Best Small-Business Loans for Minorities in 2016

Finding a small-business loan is hard — and can be even harder for minority business owners. Less wealth and fewer assets to secure a loan, among other factors, can stand between minority-owned businesses and financing, according to the federal Minority Business Development Agency.

“Collateral can be a big difficulty,” says Sasha Werblin of the Greenlining Institute, a nonprofit that works to bring capital and resources into minority communities, hard hit during the recent foreclosure crisis. The resulting tarnished credit, a red flag for lenders, has made it more difficult for some minority small-business owners to qualify for traditional loans, she says.

The average personal credit score for a minority business owner is 707, 15 points lower than the overall average for small-business owners, according to a 2016 study by Experian. And the average business credit score for a minority small business is 49.7 — nearly five points lower than the national average, the study found.

But financing is out there. We’ve rounded up some top sources for minority entrepreneurs looking for loans:

SBA loan options

National African American small-business loan fund

Alternative lender roundup

SBA Community Advantage Loans

This program is for businesses — including those owned by minorities — that need $250,000 or less and are located in underserved communities. The Small Business Administration works with local, mission-based lenders to provide financing. In the last year, 30% of the SBA’s 7(a) loans for startup and existing small businesses, which include Community Advantage Loans, went to minority business owners. Check out the Small Business Administration website for more information and a list of approved lenders.

SBA microloans

Microloans of up to $50,000 are offered through nonprofit organizations and come with a maximum repayment term of six years. Interest rates range from 8% to 13%, according to the SBA. Providers include the Opportunity Fund for California borrowers, 90% of whom are minority-owned businesses, according to the company. There’s also LiftFund (62% of borrowers identified as Hispanic in 2014) and Accion (60% of borrowers are from minority communities). Here’s a list of providers, or contact your local SBA district office for assistance.

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National African American Small-Business Loan Fund

The Valley Economic Development Center (VEDC) and JPMorgan Chase recently announced a new small-business loan program for African American-owned small businesses in New York, Chicago and Los Angeles. Loan sizes will range from $35,000 to $250,000, and borrowers will also be provided with technical assistance such as marketing, business plan development and financial consulting. Learn more here.

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Alternative lenders

Online lenders provide small-business loans faster with generally less stringent requirements. The cost for this convenience is a higher APR than traditional banks. These lenders don’t specialize in minorities, but if you don’t qualify for a bank loan because of bad credit, no collateral or a limited business history — or simply can’t afford to wait months for financing — they provide a good option.

Alternative lender options for minorities

Funding options	Good option for:	Do you qualify?	Loan amount & APR	Get started
Read our Kabbage review	Fast cash Bad credit Working capital	$50K+ annual revenue 1+ year in business No minimum credit score	$2K - $100K 32%-108%	Apply now at Kabbage
Read our OnDeck review	Fast cash Expansion Daily or weekly repayments	500+ credit score $100K+ annual revenue 1+ year in business No bankruptcies in 2 years	$5K - $500K 9% - 98%	Apply now at OnDeck
Read our StreetShares review	Newer businesses Strong credit Weekly repayments	600+ credit score $25K+ annual revenue 1+ year in business No bankruptcies in 3 years	$2K - $100K 8% - 40%	Apply now at StreetShares
Read our Dealstruck review	Outstanding invoices Strong credit Businesses that can wait on financing	600+ credit score $150K+ annual revenue 1+ year in business	$50K - $250K 11% - 28%	Apply now at Dealstruck
Read our SmartBiz review	Strong credit Established businesses that meet SBA requirements Businesses that can wait for financing	600+ credit score 2+ years in business No bankruptcies, foreclosures in 3 years	$30K - $350K 7% - 8%	Apply now at SmartBiz

*Dealstruck also offers an inventory line of credit and a term loan

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Want more options?

If you want to compare other financing alternatives, NerdWallet has come up with a list of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged them by categories that include your revenue and how long you’ve been in business.

Compare business loans at NerdWallet

Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.

To get more information about funding options and compare them for your small business, visit NerdWallet’s small-business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.

This article was updated. It was originally published on Oct. 29, 2015.