Best Business Loans and Grants for Native Americans

Approximately 1.2% of U.S. businesses (315,000) are owned by Native Americans and contribute $33 billion to the U.S. economy every year, according to U.S. Census Bureau data. Access to the right financing opportunities can help Native American entrepreneurs expand their businesses, increase profits and create jobs. Small-business loans can provide funds whether they are planning to start a business on a reservation or non-tribal land.

In addition to loans, grants may be another option. Because grants are a debt-free option, competition can be high and is often based on need and merit.

Best business loans for Native Americans

Many of these business loans are specifically tailored for Native American business owners. As with any loan, it’s important to understand what the loan can be used for, the interest rate and the repayment schedule.

1. Community development financial institution loans

Community development financial institutions (CDFIs) provide loans, investments and services to underserved or economically distressed communities. CDFIs can be banks, credit unions, loan funds and venture capital funds. The U.S. Treasury Department oversees CDFIs and the certification of institutions, including Native CDFIs.

Certified Native CDFIs primarily serve communities of Native Americans, Alaska Natives and Native Hawaiians, offering low-interest loans to startups and existing businesses. Many Native CDFIs not only consider the borrower's income and credit score but also look at factors such as their reputation in the community, support network and commitment to the business.

2. U.S. Department of the Interior Indian Loan Guarantee and Insurance Program

The U.S. Department of the Interior runs the Indian Loan Guarantee and Insurance Program for Native American-owned businesses. This program helps borrowers receive loans at reasonable interest rates by guaranteeing or insuring up to 90% of the loan and thus reducing the risk to the lenders. This program is available to federally recognized American Indian and Alaska Native tribes and individuals enrolled in such tribes.

Borrowers can use the loan proceeds for a variety of purposes, including construction, working capital, equipment purchases, business acquisition and refinancing. Individuals can access up to $500,000, and higher loan amounts are available for business entities, tribes and tribal enterprises.

3. U.S. Department of Agriculture Business & Industry Loan Guarantee

The U.S. Department of Agriculture partially guarantees business loans made to rural businesses through the Business & Industry Loan Guarantee program. Businesses in any rural community are eligible for USDA business loans, including businesses owned by Native Americans and federally recognized tribes.

Basic requirements include:

• The business is located in a rural area with fewer than 50,000 inhabitants.

• The borrower must have some collateral to protect the lender’s interest in the loan.

Interest rates and fees are negotiated between the lender and borrower, and additional guarantee fees apply.

» MORE: Best farm loans and how to get one

4. NDN Collective loans and grants

The NDN Collective is an Indigenous-led organization designed to support Indigenous communities through philanthropy, grantmaking, activism and other activities. Through its NDN Fund and Relief & Resilience loan program, it provides pre-development, operating and bridge loans of less than $500,000 to Indigenous entrepreneurs and businesses.

Also, NDN grants are available to Indigenous-led tribes, organizations, groups, projects and individuals throughout the U.S. and its territories, as well as Canada and Mexico. Grants can be used for such things as general operating support, leadership development, land purchase, new construction, and renovation of structures and equipment, plus up to 15% of a variety of overhead and indirect costs.

5. Minnesota Indian Business Loan Program

For Native American business owners in Minnesota, there is the Minnesota Indian Business Loan Program. While a majority of the loans are made to businesses located on a reservation, the application is open to wholly-owned Native American businesses anywhere in Minnesota.

Applications are accepted on an ongoing basis and the loan funds can be used by the business for startup and expansion, but not debt refinancing. Loan terms are no longer than 10 years for non-real estate loans and 20 years for real estate. Generally, interest rates are 2% to 10% and there may be a required borrower contribution of 5% to 10%, depending on the project.

6. SBA loans

The U.S. Small Business Administration (SBA) partially guarantees small-business loans made by banks and other direct lenders. Although SBA loans are open to all entrepreneurs, nearly one-third of SBA 7(a) loans went to minority business owners in 2021.

Specific SBA loan requirements vary by lender, but some qualifications include:

• Operate a business for profit in the U.S. or its territories.

• Have a business that is financially able to repay the loan.

• Haven't been able to qualify for a bank loan.

SBA loans can be easier to qualify for than bank loans because of the government guarantee, and they typically offer low interest rates and long repayment terms. The most popular SBA loan program, the SBA 7(a) loan, offers loan amounts up to $5 million for a range of business purposes, including working capital, equipment, acquisition, construction, establishing a new business and refinancing business debt.

7. Microloans

For those who need a small amount of money for their business, then a microloan — business loans under $50,000 — might be a good option.

The SBA has a microloan program, as do several private lenders. Microloan lenders are often nonprofit and community organizations that support small-business owners. These organizations can offer more flexibility when reviewing a borrower’s qualifications and considering the business’s viability.

SBA microloan interest rates are generally from 8% to 13% but can vary based on the lender. For example, Kiva has loan programs with 0% interest up to $15,000 and Accion Opportunity Fund has rates as low as 5.99%.

8. Short-term business loans

Short-term business loans are another way to borrow money. Because they are designed to be paid back quickly — 12 months or less, with the possibility of 24 months in some cases — they may be easier to qualify for than traditional term loans. However, the interest rates are generally higher than a longer-term loan, and owners may be asked to make weekly loan payments, depending on the lender. Typically, borrowers complete an online application and receive a decision quickly.

9. Business credit cards

Although they won’t take the place of traditional business loans, business credit cards can be another short-term funding option. When compared with business loans, business credit cards usually have higher APRs with short repayment periods, but there are some cards with long 0% introductory APR periods. Other cards may allow owners to earn rewards points for business-related expenses, such as travel, advertising expenses and shipping costs.

» MORE: Business credit card vs. business loan

Business grants for Native Americans

Business grants are another way to access funding to start a business or to expand an existing operation. Unlike loans, grants don't have to be repaid. A number of federal, corporate, state and regional grants are available to help small-business owners and entrepreneurs, and there are also grant opportunities for Native American-owned businesses:

• Rural Business Development Grant Program: The U.S. Department of Agriculture extends grants to tribal communities as part of the Rural Business Development Grant program, which aims to provide technical assistance and training for small businesses in rural communities.

• First Nations Development Institute: The First Nations Development Institute has a grant program that provides financial and technical resources to tribes and Native nonprofit organizations.

• U.S. Department of Commerce: The Department of Commerce runs several grant programs to strengthen economically distressed and underserved communities, including reservations.

• Administration for Native Americans: The Administration for Native Americans, part of the U.S. Department of Health and Human Services, provides grants for businesses in specific sectors, such as Native American cultural preservation.

• U.S. Department of the Interior: The Department of the Interior offers a number of grant programs to help tribal businesses through the Indian Affairs office, including the Indian Business Incubators Program.

» MORE: Minority small-business grants, plus resources

How to strengthen your business loan application

No matter which of these business loans you apply for, you’ll want a strong, complete business loan application.

Create a business plan

A business plan is typically necessary when applying for SBA loans, Department of the Interior loans and bank loans. Even if a lender doesn’t require a business plan, you should consider it essential to your business. A business plan helps to focus on the right things as you grow your company and forces you to be realistic about revenue, profit and expense projections. It can also give you a good estimate of how much you need to borrow.

Build your credit score

Generally, the better your credit, the easier it will be to secure a small-business loan and the more loan options you’ll have. Building your credit score can also help you qualify for more competitive interest rates.

Increase business revenue

Lenders like to see upward trending revenue when evaluating a business. Even as a new business, you’ll want to focus on getting paying customers and generating sales.