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Like all business funding, securing funding as a minority business enterprise (MBE) can be an uphill battle, even as the number of MBE owners continues to rise.
Despite making up 29% of all businesses in the U.S., only 11% of minority business enterprises have paid employees and only 2% have businesses that generate more than $1M annually. This is where learning about the top small business loans for minority business enterprises can make a difference.
In this blog post, we’ll cover what businesses count as minority-owned, the top loans and financing organizations, and the flexibility of working with an alternative lender.
Which businesses count as minority business enterprises (MBE)?
While there are many ways to define a minority business enterprise, certain organizations provide certifications for specific groups based on specific criteria, typically involving ownership and management by individuals from minority groups.
Under the National Minority Supplier Development Council (NMSDC), a certifying body for minority business enterprises (MBE), a business is generally recognized as minority-owned if at least 51% of it is owned, operated, and controlled by individuals who are members of minority groups.
These groups include:
- Black/African American
- Asian-Indian
- Asian-Pacific
- Hispanic or Latino
- Native American
A business can qualify if its primary owner is a U.S. citizen with at least 25% heritage from one of these minority groups. The owner must also play a significant role in the day-to-day management and decision-making of the business.
Additionally, similar guidelines exist for businesses owned by women and LGBTQ individuals. As a woman business owner, for example, you could qualify for MBE certification through your heritage and also as a woman-owned business enterprise (WBE) following very similar guidelines as the above:
- 51% ownership
- Involvement with day-to-day operations
- Investment of capital or expertise
You can achieve women business enterprise (WBE) certification through an organization like the Women’s Business Enterprise National Council.
Small business loans and resources for minority business enterprises (MBEs) can explore
When it comes to finding the right financing options for minority business enterprise owners, there are several choices designed to support your growth. Here are some of the best small business loans available for minority business enterprises.
Minority business enterprise loans
Business Consortium Fund Loans
Specifically targeting minority-owned businesses, the Business Consortium Fund Loan is a strong choice if traditional financing options have fallen through. These loans, certified by the U.S. Department of the Treasury, offer amounts between $500 and $50,000 with interest rates capped at 3% above the prime rate.
Source: Minority Development Industry
Financial organizations and resources for MBEs
1. Minority Business Development Agency (MBDA)
The MBDA, part of the U.S. Department of Commerce, is dedicated to helping minority business enterprises succeed.
Through its nationwide network of MBDA Business Centers, the agency offers financial advice and helps entrepreneurs secure loans, grants, and venture capital. The MBDA is a valuable resource for those looking to access capital and strategic guidance tailored specifically to minority business enterprise owners.
You could qualify for up to $600,000 in small business financing.Find out how we can help. |
2. Community Development Financial Institutions (CDFIs)
CDFIs are all about empowering underserved communities by providing accessible financial products and services. Certified by the U.S. Department of the Treasury, these institutions—ranging from banks and credit unions to nonprofits—offer loans from as low as $500 to as high as $2 million.
CDFIs are known for their relaxed qualification criteria, competitive interest rates ranging from 4% to 9%, and additional support through training and mentorship programs. However, your business must be located in an underserved area.
One example of a CDFI is the Nonprofit Finance Fund (NFF). With over 40 years of experience, the NFF is dedicated to empowering nonprofits and social enterprises with financing. They provide loans to support organizations across sectors, including:
- Education
- Community improvement
- Human services
- And much more
Alternatives to traditional loans
If you’re looking for more flexible opportunities that are not specifically tied to being a minority business entity, alternative lenders offer working capital with competitive terms and take a holistic look at your business profile.
Credibly, for example, offers access to financing options designed with small businesses in mind, offering flexibility and speed that traditional lenders can’t match.
These include:
- Working capital loans: Secure up to $600,000 with terms from 6 to 24 months. Get approved in as little as 4 hours, with factor rates as low as 1.11 and automatic payments to keep things simple.
- Long-term business loans: Planning a big project? Access up to $10 million with terms up to 120 months. This is perfect for long-term investments with monthly payments that fit your budget.
- Small business line of credit: Need flexible funding? Tap into a revolving line of credit up to $300,000. Use what you need, when you need it, and pay interest only on the amount you use.
- SBA 7(a) loans: The SBA 7(a) loan is a powerful option for minority entrepreneurs, offering up to $5 million in capital. While not exclusively for minorities, nearly one-third of these loans are awarded to minority-owned businesses.
The loans come with favorable interest rates and flexible repayment terms ranging from 10 to 25 years, making them ideal for significant investments in your business. The SBA looks for borrowers with strong credit and a solid track record, so if you meet the criteria, this could be a valuable support for your business.
If you’re leaning toward the flexibility offered by alternative lenders, this is where our financing experts can help.
