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.
| Lender | Loan type | Maximum loan amount | Starting interest rate | Minimum credit score |
|---|---|---|---|---|
 | Community Advantage loan | $350,000 | 12.25% Current Prime Rate of 7.75% + 4.50% | Varies based on lender |
| 7(a) loan | $5,000,000 | 10.75% Current Prime Rate of 7.75% + 3.00% | 155 SBSS Score |
| Microloans | $50,000 | 8.00% | 620 |
 | Working capital loan | $600,000 | Factor rates starting at 1.11 | 500 |
 | Business line of credit | $250,000 | 3.00% to 27.00%
| 660 |
 | Term loan | $250,000 | 39.90% This rate reflects the estimated starting APR offered to at least 5% of OnDeck customers. It doesn’t reflect the minimum APR offered by the company. | 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
| Max. amount | $350,000 |
| Term length | Not specified |
| Est. interest rate |
|
| Min. credit score | Varies based on lender |
| Min. time in business | New businesses (less than two years) |
| Pros | Cons |
|---|---|
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
| Max. amount | $5,000,000 |
| Term length | Up to 300 months |
| Est. interest rate | Varies (not to exceed the current SBA maximum of Prime + 6.50%) |
| Min. credit score | 155 SBSS Score (see below for more details) |
| Min. time in business | Typically two years |
| Pros | Cons |
|---|---|
High loan amounts Up to 85% SBA guarantee | Collateral may be required for loans above $350,000 Not ideal for startups |
The SBA’s 7(a) loan is for any type of small business, but 30% of 7(a) loans went to minority applicants in the fiscal year 2021. The program provides financing you can use to start a business, expand operations or purchase equipment or land.The SBA uses the FICO Small Business Scoring Service (SBSS) instead of a personal credit score when determining eligibility for 7(a) loans. The SBSS minimum score can change based on current credit and market conditions.
Keep in mind, this isn’t the best option for a starter loan since you typically need to be in business for a minimum of two years.
SBA microloan
| Max. amount | $50,000 |
| Term length | 84 months |
| Est. interest rate | 8.00% to 13.00% |
| Min. credit score | 620 |
| Min. time in business | Not specified |
| Pros | Cons |
|---|---|
Credit requirements tend to be less strict than other providers Availability nationwide | Typically requires some form of collateral plus a personal guarantee Small loan amounts |
The SBA offers microloans of up to $50,000 to minority-, women-, low-income and veteran-owned businesses. With maximum repayment terms of six years, these loans can be used for working capital or to purchase equipment, supplies or other business-related items.In the fiscal year 2021, SBA intermediaries provided 4,514 microloans totaling $74.7 million. The average SBA microloan was $16,557.
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
| Max. amount | $600,000 |
| Term length | 6 to 24 months |
| Est. interest rate | Factor rates starting at 1.11 |
| Min. credit score | 500 |
| Min. time in business | 6 months |
| Pros | Cons |
|---|---|
Same-day funding Low minimum credit score requirement | High monthly revenue requirement ($15,000) Factor rates can be confusing |
Credibly offers a working capital loan to support daily operations, such as payroll, inventory, marketing and other short-term costs. Although it requires $15,000 in monthly revenue, it can be an ideal option for new businesses with low credit. Credibly pairs you with a business expert to help guide you through every step of the loan process.Credibly also offers business expansion loans and merchant cash advances to small businesses. Borrowers could receive funding the same day they’re approved.
American Express Business line of credit
| Max. amount | $250,000 |
| Term length | 6, 12 or 24 months |
| Est. interest rate |
|
| Min. credit score | 660 |
| Min. time in business | 12 months |
| Pros | Cons |
|---|---|
Quick, online application Only pay for what you use | Confusing fee structure Requires a personal guarantee |
American Express Business Line of Credit provides small business owners with ongoing lines of credit up to $250,000. Once approved, you don’t have to withdraw money until you need it, and you won’t incur charges until you do. Loan terms of 6, 12 and 24 months are available, though you must borrow at least $500 if you choose a 6-month term (higher for 12- and 18-month terms).American Express Business Line of Credit also recently partnered with the Accion Opportunity Fund to provide financial and educational support to at least 250,000 mid-sized and Black-owned businesses by the end of 2024.
OnDeck: Term loan
| Max. amount | $250,000 |
| Term length | Up to 24 months |
| Est. interest rate | Starting at 27.30% |
| Min. credit score | 625 |
| Min. time in business | 12 months |
| Pros | Cons |
|---|---|
Same-day funding 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 |
OnDeck’s business term loans range from $5,000 to $250,000, with terms of up to 24 months. You can use the funds for various expenses, such as expanding to a new location, renovating or launching a marketing campaign.Repayment will be due either daily or weekly. APRs start at 27.30%, though the average APR for OnDeck term loans is 62.1%, based on loans originated in the half-year ending March 31, 2022.
OnDeck also offers a business line of credit. However, there are some industries OnDeck doesn’t serve, such as adult entertainment, loan brokers, firearms vendors and more.
Uplyft Capital: Merchant cash advances
| Max. amount | $1,000,000 |
| 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 |
| Pros | Cons |
|---|---|
Flexible requirements No credit check | Daily or weekly payments required Maximum interest rates not disclosed |
A merchant cash advance might be a good fit if you need immediate funds to cover expenses like payroll, inventory or other business needs. Uplyft uses artificial intelligence to analyze applicants and provide faster decisions. Plus, it tends to have more lenient small business loan requirements than other loan types since you’re borrowing against your future earnings.Repayments are daily or weekly, depending on your specific advance. Uplyft also offers business lines of credit and SBA loans.
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:
- Black
- Hispanic
- Asian-Pacific
- 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.
Can you get a minority business loan with bad credit?
While it may be challenging to find small business loans for minorities with bad credit, it’s still possible. Some lenders — especially alternative online lenders — will provide bad credit business loans.
Some options include accounts receivable financing and merchant cash advances, which can be accessible to borrowers who can’t obtain loans elsewhere.
If your financing options are limited due to a poor or bad credit score, consider ways to boost your credit score before applying.
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:
Federal grants — many of which are available to minority-owned businesses — are listed on Grants.gov. These grant opportunities are very specific and might not fit your business’s specific needs, but keeping an eye on your options is useful.Several federal agencies sponsor these grants, including the Department of Agriculture, Department of the Interior, Environmental Protection Agency and NASA.
One notable entry is the Rural Business Development Grants program from the Department of Agriculture. These grants are large (generally $10,000 to $500,000) and are open to businesses operating in rural regions or areas outside of cities with a population of fewer than 50,000 residents.
In addition to the federal government, several corporations offer small business grants for minorities. Some of the options below are tailored for specific minority business owners, while others are more general:
- New Voices Fund
The New Voices Fund invests in women-of-color entrepreneurs, offering cash grants from $5,000 to $25,000, plus coaching, mentoring and overall business support. The associated New Voices Foundation provides recoverable grants, or forgivable loans, to businesses not ready to receive equity funding or other kinds of investment. - National Association for the Self-Employed Growth Grants
Entrepreneurs, including minority business owners, who are members of the National Association for the Self-Employed (NASE) can apply for grants of up to $4,000 to help with a specific business need, such as buying equipment, hiring staff or creating marketing materials. Applicants must have been a NASE member for three months before applying. - FedEx Small Business Grant Contest
Minority and small business owners can enter the FedEx Small Business Grant Contest to be in the running for up to $50,000. The application requires you to create a video about your business. After, you would need to find supporters for an online competition.
Beyond the $50,000 grand prize, 10 additional winners will win a $30,000 grant. All awards include $1,000 in FedEx printing and business services.
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.
SCORE
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