The Reality of Getting Business Loans for Minorities and Women
With the economy on the upswing, entrepreneurs are seeking funds to meet increased consumer demand, leading to a need for business loans for minorities and women. In 2020, a year of infectious disease and economic crisis, many small businesses struggled to keep their doors open. Yet, more Small Business Administration loans for minorities and women were dispersed. SBA lenders reported lending $7.5 billion in combined 7(a) and 504 lendings to minority business owners. Women-owned businesses received nearly $2.7 billion from the SBA’s 7(a) lending program and more than $522 million from the 504-loan program. What lead to the increased availability of minority and women business loans, and what does it mean for the future of minority and women-owned businesses?
The Rise of Women-Owned and Minority-Owned Businesses
Unfortunately, women in business and women-owned businesses suffered mightily in the year of the pandemic, leading to what some have labeled a “shecession”. Thankfully, there’s now more positive news to report. An article in Enterprising Investor says, based on recent demand for new printings of logos, brochures, and business cards, 78% of all new businesses are female-owned.
And, according to the Senate Committee on Small Business and Entrepreneurship, women-owned businesses have been the fastest-growing small business segment in the U.S. economy for more than two decades, growing at twice the rate of all other businesses. Recognition of women entrepreneurs’ contribution to the country’s economic growth (such as the Women’s Business Ownership Act) has spurred various types of lenders to make it easier to access startup and growth funding.
While it often seems as if there are ads for business loans for minorities and women plastered on every bus stop and billboard, unfortunately, the reality is less rosy, especially for minorities, when it comes to accessing capital. There are over four million minority-owned businesses across the country, earning more than $591 billion in annual revenues. However, according to a Federal Reserve study, more applications from white-owned companies are approved for financing than applications for business loans for minorities (Asian, Hispanic, and Black business owners). In addition, the Stanford Institute for Economic Policy Research reports only 1% of Black-owned businesses get approved for loans they apply for compared to 7% of white-owned businesses. Curiously, the violence and racial strife that unfolded across the country in the past year and the growing Black Lives Matter movement has brought an increased focus on and support for Black-owned businesses, including increased access to funding—although there is still quite a long way to go.
But there is hope. From small business loans and grants for minorities and women to lines of credit for existing minorities and women-owned businesses, here is a sampling of funding options available to minority and women business owners.
Business Loans for Minorities and Women
SBA-guaranteed loan programs
- 7(a) Program: Provides government small business loans for women and minorities. These can be used for a variety of purposes, including short- and long-term working capital, refinancing current business debt, and purchasing furniture, fixtures, and supplies. The 7(a) maximum loan is $5 million.
- 504 Loan Program: The 504 loan provides long-term, fixed-rate business loans for minorities and women so they can acquire major fixed assets. The 504 loans are available through Certified Development Companies (CDCs), and the maximum loan amount is $5 million.
- Microloans: Provides business loans for minorities and women up to $50,000 to help with startup and expansion expenses.
Other Federal Small Business Loans for Minorities and Women
- Indian Loan Guarantee Program: Provides financing up to $500,000 to American Indian tribes and Alaska Native groups for working capital, equipment purchases, and other financial needs.
- National Minority Supplier Development Council (NMSDC) Business Consortium Fund: Provides debt financing for NMSDC-certified businesses.
Procurement Opportunities for Women and Minorities
- 8(a) Business Development Program: Although 8(a) does not provide business loans for minorities and women, per se, participants in the 8(a) program can compete for set-aside and sole-source contracts for federal contracts. The goal of the 8(a) program is to award at least 5% of all federal contracting dollars to small, disadvantaged businesses each year.
- Women-Owned Small Business Federal Contracting Program (WOSB): Participants in the WOSB Federal Contracting Program compete for federal contracts. WOSB’s goal is to award at least 5% of all federal contracting dollars to women-owned small businesses every year.
- HUBZone Program: Provides access to government contracts for businesses in historically underutilized business zones. The program aims to award at least 3% of federal contract dollars each year to HUBZone-certified companies.
Business Grants for Minorities and Women
- gov: Start at Grants.gov to find comprehensive and current listings for more than 1,000 grant programs available from federal grant agencies. The website offers grant writing tips and a Grant.gov chatbot to answer your FAQs.
- Rural Business Development Grants: If you operate (or plan to start) a small rural business with less than 50 employees and less than $1 million in gross revenue, you can apply for grant funding to cover technical assistance, acquisition of land, and more.
- African American Grants (AAG): The AAG lists hundreds of available grants for Black-owned startups and growing businesses across all industries.
We’re encouraged here at Financing Solutions because we’ve also noticed an increase in the number of requests for business loans for minorities and women. We offer an unsecured small business line of credit for growing businesses, especially those seeking business loans for minorities and women-owned businesses.
Contact us for a business line of credit today or fill out our no-obligation, 2-minute application to see how much your business would be approved for.