Minority Business Loans

Michelle Adams

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Between the years 2007 and 2017 minority businesses grew at an exponential rate of 79% which is 10 times the regular rate of other U.S. small businesses during the exact same time frame. With so much growth, minority businesses will have a lot of demands to meet which come with owning a new small business. These demands include making immediate invoice payments, ordering new inventory, paying for overhead and utilities, and many more expenses. In many cases, the solution to these needs are either tapping into personal savings or obtaining minority business loans to close the gap.

The Benefits of Small Business Loans For Minorities

There are several different benefits to obtaining small business loans for minorities. By exploring the benefits and advantages, minority small business owners can decide whether or not this is the best path to meeting their financial goals. Small business loans come with the responsibility of repayment so it is important to factor this fact into the overall financial plan prior to taking out the loan. Below is a list of the benefits and advantages of obtaining minority small business loans for one’s enterprise.

Flexibility in Use

One of the most immediate benefits of obtaining a small business loan such as a business line of credit is that there is a lot of flexibility in how it is used. There are no set mandates specifying that the loan has to be used for inventory or overhead costs. Instead, the way the funds are used is completely at the business owner’s discretion. This inherent flexibility is one of the primary advantages of taking out minority business loans in a business line of credit.

The credit score is not a major factor

Another major benefit of taking out a business loan in the form of a line of credit is that the business owner’s credit score is not a major determining factor of approval. In fact, many business lines of credit are approved with a credit score as low as 600. In fact, some business loans provide access to funds with credit scores that are below the standard approval rate for most loans. Small business owners searching specifically for minority business loans bad credit will enjoy the fact that this aspect of the loan process is less stringent than with traditional loans. In fact, minority business loans bad credit score owners are trying to obtain, will be easier to come by if other aspects of the loan are stronger. For instance, if the yearly income of the business is high, this would outweigh the credit factor during the loan application process.

Maintain operating costs

With a small business loan, minority business owners will find it easier than ever to keep their businesses in full operation. Operation costs can quickly skyrocket especially as a business expands. Sometimes a business owner does not have the needed funds on hand to be able to cover these expenses. However, with small business loans for minorities, these challenges and hurdles are more easily navigated. Operational costs can take a major chunk out of any business owner’s budget and can easily eat into the profit margins that a business is experiencing on a yearly basis. This is even more critical during the first years of a business when the chance of failure is the highest. During these critical first few months and years, the financial support provided by a small business loan could be the difference between success and failure for a new business owner.

Cash on hand for emergencies

Every small business owner knows that emergencies can occur at any moment. However, it’s not always easy to be prepared for these instances especially without sufficient cash on hand. This is why it’s so important to explore other options for emergency funding such as obtaining a business line of credit. When looking into small minority business loans such as business lines of credit, it helps to consider that the loans can provide much-needed upfront capital for incidences like burst pipes, HVAC emergencies, or other instances that could affect the operation and profitability of your business.

Minority Business Loans

Small Business Loans for Minority Women

When it comes to obtaining a small business loan, minority women traditionally have a harder time getting access to credit. Even with the Equal Credit Opportunity Act, it can still prove to be a challenge for minority women to get the funds they need to start a new business venture, make business improvements, or to purchase additional inventory. Some of the concerns that typically hamper minority women from obtaining small business loans include lack of credit history, professional networks, and lack of generational wealth. These factors can make it even more difficult than ever for minority women seeking a business loan to expand their enterprise. However, there are solutions that can provide minority women with the upfront business capital they need.

There are generally two different types of business loans available for minority women to obtain funding. These include a business line of credit which is in the form of a revolving business loan. Capital is borrowed and then paid back as quickly as possible to avoid paying interest on the loan. The second type of loan is a traditional business loan that is obtained all in one lump sum and is then paid back gradually over time in installments. Comparing the pros and cons of each type of loan can prove beneficial when making the best choice for meeting one’s financial goals.

Loans for minorities to start a business

The number of minority-owned businesses in the U.S. is currently around 11.1 million which is a major part of the small business community. However, there are still many more potential minority small business owners who are waiting to start simply because they don’t have the upfront capital needed to fund their ventures. With the advent of the minority business development loan, it is becoming easier for minorities to obtain loans to start their businesses. It is important to compare loan terms and rates prior to applying to ensure that one is getting the best possible deal. Loans with exorbitant interest rates could end up doing more harm than good. This is because higher interest rates usually equate to longer payment terms with less of the payment amount being applied to the capital than to the interest of the loan. Instead of taking the first loan offered, minority small business owners should have the terms of the loan reviewed with an attorney to make certain that what they are signing on to is beneficial to their business goals.

Comparing minority business loans and credit cards

Minority business owners who are seeking funding to either start or extend their business ventures can choose a revolving line of credit in the form of a business line of credit or a credit card. However, it is important to compare these two options to fully understand the differences and to be able to make the best decision that will benefit the business financially.

The Credit Score Factor

One of the major differences between taking out a credit card and obtaining a business line of credit is that the credit card approval is dependent on having a particular credit score. However, with loans for minority business owners in the form of a line of credit, credit is often not the only major determining factor when it comes to being approved for a loan. This is one of the main reasons that a business line of credit is often a more appealing option when it comes to getting black minority business loans.

No Fees For Upfront Cash

When it comes to using the cash advance feature of a credit card, there are usually significant fees involved. These fees can significantly eat into a business’ revenue stream often making the short-term benefits of obtaining the loan null and void. With a business line of credit, however, a minority business owner will be able to receive the funding they need with cash on hand without the added fees. The lack of fees is what makes a business line of credit more advantageous for when comparing minority-owned business loans.


Minority Business Loans

Finding the best minority business loans and grants

When wondering how to get a minority business loan, it helps to understand where to go to get a reputable loan. Many websites advertising loan services will really just collect business and personal information for the purposes of selling it to other loan companies. They never actually provide the loan themselves and instead, the applicant gets contacted by several different companies without actually receiving an approval for a loan. This process can be very frustrating and time intensive. As such, it helps to actually have an idea as to which companies are legitimate and can actually provide the business funding that is needed.

Legitimate loan companies

By doing substantial research, you can figure out whether or not a loan company is legitimate or not. The Better Business Bureau is the first place to check when researching the credentials of a loan company. There information will be provided that offers insight into the way in which a company operates and the way that they respond to customer concerns. By reading over past reviews and other customer experiences, applicants can have a better idea as to whether or not a loan company will be able to legitimately meet their needs.

A loan from a legitimate loan company can make a major difference in the performance of a small business both initially and over time. From obtaining the funding needed to expand the operation to obtaining inventory and preparing for emergencies, there is no doubt about the ways in which a small business loan can make a truly significant impact.

Government business loans for minorities

Government business loans for minorities are one of the ways that minorities can obtain the upfront funding they need. When applying for government business loans, it is essential to adhere to all of the stipulations of the application. Following these steps in detail will ensure that you get the best chance of a loan approval.

Whether or not to get a business loan

Many minority business owners are wondering whether or not to actually make the decision to obtain a small business loan. This is because the loan comes with the responsibility of making timely payments. However, there are many reasons that business owners can benefit from taking out a business line of credit.

Benefits of a Minority Small Business Loan Include:

  • Immediate access to cash
  • Raise your credit score with timely payments
  • Flexible terms let you pay back only on the capital you use
  • Access to funds to use as you need to

Obstacles to obtaining traditional funding

In addition to checking in depth into the reasons why one should obtain a small business loan, it also helps to consider the obstacles minorities specifically face that white business owners don’t have to worry about. Some of the traditional barriers to obtaining financing include start-up capital and assets that can be borrowed against to invest the wealth. These assets include owning a home, yacht, or another significant piece of property that can serve as collateral in a loan. Having a lower net worth than white business owners has also been a barrier to obtaining funding that minorities have faced. Latinos and African Americans typically have wealth levels that are 11 to 16 times lower than whites which can prove to be a sizeable hurdle. Thankfully with the right business loan, these challenges can be overcome and the business profitability can begin to increase over time.

Conclusion

Ultimately the small business loan for minority business owners adds to the business’ infrastructure and ensures that the business can weather the changes and challenges that come up along the way. With the support of a business loan, business owners can finally have access to new inventory and new opportunities that can take their business further than they ever thought possible. With a bit of time and research, one can uncover the best business loan opportunities to meet their needs.