Are There SBA 7(A) Loan Programs For Minorities?

As the Small Business Association’s primary way of offering financial assistance to businesses, many folks are reliant on their 7(a) loan programs in order to keep their business afloat in times of difficulty.

Since it can often be more difficult for those in less fortunate positions than the average business owners, you might find yourself wondering: are there any loans available that are specifically for minorities.

This is an especially pertinent question, given that there are over eleven million minority -owned businesses in the United States as of right now.

Unfortunately, there are not any specific SBA 7(a) loans designed for minorities in particular. However, it’s important to note that there are several loans available from the Small Business Association that have been designed to favor applications from minority business owners and entrepreneurs.

Do remember: by law, all of the SBA programs, services and loans must be offered out to the public on a nondiscriminatory basis, so minorities are no less likely to be accepted than any other applicant. For more information on this, do get in touch with the SBA’s Office of Diversity, Inclusion and Civil Rights for a chat.

SBA 8(a) Business Development Loan

Designed to “help provide a level playing field for small businesses owned by socially and economically disadvantaged people or entities” the 8(a) loan has made it far more straightforward for the minorities who qualify to achieve government contracts, as well as receive a mentor to guide them through the world of business.

Those accepted to the program are able to:

  • Apply for sole source and specifically set-aside contracts through the program
  • Receive the assistance of their very own Business Opportunity Specialist who will help them to navigate federal contracts
  • Embark on joint contract ventures and opportunities via the SVA’s Mentor-Protege program
  • Benefit from technical assistance, business training, counseling, management, marketing and high level executive developments

This does not provide financial assistance in the form of a loan, but successful applicants to the 8(A) loan will then mean that minority owned businesses find it easier to successfully apply for a 7(A) loan afterwards.

In order to be eligible for applying to the 8(A) Business Development Loan, you should:

  • Be 51% owned and controlled by an individual or multiple US citizens who have economic or social disadvantages, which includes minorities
  • Demonstrate the ability for the business to have long-term financial success
  • Prove the business is either owned or operated by somebody who has no more than four million dollars in assets

To apply for certification as an 8(A) eligible business, you must first create your profile on SAM.gov, then subsequently fill out the certification application over at certify.SBA.com.

The National African American Small Business Loan Fund (NASBLF)

Launched by JP Morgan Chase in conjunction with the Valley Economic Development Centers (VEDC) - a community development financial institution or CDFI based in California - the National African American Small Business Loan Fund was started back in 2015/

Offering loans to minority-owned businesses based in New York, Los Angeles and Chicago, not only does the fund allow financial assistance, but it also provides access to marketing, training and technical support to small businesses. As of 2016, they had paid out more than 2.2 million dollars across the United States, so you know they’re helping people!

SBA Community Advantage Loans

These are, like the 7(A) loans, not actually given out by the SBA, just guaranteed by them and then provided by local lenders, usually non profit organizations. Issued in amounts as high as $250,000, the SBA is there to ensure that 85% of the loan amount will definitely get paid, reducing the risk of lending for the companies providing money.

As a result, those who are unable to access SBA funding through the traditional SBA 7(A) route may find Community Advantage Loans a great deal more helpful, given there are less roadblocks to applications, which is always good for minority business owners.

Community Banks

You’ll find that, being far more accessible than large, corporate banks, the community options are a better alternative for financial support when it comes to minorities. Being focused on helping those in the local area as opposed to providing service to multinational, billion dollar corporations means they’re dedicated to helping the little guy instead.

As well as money, you might also be able to access a personalized customer service team, specific loans targeting minorities (this varies depending on the bank and location) as well as more competitive rates. That being said, they move even slower than the financial giants, as well as having less access to tech, so you might find the process slightly more arduous here.

SBA Micro Loans

Though not directly targeting minorities in particular, you might find that, as a minority who owns a business, the SBA’s microloans are ideal to gain up to $50,000 in order to set up, establish or expand an existing business.

Traditionally offered up by nonprofit organizations and other outside lenders, they are ideal for those who need a cash injection fast; that being said, you still need to have a good credit score and history to be eligible, as well as offer collateral just in case. As such, they might not be the best choice for those from disadvantaged communities.

Grant Proposals - the Minority Business Development Agency

The Minority Business Development Agency (MBDA) and other such institutions can be a great way to get grants for minority owned businesses, some of which are specifically only available to minorities.

All US-based MBDA business centers are specifically designed to assist minority owned small businesses in accessing training and management assistance, as well as helping them access the best possible loan and grant options available to them.

A good thing about grants is that, although the proposal process can be more arduous and difficult to succeed in than for loans, you usually don’t have to pay them back afterwards.

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