groups.

This nonprofit organization offers affordable, flexible funding options to businesses across industries. You can apply for microloans and qualified borrowers can also receive more substantial amounts.

Accion offers loans for everything you need from everyday working capital to renovations.

They’re a great option for startups, as well.

3. Union Bank

Union Bank’s Business Diversity Lending Program offers minority small businesses loans up to $2.5 million.

The program is designed to help small minority businesses finance projects large and small. To qualify, you must be in business for at least 2 years and have annual sales under $20 million.

Union Bank offers both secured and unsecured loan options with fixed or variable rates. What you qualify for will depend on your creditworthiness.

4. Business Consortium Fund

The Business Consortium fund is a registered Community Development Financial Institution that works to offer minority business loans. They have 2 programs that are open to any certified Minority Business Enterprise seeking funding.

Diverse group of coworkers celebrating approval for a minority small business loan

BCF Direct Lending Program

The BCF will often lend to businesses directly. They offer term loans and lines of credit, ranging from a minimum of $75,000 to $500,000, although loans up to $1.125 million will be considered on a case-by-case basis.

The length of repayment has a 7-year max, making these a good loan option for minority owners who need a medium-sized term loan.

BCF Loan Participation Program

Similar to the SBA loan programs, the BCF will back you up if you have trouble being approved by traditional lenders. Their involvement, dubbed the Loan Participation Program, provides a credit enhancement by covering a portion of the funding.

These loans are a good option if you need to finance equipment or invoices or need a quick boost in working capital.

Is Your Business MBE Certified?

Many organizations will require you to be a certified Minority Business Enterprise (MBE) or Disadvantaged Business Enterprise (DBE) to be eligible for minority business loans, grants or any of their other resources. The main provider of these certifications is the National Minority Supplier Development Council (NMSDC). Their MBE program qualifies you as a DBE and is recognized nationwide by suppliers, both public and private.


To qualify, your business must:

  • Be at least 51% owned by 1 or more members of an approved minority group
  • Have day-to-day operations and decision making done by minority owner(s)
  • Be a for-profit business
  • Be located in the territorial U.S.

How to Get a Minority Business Loan

A minority business loan is specifically designed for minorities and socially or economically disadvantaged individuals.

Although some options are specifically targeted towards one minority group, most provide small business loans for owners in the following racial/ethnic groups:

  • African-American
  • Asian-American
  • Hispanic-American
  • Native American
  • Pacific Islander
  • Alaskan Native

While some of these loans have their unique requirements, many programs have similar qualifications. In general, certification as an MBE or DBE is enough to pre-qualify you before they check your financial information.

Each lender will have its financial requirements.

For example, to qualify for an SBA 7(A) loan through Fast Capital 360, you’ll need to have:

  • At least $50,000 in annual revenue
  • At least 2 years in business
  • A credit score of 650+
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Applying for a Minority Business Loan

After you choose a lender, you’ll submit paperwork and financial documents to apply for a minority business loan.

While each minority business loan requires different documents, you’ll generally need to gather at least the following before applying:

  • 3 years of:
    • Business and personal tax documents
    • Revenue statements
    • Profit and loss statements
  • Recent bank statements
  • Balance sheet
  • Voided business check

Some lenders will do more due diligence than others, including possible site visits. Check with the organization to learn more about its process. Obtaining a minority business loan could take days, weeks or months depending on your lender.

Minority Small Business Grants

Other than loans, there are many grants for minority business owners who need funding to expand their business.

  • Government Grants

    Local, state and federal programs aimed to help underserved communities
  • FedEx Small Business Grants

    Contest for small business owners to vie for funding dollars
  • Minority Health and Health Disparities Research Grants

    Provides funding for minority healthcare companies for research, education and outreach
  • First Nations Development Institute Grants

    Developed for companies advancing the economies of Native American communities

One of the clear advantages minority small business grants hold over small business loans is the fact that you don’t have to pay them back. The tradeoff, however, is that grants carry more restrictions on how funds can be used. Many help disadvantaged businesses or companies with a mission to assist underprivileged individuals or communities.

If you meet the requirements, grants are some of the best ways to fund a business.

Government Grants for Minority Business Owners

There are multiple government grants for minority small business owners seeking funding to expand.

At the local level, reach out to your chamber of commerce to find out information about what’s offered in your municipality.

Your chamber of commerce can help find business funding at the state level as well, but it might be better to reach out to the secretary of state’s office for more information.

To find federal grants for minority small businesses, you can search the database. There are thousands of programs available, and you can filter out grants targeted towards minority businesses.

Small business tip:

Before you can do business with the government, you must register with the System for Award Management (SAM) website and apply for a DUNS number. After that, you can create an account of the site and begin applying for grants and bidding on government contracts.

FedEx Small Business Grant Contest

Open to any small business in operation for at least 6 or more months, the FedEx Small Business Grant Contest is a way for the company to contribute to the success of the country’s small business infrastructure.

It’s one of the best opportunities for minority owners who can leverage the power of community relationships to garner votes.

Ten winners are selected each year. You’ll need to write a profile on your business and create a video to participate. First prize winners receive $50,000.

Minority Health and Health Disparities Research Grants

The National Institutes of Health implemented the Minority Health and Health Disparities Research Grant program to improve minority communities. There are health challenges that minorities and minority communities face, and the NIH wants to help solve them.

Any for-profit healthcare community providing research, training, education or other outreach in minority communities is eligible to receive a grant through this program.

There are a few subprograms within that depend on your business and what you’ll use the funding for. The average amount you receive changes based on which subprogram you qualify for, and will range from around $250,000 to $2.3 million.

First Nations Development Institute Grants

First Nations began providing grants in 1993, and to date, have given out over $32 million. Their mission is to help fund Native American small businesses.

Funding can be used for most general business purposes, including startup costs, commercial real estate mortgages and other working capital needs.

These are great small business grants for Native Americans looking to grow the economy in their community.

How to Apply for Minority Business Grants

Just like with minority business loans, being a certified MBE will help facilitate the grant application and speed up the process. Organizations need to vet your business, so checking off the boxes that MBE certification provides cuts that process down.

You’ll need to submit a proposal for any grant that you’re looking to receive. In it, you’ll need to explain your business and how you’ll use the funding to advance your efforts.

For grants that are given to support specific causes, the proposal must clearly define why you qualify and how the funding will allow your small business to advance these community and economic efforts.

This process takes time. It’s important to make sure you do your research and apply for funding that you have a chance to receive.

Business owner planning with her staff how to use funding from a minority business loan

Other Resources for Minority Business Owners

Outside of funding, minority-owned small businesses can face more everyday challenges that require some assistance. There are many groups that you can turn to that help you secure the financial and strategic future of your small business.

SBA 8(a) Program

Unlike the 7(a) and 504 loan programs, the SBA 8(a) program assists socioeconomically-disadvantaged small businesses, including those owned by minorities.

Instead of directly giving money to your business, 8(a) certified businesses get increased exposure and opportunities to win lucrative government contracts. Sometimes, your business may be the only company capable of fulfilling the contract. By default, you’re awarded a multi-million dollar contract that could change your future.

Participation in the program is limited to 9 years and includes access to management training as well as their Mentor-Protege program.

You’ll need to become 8(a) certified to enter the program.

The SBA 8(a) program has specific guidelines that determine your eligibility. To qualify, you must:

  • Be classified as a small business under government size standards
  • Not be a former participant in the program
  • Have a personal net worth under $250,000
  • Not have an average adjusted gross income over $250,000 for 3 years
  • Have less than $4 million in personal assets

After pre-qualifying, create a profile on the site and follow the instructions the SBA provides to submit the rest of your application.

National Minority Supplier Diversity Council

Membership with the NMSDC can give you multiple new avenues to help your business grow.

Through their corporate partners, including global giants like Apple, Boeing, SAP SE and IBM, you can compete for contracts with companies seeking to use diverse B2B partners. Some of their partners can also help you find funding for your business.

To become a member — and to be eligible for resources and benefits from many other governmental and nonprofit entities — the NMSDC also provides certification for your business as a Minority Business Executive. Their certification is recognized across industries and fulfills prerequisites for all of the top minority business loan and grant options.

Minority Business Development Agency (MBDA)

The MBDA works to assist minority-owned businesses in finding the capital, contracts and markets they need to succeed. They focus on serving people in areas with high concentrations of minorities, building up the economies in these communities.

MBDA offers your business technical, management and marketing training to build a better strategy for your future. If you need funding, they’ll help you find lenders who want to work with you. Their network of business centers is available to all minority business owners.

Minority Chamber of Commerce (MCC)

Members of the MCC have access to resources to sustain success.

Minority Business Enterprises can receive specialized training by expert teachers with a focus on marketing, management and expansion.

The MCC can also match you with their corporate partners. Partners include multiple Fortune 500 companies that have diversity programs earmarking certain B2B contracts for minority-owned businesses.


The Service Corps of Retired Executives (SCORE) offers you the opportunity to learn how to run your company from successful entrepreneurs and former executives.

Mentors with SCORE guide you through all levels of business ownership. They can help you navigate the startup phase, expansion and even teach you how to obtain minority small business loans.

The nonprofit also holds conferences and workshops that, for a small cost, offer you training as well as an opportunity to network with mentors and fellow entrepreneurs.

Minority Business Loans: Financing is within Your Reach

The organizations that provide business loans and grants understand the challenges you face as a minority business owner. They offer these funding programs, educational resources and networking opportunities to assist you and bridge the gap between you and your non-minority competitors.

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