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4 Best Small-Business Loans for Minorities of March 2021

Minority business owners should compare financing options but may have more success with an online lender.

Steve NicastroFebruary 19, 2021
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Minority business loans are available from many lenders. But getting funding from a traditional financial institution may be tougher for minorities than other business owners due to issues like insufficient credit, limited banking history and unconscious bias.

More success may be possible with alternative sources, such as nonprofit organizations and online lenders. In fact, a 2019 report from the Federal Reserve found similar approval rates for white- and Black-owned businesses among online lenders, which was not the case for banks.

To get the best deal possible, be sure to compare all your small-business loan options. But here are some small-business loans that may be a good fit for minorities, plus other financing options and resources — including grants and certifications — for minority-owned businesses.

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Our pick for

Businesses with insufficient credit history

Online lenders may have lower credit score requirements — sometimes as low as a FICO score of 500 — compared to banks.

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on Fundbox's secure website

Fundbox - Line of credit

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on Fundbox's secure website

Est. APR

10.10 - 79.80%

Min. Credit Score

600

Fundbox offers a business line of credit to fill a cash-flow gap, and qualifying is easier than with other lenders.

Pros

  • Cash can be available by the next day.
  • Low minimum credit score requirement.

Cons

  • Rates are high compared to traditional banks.
Read full review

Qualifications:

  • Minimum credit score: 550.
  • Minimum time in business: 3 months.
  • Minimum annual revenue: $50,000.

Our pick for

Businesses with good credit

A credit score in the high 600s can unlock additional funding options.

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Credibility Capital - Online term loan

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Est. APR

19.99 - 24.99%

Min. Credit Score

680

Credibility Capital offers low-cost business loans that work best for small-business owners with strong credit.

Pros

  • Competitive rates among online lenders.
  • No prepayment penalty.
  • Extra monthly payments can save interest cost.

Cons

  • Short repayment term results in higher payment amounts.
  • Requires high minimum credit score and revenue.
Read full review

Qualifications:

  • Minimum credit score: 680.
  • Minimum time in business: 2 years.
  • Minimum annual revenue: $250,000.
  • No bankruptcies in the past 5 years.

Our pick for

Businesses with unpaid customer invoices

Approval for invoice factoring typically depends on the strength of your customers — such as whether they pay on time.

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BlueVine - Invoice factoring

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Est. APR

15.00 - 68.00%

Min. Credit Score

530

BlueVine’s invoice factoring works best for financing larger invoices, but only if your customers reliably pay on time. NOTE: BlueVine has temporarily paused applications for this product to prioritize PPP funding.

Pros

  • Finances larger invoices.
  • Cash can be available within the same day.
  • Accepts low minimum credit score and short time in business.

Cons

  • Not for businesses that do not invoice on net terms.
  • Loan amount is tied to the value of your invoices.
  • Dependency on customers to pay their bills on time.
Read full review

Qualifications:

  • Minimum credit score: 530.
  • Minimum time in business: 3 months.
  • Minimum annual revenue: $100,000.

Our pick for

Government-backed loans

Minority business owners aren't approved as often for government-backed loans, but these loans offer low rates and flexible terms if you can qualify.

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Summary of Best Small-Business Loans for Minorities of March 2021

LenderBest ForEst. APRMin. Credit ScoreNext Steps

Fundbox - Line of credit

Best for Businesses with insufficient credit history10.10 - 79.80%600
See Your Loan Options

on Fundbox's secure website

Credibility Capital - Online term loan

Best for Businesses with good credit19.99 - 24.99%680
See Your Loan Options

with Fundera by Nerdwallet

BlueVine - Invoice factoring

Best for Businesses with unpaid customer invoices15.00 - 68.00%530
See Your Loan Options

with Fundera by Nerdwallet

What is a minority-owned business?

A business is typically considered to be minority-owned if it’s at least 51% owned and operated by people of specific ethnicities. For example, to be considered a minority-owned business in New York, business owners must be Black, Hispanic, Asian-Pacific, Asian-Indian Subcontinent, Native American or Alaskan Native.

A certification stating your business is minority-owned may be required for you to qualify for specific minority business loans or programs.

Loans for minority business owners

Banks typically offer the lowest-cost business loans, and some — such as Union Bank and Native American Bank — specifically work with minorities. But traditionally, minorities have struggled to get approved for bank small-business loans.

If you’re a minority business owner, you may instead want to consider:

  • Online loans. Alternative online business loan lenderstend to have looser eligibility requirements than traditional banks, and may focus more on criteria like your cash flow than your credit. Loan amounts range from about $1,000 to $5 million. Minority applicants have a better chance of getting approved with online lenders than banks, according to the Federal Reserve, but your loan will likely cost more.
  • SBA Community Advantage loans. The U.S. Small Business Administration backs many types of SBA loans, which banks and other lenders issue. The Community Advantage program is for businesses located in underserved communities that need $250,000 or less. The SBA works with local, mission-based lenders to provide the financing. Use the SBA Lender Match tool to find loan providers near you.
  • Microloans. The SBA offers microloans of up to $50,000 through nonprofit organizations. Its partners include The Opportunity Fund, which says 86% of its borrowers are minority business owners, and Accion, which draws more than 60% of its borrowers from minority communities. You can find providers in your state on the SBA website. Contact your local SBA district office for assistance.
  • Community development financial institutions. CDFIs are banks, credit unions and other institutions that provide financial access, including loans, to minorities and other economically disadvantaged communities. For example, The National Minority Supplier Development Council Business Consortium Fund is a CDFI that provides minority business loans from $100,000 to $750,000. You can find a CDFI in your state with this tool.

Additional help for minority businesses

  • SBA 8(a) business development program. The SBA 8(a) program does not offer loans. Rather, it’s a certification that can help small businesses interested in government contracting improve their chances of winning bids. To qualify, your firm must be 51% controlled by “socially and economically disadvantaged individuals,” which includes minorities, women and veterans.
  • Small-business grants. The government and private organizations offer grants and awards to minority-owned businesses. Opportunities often vary drastically from state to state, but here are some minority small-business grants to consider.
  • Free community resources. Many federal resources have regional or local offices, such as the small business development centers and Minority Business Development Agency offices. These resources may be able to provide information on community financing, look over your loan applications and offer mentorship and networking opportunities.
  • SCORE. Though it’s not specifically geared toward minority business owners, SCORE is a free volunteer program that connects entrepreneurs with seasoned business mentors who have a wealth of knowledge about business funding challenges.

If your business has been open less than a year

Funding options are limited for small businesses that have less than one year of operating history — regardless of the owner’s background.

Lenders typically prefer established businesses with a track record and operations that produce more than enough cash flow to support loan repayments, which tends to disqualify young businesses. The good news: You still may be able to finance your startup.

If you have strong personal credit, for instance, a personal loan for business is a viable option since most personal loans are unsecured.

Business credit cards, too, may also offer financing for minority business owners starting out or those looking for working capital.

Compare small-business loans

When shopping for loans, be sure to compare annual percentage rates, or APRs, which indicate the true cost of borrowing including all fees. Use NerdWallet’s business loan calculatorto figure out your monthly payment and total interest costs, and see loan options based on your credit score.

NerdWallet’s small-business loans comparison toolcan also help you compare options. We gauged lender trustworthiness, market scope and user experience, among other factors.

Last updated on February 19, 2021

To recap our selections...

NerdWallet's Best Small-Business Loans for Minorities of March 2021

Frequently Asked Questions

Two new laws provide coronavirus relief for small businesses and the self-employed, including access to forgivable small-business loans under the Paycheck Protection Program and immediate emergency funds.

To qualify as a minority-owned business, your company must be owned and controlled at least 51% by a minority. That could include someone who is Asian, Black, Hispanic, Native American or part of a different ethnic group.

The U.S. Department of Agriculture, National Association for the Self-Employed and the Minority Business Development Agency are just a few organizations providing small-business grants for minorities.