Best Business Loans for Minority Entrepreneurs
Business loans for minority entrepreneurs tend to have more flexible qualification requirements than traditional loans, and may require you to submit a certification stating your business is minority-owned.
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Minority-owned businesses were nearly half as likely to be approved for financing than white-owned firms, according to findings released by the Federal Reserve in 2024. However, many alternative lending sources, like nonprofit organizations and online lenders, offer small-business loans specifically to minority-owned businesses.
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What is a business loan for minorities?
A business loan for minorities is a loan targeted toward members of minority communities and is intended to help them access capital when they may not otherwise be able to.
A business is typically considered to be minority-owned if it’s at least 51% owned and operated by a person of specific ethnicities. For example, the National Minority Supplier Development Council (NMSDC) defines a minority business owner as an American citizen who is at least 25% of any of the following groups:
Asian-Indian.
Asian-Pacific.
Black.
Hispanic.
Native American.
Some certification agencies or lending institutions also extend their definition to other underserved groups, such as women, veterans or LGBTQ business owners.
Getting certified as a minority-owned business can open up additional financing and networking opportunities for you and your small business.
Where to get a minority business loan
SBA lenders
One of the best SBA loan options for minority-owned businesses is working with Community Advantage Small Business Lending Companies (CA SBLCs), previously Community Advantage lenders. Although the SBA Community Advantage program expired on Oct. 31, 2023, the CA SBLC license allows these lenders to issue regular 7(a) loans. CA SBLCs will continue to prioritize loans for business owners in underserved markets.
Minority depository institutions
Minority depository institutions (MDIs) are mission-driven banks that provide banking services and loans to underserved communities. They are officially defined as financial institutions whose voting stock is at least 51% owned by minority individuals, or if the majority of the board of directors is part of an underserved community and the primary community served is predominantly minority.
Banks and credit unions
Banks and credit unions typically offer the most competitive business loans, and some — such as U.S. Bank, Huntington Bank, Fifth Third Bank and Native American Bank — offer lending programs dedicated to minority-owned businesses. Traditionally, minority business owners have faced difficulties in getting approved for small-business bank loans due to issues like unconscious bias, credit challenges or limited banking history. However, if you can qualify for a business loan from a bank, this will likely be your most affordable option.
Community development financial institutions
Community development financial institutions (CDFIs) are banks, credit unions and other institutions that provide financial access, including loans, to minorities or economically disadvantaged communities. Many CDFIs also utilize the SBA microloan program and provide other resources, like counseling and networking, for minority-owned businesses.
Microlenders
Many mission-based nonprofit organizations offer microloans to local businesses, often focusing on businesses owned by minority groups, women and veterans. Microlenders typically offer small loan amounts up to $50,000. These loans can have more flexible qualification requirements, but eligibility and loan terms will vary by lender.
Online lenders
Online business lenders tend to have more flexible eligibility requirements than traditional banks, and many target funding access to minority-owned businesses or other underserved communities. Some online lenders work with startups or borrowers with bad credit. While minority applicants have a better chance of getting approved with online lenders than banks, the loan will likely cost more.
Best minority business loans
| Product | Max loan amount | Min. credit score | Learn more |
|---|---|---|---|
 SBA 7(a) loan Apply now with Fundera by NerdWallet | $5,000,000 | 650 | Apply now with Fundera by NerdWallet |
 Fora Financial - Online term loan NerdWallet Rating Apply now with Fundera by NerdWallet | $1,500,000 | 570 | Apply now with Fundera by NerdWallet |
SBA microloan Apply now with Fundera by NerdWallet | $50,000 | 620 | Apply now with Fundera by NerdWallet |
 Giggle Finance - Merchant cash advance Apply now with Fundera by NerdWallet | $10,000 | 300 | Apply now with Fundera by NerdWallet |
 Huntington National Bank Lift Local Business Program | $150,000 | Undisclosed | |
 Accion Opportunity Fund Small Business Working Capital Loan NerdWallet Rating Apply now with Fundera by NerdWallet | $250,000 | 600 | Apply now with Fundera by NerdWallet |
 Wells Fargo Small Business Advantage® Line of Credit NerdWallet Rating | $50,000 | 680 |
Alternative funding options for minority business owners
Grants for minority entrepreneurs. The government and private organizations offer small-business grants for minorities. Opportunities often vary drastically from state to state.
Venture capital. Venture capital firms are investment companies that fund startups and entrepreneurs in exchange for a percentage of ownership in your business. Firms like Oakland-based Kapor Capital and Harlem-based Harlem Capital are dedicated to closing the gap in venture capital that many minority-owned businesses experience.
Self-funding. Self-funding, also known as bootstrapping, is another option to fund your business, if you have enough money in savings. You may also consider Rollovers as Business Startups (ROBS) transactions, which allow you to use retirement savings to fund your company. With self-funding you can save money on interest and avoid diluting your ownership; however, you are at risk of losing your own money if your business fails.
» MORE: Business grants for Black women
Resources for minority-owned businesses
Government and nonprofit organizations may offer free assistance to minority entrepreneurs. These resources may help you gain access to alternative financing options, educational tools or advice from industry experts.
Organization | Overview |
|---|---|
The MBDA is a federal agency dedicated to supporting minority-owned businesses. It offers assistance securing capital, competing for contracts and identifying new opportunities. | |
The NMSDC is a national nonprofit organization that — in addition to its MBE certification process — partners with lenders and offers programs in executive leadership, marketing and operations. | |
Business Consortium Fund (BCF) is a nonprofit business development CDFI that works with the NMSDC to develop and fund certified minority-owned small businesses, particularly those with supply-chain contracts. | |
SBA 8(a) business development program | The SBA 8(a) program is a certification program that can help small businesses interested in government contracting improve their chances of winning bids. To qualify, your firm must be 51% controlled by “socially and economically disadvantaged individuals,” which includes minorities, women and veterans. |
The SBA’s HUBZone Program is a certification program dedicated to awarding government contracts to businesses in underutilized zones, specifically designated as HUBZones. HUBZone-certified businesses are eligible to compete for contracts that are specifically set aside for small-business owners, and get a 10% price evaluation preference. | |
The Emerging Leaders program, an SBA Office of Entrepreneurial Development initiative, works with high-potential, established small businesses in America’s underserved cities. Participants receive customized training and networking opportunities. | |
The SBA’s Office of Native American Affairs provides free resources and technical assistance to American Indian, Alaskan Native or Native Hawaiian small-business owners. |
NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer small-business friendly features, including:
Transparency of rates and terms.
Flexible payment options.
Fast funding times.
Accessible customer service.
Reporting of payments to business credit bureaus.
Responsible lending practices.
We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
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