As a minority woman in business, it is important to know what is available to you for business funding. Do business loans for minority women even exist? The answer is, sort of. There are business loans for minority women, but not for them exclusively. There are other funding options out there as well. Grants, crowdfunding, and even angel investors are all viable options.
How do you find the best options for you? How do you know if you need to be looking for grants or business loans for minority women? The truth is, you need to explore every option. This is because, in reality, it is probably going to take a combination of funding options to fully fund your business.
Business Loans for Minority Women: The Truth
The thing is, there aren’t a ton of loan programs only for minority women. You are really looking for regular loans that work with the challenges faced by business owners that fit into both categories. Once you understand that, your search will become much easier.
Business Loans for Minority Women: Traditional vs. Private
As a general rule, loans from traditional lenders are both the best and the hardest to get. Their terms and rates are much better than those offered by private lenders. They also have more stringent eligibility requirements. They typically require higher credit scores, longer time in business, and more annual revenue.
Private lenders, on the other hand, work a little differently. They tend to have higher interest rates and less favorable terms. However, they have less strict requirements for approval. They allow lower credit scores and less time in business, as a general rule.
The Small Business Administration
So where do you go to find business loans for minority women? Since traditional loans offer the best rates and terms, they are truly the place to start. They are harder to get, but the Small Business Administration loan programs help make them easier. They do not lend funds directly. Instead, they work with traditional lenders.
They back loans to make them easier for borrowers to qualify—with a 680 FICO score. You can find a list of SBA partner lenders using their lender match tool.
This is the Small Business Administration’s main loan program. It offers federally funded term loans up to $5 million. The funds can be used for expansion, purchasing equipment, working capital and more. These funds are distributed through traditional lenders.
There is a down payment requirement of at least 10% for the purchase of a business, commercial real estate, or equipment. The minimum time in business is 2 years. In the case of startups, business experience equivalent to two years will suffice.
These loans are also available up to $5 million and can buy machinery, facilities, or land. They are generally used for expansion. Like 7 (a) loans, private sector lenders or nonprofits process and disburse these funds. They work well for commercial real estate purchases especially.
Terms for 504 Loans range from 10 to 20 years. Unfortunately, funding can take up to 90 days. The collateral is the asset it is financing. There is also a down payment requirement of 10%, which can increase to 15% for a new business.
There is also a 2-years in business requirement. For a startup, equivalent experience for management will meet this.
Microloans are available in amounts up to $50,000. They work for starting a business, purchasing equipment, buying inventory, or for working capital. Community based nonprofits handle SBA microloan programs as intermediaries.
Interest rates on these loans are 7.75% to 8% above the lender’s cost to fund, and the terms go up to 6 years. Similar to other programs, they can take up to 90 days to fund. The minimum credit score is 640, and the collateral and down payment requirements vary by lender.
SBA Express Loans
These loans max out at $350,000. They have a maximum interest rate of 11.50%. In addition, terms range from 5 to 25 years, and the SBA guarantee is less than it is with their other loan programs at 50%. To qualify, you must have a debt to service ratio of 1.1 or higher. If the loan is greater than $25,000, collateral may be necessary. It depends on the lender.
The turnaround for express loans is much faster. The SBA takes up to 36 hours to give a decision. Also, there is not as much application paperwork. As a result, express loans are a great option for working capital, among other things, if you qualify.
Other SBA Resources
The SBA exists for all small company owners. However, their Office of Women’s Business Ownership exists to help women local business owners specifically. This includes women minorities. Their goal is to enable and empower business owners that are women via advocacy, outreach, and education as well as assistance.
Business Loans for Minority Women: Private Lenders
Other options for business loans for minority women include private lenders. These loans, much like SBA loans, are not exclusively for minorities or women. However, by nature they tend to work well with the unique challenges each group faces.
LendingClub functions as a peer-to-peer lender that offers mostly fixed-term small business loans. Borrowers that get loans from LendingClub generally use loans funds to buy equipment, finance growth or expansion projects, consolidate other debt, or hire new employees.
The minimum loan amount at LendingClub is $5,000 and the maximum is $300,000. You must have been in business for 12 months or more and have at least $50,000 in annual sales to qualify. There can be no tax liens or bankruptcies, and you must have at least 20% ownership. They will work with a credit score that is fair or higher. A fair credit score ranges from 620 to 659.
Lendio offers a loan-connection service that dramatically cuts the time it takes for small business owners to find the perfect loan. They do the legwork by vetting a network of competing small business lenders. Funding is fast, sometimes in as little as 24 hours.
Potential borrowers submit one application and then see offers from lenders in the network. The minimum loan amount is $500 while the maximum is $5,000,000. The business must be U.S. or Canada based and must have a business bank account. The minimum personal credit score for approval is 560.
Blue Vine Business Loans for Minority Women
BlueVine offers two options for small business financing. They include lines of credit and invoice factoring. They also offer the ability to talk with a financing advisor, and their application process takes place exclusively online. Their minimum loan amount is $5,000 and their maximum is $100,000. To be eligible you must be in business for at least 6 months, have revenue of $120,000 per year or more, and have a credit score of at least 600.
Kiva has a different lending model. They offer loans to businesses, but their platform is far different from that of traditional or even other non-traditional lenders. It is a kind of cross between crowdfunding and lending. They offer loans with a 0% interest rate, so even though you have to pay it back, it is actually free money. In addition, they do not run a credit check at all.
The only requirement is that you have to get at least 5 family members or friends to donate money for your business, and you have to give at least a $25 loan to another business on the platform yourself.
Microloans are a great option when it comes to business loans for women with bad credit. Grameen is one of the few lenders that offers microloans specifically for women. The loan amounts range from $2,000 to $15,000, and they also offer financial training and support.
As a bonus, they report payments to Equifax and Experian. Consequently, these loans help borrowers build credit.
Other Resources for Women
Here are some other organizations that work to help women of all races.
National Female’s Service Council
The NWBC is a federal advising council. It works as a resource of guidance to the government on women’s organization problems. The objective is to encourage campaigns, programs, and policies to sustain females from startup to growth.
Other Tools to Consider
Along with those firms listed above, these agencies provide support to women owned businesses.
The AWBC runs a network of business centers geared toward women. These centers labor to help women succeed by offering training, business development, financing, and mentoring opportunities.
This organization, also known as NAFE, sponsors events, provides training, and offers other resources to help female business owners achieve success.
The NAWBO works across the country to offer training, events, and other resources to women owned businesses nationwide.
With more than 300 chapters and 10,000 volunteers, this is the country’s largest network of expert business mentors that volunteer their time. They match female business owners with mentors, or they can participate in a workshop to help them learn what they need to know to be successful.
Don’t Forget to Look into Grants to Supplement Business Loans for Minority Women
Though highly competitive and rarely enough to fund a business on their own, grants are a great way to supplement other business funding. Here are a few you can start with.
The Amber Grant awards $500 to $1,000 per month to a woman-owned business. One of the recipients also receives an additional $10,000 grant at the end of the year. Applicants only need to tell their story and turn it in with a $15 application fee.
#GIRLBOSS Foundation Grant
Specifically for woman-owned businesses in fashion, music, and art, the #GIRLBOSS small business grant awards $15,000. They also offer exposure via the Girlboss website and social media platforms. Judges rate those applying on creativity, business savvy, planning, innovation in the field, need, and where they plan to work.
Cartier Women’s Initiative Award
The Cartier Women’s Initiative Award is $100,000 for first place and $30,000 for second place. They award the grant to 18 female business owners from around the world each year. Women business owners who are just getting started may qualify. Look over the complete application for more information.
Update 6/23/2020: 2020 Cartier Women’s Initiative Award winners are:
- North America: Stephanie Benedetto, New York – Queen of Raw: An online marketplace for businesses to buy/sell deadstock fabrics and textiles, as a sustainable alternative to destroying them.
- Latin America + the Caribbean: Adriana Luna Diaz, Mexico – Tierra de Monte: A technology that relies on bacteria and fungi to rejuvenate plant and soil fertility, regulating diseases and pests, in a safe, effective and affordable manner.
- East Asia: Chunguang (Charlotte) Wang, China – Equota Energy (Technology) Shanghai Co. Ltd.: A data analytics-driven energy efficiency solution provider. They help clients understand their energy consumption in real time and make recommendations for reductions that create cost and environmental impact savings.
- South Asia + Oceania: Joanne Howarth, Australia – Woolpack Australia – Planet Protector Packaging: A manufacturer of environmentally responsible insulated packaging (made of sheep’s wool) for temperature sensitive goods in transit.
- Europe: Anna-Sophie Hartvigsen, Denmark – Female Invest: Seeks to educate women on investing, and to employ more women in the financial industry, by organizing financial educational training for women via a membership model.
- Sub-Saharan Africa: Temie Giwa-Tubosun, Nigeria – Life Bank: Delivers WHO-compliant essential products, such as blood and oxygen, to hospitals using their own network of motorbikes and boats.
- Middle East + North Africa: Nadia Gamal El Din, Egypt – Rahet Bally: The Rahet Bally card offers discounts and access to health experts and hospitals. ‘The Cloud by Rahet Bally’ is a facility that offers all the services a mom needs, including psychiatric counseling services, gyms and babysitting.
These ladies were selected from 1,200 applications from 159 different countries. Each of the seven laureates will receive a $100,000 investment in their business, while the 14 runners-up each receive a $30,000 investment. All 21 finalists will receive mentoring, networking and business development support.
Grants for Minorities
If you are looking into business loans for minority women, then you must be both a minority and a woman. That being the case, you should check out these grants for minorities as well.
First Nations Development Institute Grants
The mission of this group is to offer grants that help Alaska Natives, Native Hawaiians, and Native Americans. They offer assistance in the application process in addition to funds.
National Black MBA Association Scale-Up Pitch Challenge
Also known as NBMBAA, the Scale-Up Pitch Challenge has cash prizes ranging from $1,000 to $50,000. The associate states its purpose is to help newer businesses that have an African founder that maintains equal ownership.
Non-Minority or Female Specific Options
There are grants options that can work well even though they are not exclusively for minorities, or women. Some examples include the following.
FedEx Small Business Grant
There are 10 grants the company awards each year. They range from $15,000 to $50,000. If you’re a minority owned business with a cutting-edge product, this could be the grant for you.
A business must use the FedEx website to submit entries. There are a few questions to answer about your business. In addition, there is a requirement for an elevator pitch about what makes your business special. Also, you have to explain how you would use the grant funds. A 90 second video submission is optional.
NASE Growth Grants
The National Association for the Self-Employed (NASE) has small business Growth Grants of up to $4,000. They are for micro-businesses, and proceeds can be used for a number of things. They can be utilized for marketing, advertising, expansion, and even to hire employees. These grants are open to everyone.
However, you do have to be an NASE member to apply. Membership fees vary based on the membership level chosen.
USDA Value Added Producer Grant
The USDA’s Value-Added Producer Grant (VAPG) program offers grants for small businesses. It includes minority owned business. Grants range up to $250,000. They are specifically to help agricultural producers with activities that add value to their products. As a result, grants are open to those in rural areas. They must be operating as one of the following:
- an independent agricultural producer
- or an agricultural producer group
Business Loans for Minority Women and Other Helpful Resources
It’s important that you know about your options for business loans for minority women. However, you need to know what other resources are available as well. There are plenty. Take a look around and see what you can dig up.