A Guide To Minority Business Loans

Camino Financial30 Jan 2024
A Guide To Minority Business Loans

Understanding the essential concepts of minority business loans can help you improve your chances of getting approved for one.

This is crucial for minority-owned businesses, which have a tougher time opening and running a business.

In this article, you'll find the best financing options at your disposal. Plus, we'll share how to get small business financing if you are a woman and many resources to help you grow your business.

Get funds for your small business

What Are Minority-Owned Small Businesses?

A minority-owned business is a company with at least 51% owned by one or more members of a minority group. The term "minority group" includes racial and ethnic minorities, women, and persons with disabilities. Minority-owned businesses are an essential part of the American economy. They provide goods and services to consumers, create jobs, and help to grow the economy. Several programs and initiatives support funding for minority-owned businesses. The U.S. Small Business Administration has a program called the 8(a) Business Development Program, which assists small businesses owned by minorities. The Minority Business Development Agency is another federal agency that supports minority-owned businesses and many private organizations. These organizations offer financing, training, and other resources to help these businesses succeed.

The Best Small Business Loans for Minorities

Since small businesses, especially minority-owned ones, are taking a bigger role in the country's economy. Many innovative technology companies like Camino Financial are keen on partnering with and funding this new breed of entrepreneurs. Fortunately, minority business owners can apply with alternative lenders that offer minority businesses. We have curated a selection of the ten best lenders/programs in the market.

Camino Financial

Camino Financial is an online lender with the mission to help minority-owned businesses grow by offering small business loans for minorities. While we are a CDFI, our process is 100% online. This makes obtaining a loan convenient, simple, and secure for small business owners. At Camino Financial, we offer small business loans ranging from $10,000 to $50,000. A Social Security Number (SSN) is required to apply for a loan. Additionally, applicants must have a minimum FICO Score of 670. We have a bicultural team that speaks English and Spanish. Pros: Our online business loans don't require collateral. You can repay the loan anytime with no penalties or additional fees. Your application is pre-qualified within 72 hours, and you can submit all required documents electronically to avoid unnecessary trips to submit or sign documentation. Cons: You can't use the loans for real estate investing, financial investing, and car dealerships.

Community Development Financial Institutions (CDFI)

CDFIs are nonprofit financial institutions looking to lend to traditionally underbanked communities, including minority small business owners. After the Community Reinvestment Act of 1977, the government obliges banks to fund communities that find it harder to qualify for a loan. Many large financial institutions indirectly support minorities by funding their CDFI partners and referring bank clients to them.
#DidYouKnow CDFI stands for Community Development Financial Institution.
The best way to locate a CDFI is by going to your local Small Business Administration office or business development center to inquire about them.

CDFI Pros And Cons

  • Pros: Personalized assistance with your loan that helps you prepare to get a large bank loan in the future. Competitive rates with wide coverage in the U.S.
  • Cons: The application process might take a while. A CDFI loan might not be enough if you require a larger loan. Just as with a large bank loan, you might require collateral.
#DidYouKnow Camino Financial is the first neo-CDFI in the US!

Community Banks

Community banks are usually a great alternative for minority-owned businesses. They're more accessible than large banks and more focused on helping people in the community instead of serving big national businesses. In addition, they offer personalized customer care for minorities, competitive rates, and small business startup loans, making them a great alternative. But as in everything in life, there are pros and cons.

Community Banks' Pros And Cons

  • Pros: Faster and better customer service so you can access your loan more easily. They will get to know your story and consider this in the loan application. Building a relationship with your bank is key! Since most banks are certified SBA lenders, their rates and loan terms are just as good as large banks.
  • Cons: Similar to large banks, they don't move very fast. In addition, community banks are even less tech-enabled than large banks, which requires you to make several trips to the bank branch to submit paperwork and sign your loan docs.

SBA Minority Loans

The SBA Business Development Program targets socially and economically disadvantaged communities. It offers federal small business loans for minorities. This allows business owners to compete for federal contracts set aside for small businesses.
#DidYouKnow SBA stands for Small Business Administration.
After certifying as a small business, you work with a business analyst specialist and form joint ventures with other businesses. According to the guidelines, disadvantaged people include anyone subjected to racial, ethnic, and cultural bias or those with less capital or credit.

SBA Loan Pros And Cons

  • Pros: You can receive business training and counseling and get help with marketing your business. The federal government earmarks 5% of its contracts to benefit disadvantaged people as defined by its regulations.
  • Cons: You must meet specific criteria to qualify for the Small Business Administration Business Development Program. A U.S. citizen must control at least 51% of the business: non-lawful permanent residents don't qualify. Personal net worth must be less than $250,000.

National African American Small Business Loans

The NASBLF offers small business loans for minorities in low and medium-income communities in New York, Los Angeles, and Chicago. NASBLF's mission is to help provide financial assistance to African American minority-owned businesses that can't get funding through traditional means.

National African American Small Business Loans Pros and Cons

  • Pros: Loans range in size from $35,000-$250,000. The program also provides technical assistance and financial consultation to small business owners. Recipients may use the money to purchase equipment, provide more cash flow, and expand operations.
  • Cons: NASBLF restricts the funding to three major cities limiting outreach to minorities in other locations. Likewise, African Americans must own the businesses. Unless NASBLF receives additional grants, the loan fund it's capped at $30 million.

Accion U.S. Network

Accion offers funding from $200 to $300,000 in all 50 states to business owners with low to moderate incomes. In addition to minority-owned businesses, Accion also reaches out to women, veterans, restaurant owners, and people with disabilities.

Accion U.S Network Pros and Cons

  • Pros: The nonprofit community lender helps entrepreneurs build their businesses from the ground up. The organization puts business owners in contact with banks, nonprofits, and government agencies to provide a support network.
  • Cons: You can't be over 30 days late on bills, loans, or credit cards. Applicants must have a minimum credit score of 575 and no late mortgage or rent payments within the last 12 months.

Accompany Capital

Accompany capital offers $5,000 to $50,000 loans to minority business owners in the U.S. In addition, AC offers capital to refugees, women, and immigrants. The organization helps business owners who other lenders have turned down because of low credit scores, loan requests that are too small, or startup businesses.

Accompany Capital Pros and Cons

  • Pros: Lenders charge between 8.25 and 10 percent fixed interest rates, low application fees, and a 2% loan closing fee.
  • Cons: You'll require a cosigner for amounts over $3,000. And borrowers will need to match 20% of the loan amount.

Business Consortium Fund, Inc.

The Business Consortium Fund is a nonprofit business program for minorities certified by the U.S. Department of the Treasury. It dedicates exclusively to offering $75,000 and up to $500,000 commercial loans for minorities.

Business Consortium Fund Pros and Cons

  • Pros: Business loans are mainly term loans or lines of credit. They consider the loan amounts above $500,000 on a case-by-case basis. BCF loans include contract financing, working capital, and equipment financing.
  • Cons: You must certify your business through The National Minority Supplier Development Council. You can only apply for a loan if you have a supplier relationship with the NMSDC.

Business Diversity Lending Program

The Business Diversity Lending Program is a Union Bank program that offers small business loans for minorities and lines of credit. Qualifying ethnicities include Hispanic, Latino, American Indian, Alaskan Native, Asian, Black or African American, and Native Hawaiian or other Pacific Islander.

Business Diversity Lending Program Pros And Cons

  • Pros: Businesses with revenues up to $20 million may qualify for a loan and borrow up to $2.5 million.
  • Cons: You must have been in business for at least 2 years. Business owners must legally own at least 51% of the business.

Indian Loan Guarantee Program

The Indian Affairs branch of the federal government helps native Americans secure small business financing. Individuals may apply for up to $500,000. In addition, tribal enterprises and business entities can complete an application for minority business loans that offer larger amounts.

Indian Loan Guarantee Program Pros and Cons

  • Pros: Applicants apply with any lending institution if the lender uses a designated Indian Affairs application.
  • Cons: There are additional loan requirements if you use the funds for construction, renovation, or refinance an existing loan. Most loans require an analysis of the business operation, a list of available collateral, and a credit report from a national credit bureau.
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Large Bank Loans: an Option for Minority Business Owners?

This is probably the first thing that came to your mind, right? It seems only obvious. If you need a loan, you go to a bank because they offer the best rates, and you probably have a checking account opened with them. While banks offer the lowest rates and the longest payback terms, they have several drawbacks.

Bank loans might not work for minority business owners:

  • Large banks are not very comfortable lending to businesses earning less than $1 million in sales because of the relatively small loan amounts and higher failure rates than larger businesses.
  • Due to the lack of collateral, small businesses find it challenging to access a secured loan from a bank. Why? Small businesses don't always own large assets such as commercial real estate or a fleet of vehicles to pledge as collateral for the loan. It's more likely that small businesses rent or lease large properties or assets instead of owning them.
  • When applying with a large bank, you must ensure a credit score over 680 to qualify.
But don't lose hope yet! There is a great loan alternative that adapts perfectly to your situation.

How to Get a Minority Business Loan

Getting business loans for minorities is pretty straightforward. Just follow these instructions:

Analyze All Types Of Loans For Small Minority-Owned Businesses

Start by researching different types of loans; for instance, if you are a female entrepreneur, you can review which small business loan for women is better for you. Then, find the ones that could be useful for someone in your position and your needs.

Check If You Qualify

Qualifying for a minority business loan is not always easy. Usually, your business must be majority-owned by a member of a minority group. Additionally, you may require registration or certification as a minority business or disadvantaged business enterprise (MBE/DBE). Keep in mind that not all lenders have those requirements. For example, Camino Financial is an alternative lender open to lending to any business owner without stringent requirements. What else do you need to consider for programs created to offer minority loans for business? If you answer "Yes" to any of the following questions, you're likely eligible for flexible loan programs to finance your business.
  • Do you run a business generating less than $1 million in sales?
  • Has your business reported less than 2 years of positive net income in its tax returns?
  • Are you starting a business, or have you been operating for less than 3 years?
  • Do you belong to one of these minority groups? Women, African Americans, Asian Americans, Indian Americans, Hispanics, Latino, or Pacific Islanders.

Select A Type Of Loan

Identify what you think your best option is. Then, find a specific financial institution that offers these financing options.

Choose A Lender And A Loan Amount

Review the minority business loan requirements and select a lender whose requirements you can meet. It's also a good idea to make sure you choose a loan amount you'll be able to repay comfortably. A business loan calculator can help you with this.

Gather Documents And Information

Before you apply, you'll want to get your financial information in order. This could include financial records, permits, licenses, and more.


You'll then need to complete an application. Usually, online lenders will ask for personal, business, and financial information.

Continue The Application Process

The lender might require more information to complete the loan application process. This could include reviewing financial statements to make sure you can pay the loan.

Wait For A Loan Decision

Then you'll just have to wait to see if the lender approves your loan. You'll receive the loan directly into your bank account if they do.

Other Business Financing Alternatives For Minorities

If you need some extra cash for your business, don't worry, you can get it. The best resource at your disposal is a minority loan.

Here's a look at 10 different types of loans for minority entrepreneurs.

Small Business Loans And Microloans

Microloans and business loans for female-owned businesses are some of the best financial products in the market. Minority loans for businesses allow you to strengthen and grow your business. You can use this money for all sorts of things, including:
  • hiring staff
  • making inventory purchases
  • renovating your workplace
  • creating marketing campaigns
  • strengthening your working capital
  • and so much more

Small Business Startup Loans For Minorities

The purpose of these loans is to help start or expand a business that will generate jobs in the local community and contribute to its overall economic development. The loans are available in varying amounts and usually require collateral, such as real estate or equipment. Interest rates on these loans vary widely depending on the lender and the borrower's credit rating.

SBA Loans

The Small Business Administration (SBA) has several different business loan programs.

SBA Community Advantage Loans

An SBA Community Advantage loan is one option that falls under the 7(a) umbrella. Lenders offer these $50,000 to $250,000 loans in specific communities. So, for example, say you live in an underserved community and are looking for access to capital. These could be an excellent option for you to take advantage of, assuming you qualify. An SBA Community Advantage Loan is like an installment loan. The interest rates could either be variable or fixed. These lenders must offer a minimum of 60% of their loans to minorities. So if you're a woman part of any other minority group, you can get these types of loans.
#DidYouKnow There are also SBA grants that you can apply for and grow your business. 

SBA Microloans

A Small Business Administration microloan offers up to $50,000. However, the average microloan falls around $13,000. There aren't any restrictions on who can apply for one. But they're usually for veterans, women, minorities, or low-income applicants. On the other hand, the downside of all SBA loans is that they require a very high minimum credit score.

Banks And Credit Unions

Depending on your bank or credit union, you'll find different guidelines. In other words, the amount you'll be able to borrow will vary from one organization to the next. However, the one constant is that they usually only help established businesses. Traditional banks' relatively low (and fixed) interest rates are their most significant benefits. However, you'll need a good to excellent credit score to qualify for a loan with favorable rates. These institutions also offer various products to fit most financial needs. But there are some potential cons you'll want to keep in mind. Firstly, it might be hard to qualify for one of these loans if you don't have a good credit history or a low credit score. The same will happen if you don't have a strong track record of operating a business successfully, Secondly, it's also important to remember that this may not be the fastest route if you need funds quickly. Applying for business loans for minorities through a bank can be lengthy. In addition, they can take a long time to get back to you. Once approved, you can wait weeks to get the money you need.

Nonprofit Loans

You might have difficulty securing business loans if you are part of a minority. That's especially true with traditional financial institutions and some online lenders. Or maybe the other loans have too high rates for your business. That's where nonprofit organizations come in. They usually offer loans for no more than $50,000 with very friendly terms and rates. Usually, their credit score requirements are very lenient. Its mission is to impulse economic development in their communities. Nonprofit lenders usually also offer assistance and workshops. These loans might suit you if you're a minority woman who runs a business.

CDFI Loans

CDFI stands for Community Development Financial Institutions. These private financial institutions help low-income and disadvantaged communities improve their financial circumstances. They do so by providing loans. Why? When these businesses have borrowing options, they can also strengthen their communities. Camino Financial is the first-ever Neo-CDFI in the country. This means that artificial intelligence helps us fund minority small business owners.

Business Line Of Credit

A business line of credit (LOC) is a type of revolving credit. This means you'll have access to funds up to a particular credit limit as long as you have available credit. You probably have a good idea of how revolving credit works if you have a credit card. If you have an unexpected dip in business, your line of credit can be there waiting to help you. You can use a line of credit for business expenses or strengthen your cash flow. One of the main benefits of this type of loan is that you'll have money on hand whenever you need it. This means that once you've paid back what you owe, you can borrow money again without applying for another loan. You'll only pay interest on what you've borrowed, not the total available amount. Keep in mind that the size of the LOC will depend on:
  • your credit history
  • the health of your business
For example, a business line of credit can be a practical option if you have a problem with cash flow. However, it's not that great of an alternative for significant, single investments or purchases. A credit line can be handy in your back pocket if you need flexible small business loans for female minorities.

Equipment Financing

Maybe you don't need capital to hire employees or expand your small business. However, if you need to buy machinery, you need an equipment financing loan. These types of loans can help you finance a piece of machinery or equipment that you need to run your business. Most often than not, with this type of loan, the equipment you buy will work as the loan's collateral. They can help you buy heavy-duty vehicles or office equipment, for example. You can quickly get one of these with online lenders.

Peer To Peer Loans

Peer-to-peer (or P2P) is a type of lending that takes financial institutions out of the picture. Instead, you can connect with individuals willing to invest in your business. They're online platforms that will match borrowers with lenders Although they're usually unsecured, you can also find secured loans in this industry.

Working Capital Loans

Working capital loans are for everyday short-term costs (not significant investments). But what is working capital? It includes operational needs, like:
  • pay your workers
  • finance debts
  • pay the lease on your workspace
  • deal with any overhead costs
These loans are great for businesses that don't have a stable revenue (for example, seasonal businesses).

Business Credit Card

These aren't a loan in the conventional sense. But business credit cards are a helpful way to pay for everyday business expenses. They share many similarities to a business line of credit in that they're both a type of revolving credit. You can also earn cashback with a credit card or travel rewards with business credit cards.

Compare the Top Minority Business Loan Alternatives

Analyzing all the information about business loans for minorities can make you dizzy! Check out this comparison table to take a fast look at what could be the best minority business loan for you:
Lender Collateral Need a profitable tax return? Average Credit Score Ease of loan process Speed of loan process Offered Business Education
Large Bank ✔️ ✔️ 650+ Requires significant documents 60-90 days Sponsors events and workshops
Community Bank ✔️ ✔️ 650+ Requires significant documents 45-60 days Personalized customer care
CDFI ✔️ 620+ Requires significant documents 60-90 days Workshops
Camino Financial 580+ Low amount of documents submitted electronically 3-10 days Blog, online videos, webinars, e-mails, newsletters

Resources For Minorities

  • Minority business certification. A minority business certification signals which are minority-owned businesses. In addition, the certificate can help you get government contracts.
  • MBDA (Minority Business Development Agency). The federal agency provides grants and funding to minority business enterprises.
  • SBA's 8(a) Business Development Program. This is a nine-year program created by the SBA. The business development program helps businesses owned by economically disadvantaged individuals.
  • National Minority Business Council. The nonprofit organization provides education and assistance to minority and female-owned small businesses.

What's the Best Option for Minority Small Business Owners?

At a glance, it might seem complicated it getting small business loans for minorities. But as we mentioned, several financial institutions and organizations have the mission to help these sectors. Getting the necessary capital will involve effort, but it'll be worth it. After all, getting the money that you need and a lender that understands you can make your small business soar in little time. Get funds for your small business  

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Do women qualify for minority business loans?

It will depend on the lender, institution, or particular loan. Usually, what constitutes a minority is communities that are "economically and socially disadvantaged." Check if the loan is for a specific minority (i.e., ethnic minorities) or if any person part of any minority can apply.

Can women get business loans?

Yes. Women can get business loans to strengthen their companies. We recommend you use loans to grow and strengthen a business.

How hard is it for a woman to get a business loan?

Usually, it can be more challenging for female entrepreneurs to get capital (in comparison to their male counterparts). Fortunately, some unbiased lenders approve loans without considering the applicant's genre.

What is the easiest SBA loan to get?

The SBA 7(a) loan is generally the easiest SBA loan to get. This is because the eligibility requirements are less strict than for other SBA loans, and the application process is relatively straightforward.

How do I get a PPP minority loan?

You can get a PPP minority loan by contacting your local SBA office or district representative. They will be able to help you with the paperwork and guide you through the process.

What is minority lending?

It refers to financial institutions that offer products and services specifically designed for minority groups.

This can include minority small business loans, home mortgages, and other types of credit products.

What are the benefits of a minority-owned business?

A minority-owned business brings unique perspectives and insights to the table due to their personal experiences as a minority. This can benefit all businesses, as it opens up new markets and ways of thinking. Minority-owned businesses also tend to be more entrepreneurial because they often work twice as hard and hustle ten times as much just to get off the ground. This drive and determination are highly sought after by larger businesses, as they can help them stay ahead of the competition.

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