Epsilon Business Credit

Business Loans for Minority Women

It takes money to make money, but money can be especially hard to come by for minority women looking to start their own businesses. Fortunately, there are a number of excellent options out there, including grants and business loans for minority women. In this article, we will outline some of the ways in which minority women can obtain the capital resources they so desperately need to join the ranks of entrepreneurs living out the American Dream.

The first option is not a loan, but it can help minority women obtain the guidance and government contracts that can prove essential to a successful business. The Small Business Administration (SBA) has a Business Development program that can help qualifying minority-owned businesses develop and grow their business. The SBA 8(a) Business Development program provides one-to-one counseling, training workshops, and management and technical guidance. The program also provides these firms access to government contracting opportunities, which can allow these businesses to become solid competitors in the federal marketplace and grow their business out from there.

The next option is a federally guaranteed loan through the SBA. Federal and state governments may not provide grants to women and minorities to start a business, but the SBA does guarantee loans for businesses, with some favor shown to minorities and women. Recent studies have shown, in fact, that an SBA loan is five times as likely to be granted to minority- or women-owned businesses than loans made by banks, because the certified lenders affiliated with SBA are inclined to award loans to many women and minorities businesses.

It is also important to check with state and local economic development agencies, since several provide loan programs specifically to assist women- and minority-owned enterprises. Different programs have differing eligibility requirements, but most of them will provide start-up financing as well as working capital for eligible small businesses.

As another federal option, be sure to check out the Minority Business Development Agency, because it is another terrific resource for financial assistance. The MBDA is the only federal agency specifically created to help the growth of minority-owned businesses, and has strong relationships with local lenders that may not be affiliated with the SBA. While the MBDA does not provide capital funding itself, it does use its resources to help women- and minority-owned small businesses secure capital elsewhere.

There are also a number of banks that offer minority small business loans. These loans require that the business owner qualify as a minority under the Equal Employment Opportunity Commission, owning and managing at least 51% of the business. These loans are not federally guaranteed, so have stiffer requirements than SBA and MBDA loans. For example, some of these loans will require that the business have annual sales not exceeding $15 million, have been in business for at least two years, and have borrowing needs of less than $2.5 million.

If you are a woman, do you automatically qualify as a minority? Unfortunately, no. When these programs define an eligibility requirement of being a minority, they typically require that the business owner be a part of a minority as defined by the Equal Employment Opportunity Commission (EEOC). The EEOC defines “minority” as belonging to one of the following groups:

  • Black – All persons having origins in any of the Black racial groups of Africa and not of Hispanic origin.
  • Hispanic – All persons of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish culture of origin, regardless of race.
  • Asian/Pacific Islander – All persons having origins in any of the original peoples of the Far East, the Indian subcontinent, or Pacific Islands. This area includes China, India, Japan, Korea, Vietnam, the Philippine Islands, and Samoa.
  • American Indian/Alaskan Native – All persons having origins in any of the original peoples of North America and who maintain cultural identification through tribal affiliation or community recognition.

With these definitions, we move onto other possible sources of funding, specific to the minority group the business owner belongs to. Each of these minority groups has one or more local, regional, or national organizations devoted to looking after the needs and rights of that minority group. For example, the National Association for the Advancement of Colored People exists to “ensure a society in which all individuals have equal rights without discrimination based on race.” While the NAACP is most well-known for its actions in assuring equal treatment and rights for black individuals, part of NAACP’s mandate is ensure the economic welfare of people of black origins. As such, NAACP helps to establish banking principles that favor minorities, and in some regional offices can help obtain start-up funding for a small business owned by a minority woman. Similarly, several of the larger Native American tribal organizations offer financial counseling and assistance, so be sure to check your local resources in addition to SBA and MBDA resources.

Other minority groups may also offer assistance to individual minorities, so be sure to research in depth what options exist. Do not focus just on loans, either; often, a grant can be easier to obtain and is definitely more advantageous than a loan (since you do not have to repay a grant). Be wary of programs that ask for money to divulge these opportunities; that is a waste of your limited resources, and all of the information is readily available through the minority groups and federal agencies.

In closing, there are a number of options out there, both for grant funding and for business loans for minority women. It is important to explore all available resources, and take advantage of the opportunities the federal, state and local governments make available to minorities and minority women, in particular. As you begin your business venture, be sure to borrow wisely, especially within the first two years of your business. Look favorably towards borrowing options that report your favorable payment history to Dunn & Bradstreet, because future financial opportunities will require an excellent business credit history. With wise use of credit opportunities, a minority-owned business will have many more opportunities for financial assistance when the business needs to expand beyond its current operating limitations.