Best Of
Minority business owners should compare financing options but may have more success with an online lender.
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.
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.
on Fundbox's secure website
on Fundbox's secure website
10.10 - 79.80%
600
Pros
Cons
Qualifications:
Our pick for
Businesses with good credit
A credit score in the high 600s can unlock additional funding options.
with Fundera by Nerdwallet
with Fundera by Nerdwallet
19.99 - 24.99%
680
Pros
Cons
Qualifications:
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.
with Fundera by Nerdwallet
with Fundera by Nerdwallet
15.00 - 68.00%
530
Pros
Cons
Qualifications:
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.
| Lender | Best For | Est. APR | Min. Credit Score | Next Steps |
|---|---|---|---|---|
Fundbox - Line of credit | Best for Businesses with insufficient credit history | 10.10 - 79.80% | 600 | See Your Loan Options on Fundbox's secure website |
Credibility Capital - Online term loan | Best for Businesses with good credit | 19.99 - 24.99% | 680 | See Your Loan Options with Fundera by Nerdwallet |
BlueVine - Invoice factoring | Best for Businesses with unpaid customer invoices | 15.00 - 68.00% | 530 | See Your Loan Options with Fundera by Nerdwallet |
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.
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:
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.
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.
To recap our selections...
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.