Today’s fast-paced business world is open for everyone. Whether you are a teenager or belong to a minority group – starting a business has become effortless in the digitalized era. However, one of the challenges that minority-owned companies encounter is access to capital and funding. Also, the chaotic procedures and limitations act as a barrier, discouraging them from stepping into the business world.
For the economy to prosper, the government must empower every citizen regardless of their race, gender, religion, or nationality. Hence, immigrants, Native Americans, the black community, and every other minority group should get equal opportunities and financial power. In addition to enabling the sustainability of minority groups, it can improve the economy’s wellbeing. It increases government revenues through tax collection, reflecting growth in the gross domestic product (GDP).
Fortunately, several avenues are providing financial solutions for minority-owned businesses. Here we are listing five types of loans for minorities to get a quick loan for startup or business expansion.
- Minority-Owned Business Loans
The most common reason minority-owned firms don’t get loan approvals is that they have a lower net worth. Banks are traditionally biased against applicants with less money irrespective of whether they belong from the minority group or not. To help overcome this hurdle, many non-government organizations provide minority-owned business loans. These loans aren’t restrictive; meaning, the minority groups, can use them for any business.
Moreover, there are also black and Latino community institutes that are financial solutions to these groups. If you belong to this community, look for a black owned bank to acquire funding for your business. You can also open a savings account in these banks to enjoy a higher return on investments. Besides this, many minority-owned business loans provide entrepreneurial guidelines and a certificate for their business.
- Latino Economic Centered Loans
The Latino Economic Development Center offers different soft loans to help minority groups expand the business. Most of these loans align with minorities’ preferences to provide convenience and flexibility to minority-owned companies. If someone wants to engage in small business activities, they can opt for a microenterprise loan. Similarly, minority groups can seek cooperative loans if they are going to form a cooperative business. All these loans have minimal requirements, offering quick funding to the minority groups. They have to submit the business plan, financial statement of the past two years, and a credit history report.
- SBA Community Advantage Loans
In addition to funding small businesses, the small business administration (SBA) ensures minority groups can access loans without any hassle. It has introduced SBA community advantage loans for minority-owned businesses that don’t have hefty balance in their accounts. Likewise, these loans don’t require firms to submit collateral for security. The authorities only look at minority groups’ creditworthiness. They evaluate applicant’s credit history and records to ensure they don’t have bad credit.
As most minority groups have a clean credit record, they can qualify for the loan and improve business operations. The loans range from $25,000 to $250,000, and the SBA guarantees up to 85% for funds at $150,000. Moreover, the interest rates on these loans are lower than other financing options since the government offers these loans. However, you have to submit all the required documents timely so that SBA can forward them to the lender.
- Business Diversity Lending Program
At times, minority groups manage to start the business, but they cannot keep it afloat in the long run. The business diversity lending program rescues minority-owned companies from the financial crisis. This program aims to promote investment activities amongst minority groups by helping them acquire business loans. To qualify for this program, the applicant must fall under any category of the bank’s race and ethnicity category. Likewise, the business should be operational for at least two years.
Precisely, all Latinos, African Americans, Asians, and Hispanics can qualify for the business diversity lending program. After all, the requirements are pretty straightforward. The minority-owned businesses have to fill an application online, submit credentials, and wait for a few days to get the loan approved. Best of all, the program offers up to $2.5 million to borrowers with flexible repayment terms.
- USDA Loans
The US Department of Agriculture (USDA) and business and industry loan guarantee programs provide financial solutions to minority groups. The USDA guarantees loans which local banks and direct lenders offer to minority-owned companies. The loan extends up to a maximum of $25 million and doesn’t have any restrictions. Hence, minority-owned businesses can fulfill work capital needs, finance real estate, or refinance debt.
It is also the perfect choice for minority groups who need large amounts of capital. The USDA loans also have low interest rates with extended payment terms to attract more borrowers. Also, these loans only require 10%-20% of the total borrowing amount as a down payment.
Unlike old times, there are a lot of financial opportunities and avenues for minority-owned businesses. Besides the government, many organizations are willing to give loans to minority groups at low interest rates to promote economic activity. The majority of minority-owned business loans are quickly accessible and don’t have restrictions. Therefore, the minority groups can acquire funding to start a venture or grow their businesses.