Money for Small Business | Small Business Minority Loans

Small Business Minority Loans


Being in a minority group need not be a hindrance to having your very own business. According to John F. Robinson, president and CEO of the National Minority Business Council, “no matter what your background is, having a strong business plan is the most important factor in securing small-business financing.” There are resources that are accessible to minorities in business.

Minority loans are financial assistance instruments that are extended to ethnic minorities and women business owners to help finance their business. Federal agencies such as the Minority Business Development Agency (MBDA) and the Small Business Administration (SBA) have financing instruments supported by federal funds earmarked for the business development of these segments. The MBDA controls a number of Business Development Centers that extend assistance to minority business owners by way of technical assistance including writing business plans. These plans play a vital role in the evaluation of the credit-worthiness of minority loans applicants. The more detailed these plans are, the better the chances are for the application to be approved.

Just like any other type of loan, minority loans are approved based on the borrower’s capacity to pay. Based on the business plan, the lender will determine whether or not they chance of the business being able to generate sufficient revenues to pay off the loan are high. Business credit scores are likewise taken into consideration. That is why it is normally required for the business to be in operation for at least two years. An established business credit track record is a necessary factor in considering an application of minority loans.

The SBA is also a good source of minority loans. It can guarantee loans of up to $250,000 taken out from an SBA-approved lender. SBA does not directly fund loans. A third party financial institution is often the source of funding after the SBA evaluates and approves a borrower depending on certain SBA guidelines. Most banks have signed partnership agreements with the SBA to provide assistance to small business borrowers including minorities and women at business-friendly interest rates and repayment terms. On top of the list of minority loans partner banks is Bank of America. Wells Fargo is another financial institution that extends SBA minority loans to African-Americans, Latinos and women.

The following eligibility requirements need to be fulfilled to be considers for SBA minority loans:

1. The business should be a profitable business with at least two years of business experience.

2. The business owner should be reputable and with good personal and business credit track record.

3. The business should not have filed for bankruptcy within the past 10 years.

4. The business should be guided by a solid business plan.

One other option for minority loans is the Small Business Investment Companies (SBICs). These companies are privately owned and managed investment companies that extend venture capital and start-up financing to small businesses. The SBIC is an SBA-regulated company.

Other than the MBDA and the SBA, there are organizations that offer financial assistance to help develop businesses of minority groups. But no matter which organization you turn to for your business’ financial requirements, in order for your business to succeed, it is important that you have a thorough understanding of your business and the industry where it belongs.

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