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Finance & Accounting

Best Small-Business Loans for Minorities of May 2022




Minority business loans are available from many lenders. But getting funding from a traditional financial institution may be tougher for minority business owners due to issues like unconscious bias, insufficient credit and limited banking history.

More success may be possible with alternative sources, such as nonprofit organizations and online lenders. In fact, a 2019 report from the Federal Reserve found similar approval rates for white- and Black-owned businesses among online lenders, which was not the case for banks.

To get the best deal possible, be sure to compare all your small-business loan options. But here are some small-business loans that may be a good fit for minority business owners, plus other financing options and resources — including grants and certifications — for minority-owned businesses.

Best small-business loans for minorities

Our pick for SBA loans for minorities

SBA 7(a) loans offer competitive rates and terms and can be used for a variety of funding needs. In fiscal year 2021, 30% of SBA 7(a) loans were issued to minority business owners.

SBA 7(a) loan


7(a) program participants include specialized lenders like Live Oak Bank and big-name traditional banks like Wells Fargo.

Maximum loan amount: $5,000,000.

Minimum credit score: 650.

Estimated APR: 5.5% to 8% (depending on your creditworthiness and business financials).

  • Available as a term loan or line of credit.

  • Interest rates are capped.

  • Long repayment terms available.

  • Personal guarantee is required.

  • Collateral is typically required.

  • Longer processing times than online lenders.


Our pick for small-business loans for minorities with bad credit

If your credit score is at least 600, you may be able to qualify for a short-term business loan with amounts up to $250,000. These loans are good for specific, one-time purchases.

OnDeck – Online term loan


OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.

Maximum loan amount: $250,000.

Minimum credit score: 600.

Estimated APR: 9% to 99% (depending on your creditworthiness and business financials).

  • Cash can be available within the same business day.

  • Requires low minimum credit score.

  • Less paperwork than most lenders.

  • Fixed-fee structure means early repayment will not save interest.

  • Requires frequent (daily or weekly) repayments.

  • Requires business lien and personal guarantee.


Our pick for small-business startup loans for minorities

A business line of credit may be available if you have at least six months in business. You only pay interest on the funds you draw from the credit line, giving you more flexibility than a term loan.

Fundbox – Line of credit


Fundbox offers a business line of credit to fill a cash-flow gap, and qualifying is easier than with other lenders.

Maximum loan amount: $150,000.

Minimum credit score: 600.

Estimated APR: 10.1% to 79.8% (depending on your creditworthiness and business financials).

  • Financing available within one business day after approval.

  • Simple application with minimal documentation required.

  • Startup-friendly — accepts borrowers with a minimum of six months in business.

  • Low minimum credit score requirement.

  • No prepayment penalties, account maintenance fees or inactivity fees.

  • Rates are high compared to traditional banks.

  • May require personal guarantee.

  • Can’t be used to build business credit.

  • Weekly repayments are required over a short term (maximum of 24 weeks).


Our pick for minority-owned businesses older than two years

Established businesses with strong credit may qualify for an online small-business loan with terms up to five years. Funding can be available within three business days.

Credibility Capital – Online term loan


Credibility Capital offers low-cost business loans that work best for small-business owners with strong credit.

Maximum loan amount: $500,000.

Minimum credit score: 650.

Estimated APR: 6.99% to 24.99% (depending on your creditworthiness and business financials).

  • Competitive rates among online lenders.

  • No prepayment penalty.

  • Extra monthly payments can save interest cost.

  • Requires high minimum credit score and revenue.

  • Requires business lien and may require personal guarantee.

  • Not available in Nevada, North Dakota, South Dakota or Vermont.


What is a minority-owned business?

A business is typically considered to be minority-owned if it’s at least 51% owned and operated by people of specific ethnicities. For example, to be considered a minority-owned business in New York, business owners must be Black, Hispanic, Asian-Pacific, Asian-Indian Subcontinent, Native American or Alaskan Native.

A certification stating your business is minority-owned may be required for you to qualify for specific minority business loans or programs.

Where to get a minority business loan


SBA lenders

The U.S. Small Business Administration backs many types of SBA loans, which are issued by banks and other lenders. One of the best SBA loan options for minority-owned businesses is the SBA Community Advantage loan program, which is specifically designed to provide financing for businesses in underserved communities. These SBA loans are available in amounts up to $250,000 and distributed by local, mission-based lenders.

Online lenders

Alternative online business loan lenders tend to have more flexible eligibility requirements than traditional banks. Some online lenders will even work with startups or businesses with bad credit. Loan amounts can range from about $1,000 to $500,000. Minority applicants have a better chance of getting approved with online lenders than banks, according to the Federal Reserve, but your loan will likely cost more.

Nonprofit microlenders

Many mission-based nonprofit organizations offer microloans to local businesses, often focusing on businesses owned by minority groups, women and veterans. The SBA also offers microloans of up to $50,000 through these nonprofit organizations. The SBA microloan program can be a good option for startups, as well as business owners with less-than-perfect credit histories.

Community development financial institutions

CDFIs are banks, credit unions and other institutions that provide financial access, including loans, to minorities and other economically disadvantaged communities. For example, The National Minority Supplier Development Council Business Consortium Fund is a CDFI that provides minority business loans from $100,000 to $750,000. Many CDFIs also issue small-business startup loans for minorities through the SBA microloan program.

Banks and credit unions

Banks and credit unions typically offer the most competitive business loans, and some — such as Union Bank and Native American Bank — offer lending programs dedicated to minority-owned businesses. But traditionally, minority business owners have faced difficulties in getting approved for small-business bank loans. If you can qualify for a business loan from a bank, however, this will likely be your most affordable option.

Other resources for minority-owned businesses

  • SBA 8(a) business development program. The SBA 8(a) program does not offer loans. Rather, it’s a certification 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.

  • Small-business grants. The government and private organizations offer grants and awards to minority-owned businesses. Opportunities often vary drastically from state to state, but here are some minority small-business grants to consider.

  • SCORE. Though it’s not specifically geared toward minority business owners, SCORE is a free volunteer program that connects entrepreneurs with seasoned business mentors who have a wealth of knowledge about business funding challenges.



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Finance & Accounting

4 tips to find the funding that fits your business



The facts are clear: Startups are finding funding increasingly difficult to secure, and even unicorns appear cornered, with many lacking both capital and a clear exit.

But equity rounds aren’t the only way for a company to raise money — alternative and other non-dilutive financing options are often overlooked. Taking on debt might be the right solution when you’re focused on growth and can see clear ROI from the capital you deploy.

Not all capital providers are equal, so seeking financing isn’t just about securing capital. It’s a matter of finding the right source of funding that matches both your business and your roadmap.

Here are four things you should consider:

Does this match my needs?

It’s easy to take for granted, but securing financing begins with a business plan. Don’t seek funding until you have a clear plan for how you’ll use it. For example, do you need capital to fund growth or for your day-to-day operations? The answer should influence not only the amount of capital you seek, but the type of funding partner you look for as well.

Start with a concrete plan and make sure it aligns with the structure of your financing:

  • Match repayment terms to your expected use of the debt.
  • Balance working capital needs with growth capital needs.

It’s understandable to hope for a one-and-done financing process that sets the next round far down the line, but that may be costlier than you realize in the long run.

Your term of repayment must be long enough so you can deploy the capital and see the returns. If it’s not, you may end up making loan payments with the principal.

Say, for example, you secure funding to enter a new market. You plan to expand your sales team to support the move and develop the cash flow necessary to pay back the loan. The problem here is, the new hire will take months to ramp up.

If there’s not enough delta between when you start ramping up and when you begin repayments, you’ll be paying back the loan before your new salesperson can bring in revenue to allow you to see ROI on the amount you borrowed.

Another issue to keep in mind: If you’re financing operations instead of growth, working capital requirements may reduce the amount you can deploy.

Let’s say you finance your ad spending and plan to deploy $200,000 over the next four months. But payments on the MCA loan you secured to fund that spending will eat into your revenue, and the loan will be further limited by a minimum cash covenant of $100,000. The result? You secured $200,000 in financing but can only deploy half of it.

With $100,000 of your financing kept in a cash account, only half the loan will be used to drive operations, which means you’re not likely to meet your growth target. What’s worse, as you’re only able to deploy half of the loan, your cost of capital is effectively double what you’d planned for.

Is this the right amount for me at this time?

The second consideration is balancing how much capital you need to act on your near-term goals against what you can reasonably expect to secure. If the funding amount you can get is not enough to move the needle, it might not be worth the effort required.

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Overdraft Protection: What It Is and Different Types



Overdraft fees can be a major drain on your finances. Some banks charge more than $30 per overdraft and potentially charge that fee multiple times per day if you keep making transactions that overdraw your checking account. If you want to avoid these fees, you can typically opt out of overdraft coverage with your bank. It can be useful, however, to set up overdraft protection instead of opting out so you don’t find yourself unable to pay for something urgent.

What is overdraft protection?

Overdraft protection is a checking account feature that some banks offer as a way to avoid overdraft fees. There are several types of overdraft protection, including overdraft protection transfers, overdraft lines of credit and grace periods to bring your account out of a negative balance. Some other overdraft coverage programs might be a combination of these features.

Before you opt out of overdraft protection altogether — which means your bank will decline any transaction that would result in an overdraft — consider how you might need overdraft coverage in an emergency. For example, maybe you’re using your debit card to pay for gas on a road trip. You need enough fuel to get home but don’t have enough money in your checking account. Instead of dealing with running out of gas, you may want to deal with an overdraft.

How does overdraft protection work?

Here are more details about the main types of overdraft protection that banks tend to provide.

Overdraft protection transfers. When a bank allows you to make an overdraft protection transfer, you can link a savings account, money market account or a second checking account at the same bank to your main checking account. If you overdraft your checking, your bank will take the overdrawn funds from your linked account to cover the cost of the transaction. Many banks allow this service for free, but some banks charge a fee.

Overdraft lines of credit. An overdraft line of credit functions like a credit card — but without the card. If you don’t have enough money in your account to cover a transaction, your bank will tap your overdraft line of credit to cover the remainder of the transaction. Lines of credit often come with steep annual interest rates that are broken up into smaller interest charges that you keep paying until the overdraft is paid back. Be aware that a line of credit could end up being expensive if you use this option to cover your overdrafts.

Grace periods. Some banks offer grace periods, so instead of immediately charging an overdraft fee, the bank will give you some time — typically a day or two — to return to a positive account balance after overdrafting. If you don’t do so within that time frame, your bank will charge you fees on any transactions that overdrafted your account.

Other coverage programs. Some banks are taking a new approach to overdraft protection by offering what’s basically a free line of credit with a longer grace period for customers to bring their account to a positive balance. One example, Chime’s SpotMe® program, allows customers to overdraft up to $200 with no fees. The customer’s next deposit is applied to their negative balance, and once the negative balance is repaid, customers can give Chime an optional tip to help keep the service “free.”

Chime says: “Chime is a financial technology company, not a bank. Banking services provided by, and debit card issued by, The Bancorp Bank or Stride Bank, N.A.; Members FDIC. Eligibility requirements and overdraft limits apply. SpotMe won’t cover non-debit card purchases, including ATM withdrawals, ACH transfers, Pay Friends transfers or Chime Checkbook transactions.”

4 ways to avoid overdraft fees

  1. Set up low balance alerts. Many banks offer an alert option so you’ll get a text, email or push notification if your account drops below a certain threshold. These alerts can help you be more mindful about your balance so that you can put more money into your account or spend less to avoid an overdraft.

  2. Opt out of overdraft coverage. If your bank doesn’t offer overdraft protection — or if its only options cost money — you may want to opt out of overdraft coverage, in which case your bank will decline any transactions that would bring your account into the negative. Keep in mind that this option could put you in a sticky situation if you’re in an emergency and can’t make an important purchase because you don’t have overdraft coverage.

  3. Look for a bank that has a more generous overdraft policy. Many banks are reducing or eliminating their overdraft fees, so if overdrafts are an issue for you, do some comparison shopping to see if there are better options available.

  4. Consider getting a prepaid debit card. Prepaid debit cards are similar to gift cards in that you can put a set amount of money on the card, and once you run out, you can load it with more money. The prepaid debit card can’t be overdrawn because there isn’t any additional money to draw from once its balance has been spent.


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Business Ideas

Startup Business Grants: Best Options and Alternative Funding Sources



Startup business grants can help small businesses grow without debt. But if you want free money to start a company, your time may be better spent elsewhere. Competition for small-business grants is fierce, and many awards require time in business — often at least six months.

Some grants are open to newer businesses or true startups. And even if you don’t qualify now, it can pay to know where to look for future funding. Here are the best grants for small-business startups, plus alternative sources of startup funding to consider.

How Much Do You Need?

with Fundera by NerdWallet

Government startup business grants and resources

Some government programs offer direct funding to startups looking for business grants, but those that don’t may point you in the right direction or help with applications: Government agencies routinely post new grant opportunities on this centralized database. If you see an opportunity relevant to your business idea, you can check if startups are eligible. Many of these grants deal with scientific or pharmaceutical research, though, so they may not be relevant to Main Street businesses.

Local governments. Lots of federal grants award funding to other governments, like states or cities, or to nonprofit economic development organizations. Those entities then offer grants to local businesses. Plugging into your local startup ecosystem can help you stay on top of these opportunities.

Small Business Development Centers. These resource centers funded by the Small Business Administration offer business coaching, education, technical support and networking opportunities. They may also be able to help you apply for small-business grants, develop a business plan and level up your business in other ways.

Minority Business Development Agency Centers. The MBDA, which is part of the U.S. Department of Commerce, operates small-business support centers similar to SBDCs. The MBDA doesn’t give grants to businesses directly, but these centers can connect you with grant organizations, help you prepare applications and secure other types of business financing.

Local startup business grants

Some local business incubators or accelerators offer business grants or pitch competitions with cash prizes. To find these institutions near you, do an online search for “Your City business incubator.”

Even if you don’t see a grant program, sign up for their email newsletter or follow them on social media. Like SBDCs and MBDAs, business incubators often provide business coaching, courses and lectures that can help you develop your business idea.

Startup business grants from companies and nonprofits

Lots of corporations and large nonprofits, like the U.S. Chamber of Commerce, organize grant competitions. Some national opportunities include:

iFundWomen. iFundWomen partners with other corporations to administer business grants. You can fill out a universal application to receive automatic notifications when you’re eligible to apply for a grant.

Amber Grant for Women. WomensNet gives two $10,000 Amber Grants each month and two $25,000 grants annually. Filling out one application makes you eligible for all Amber Grants. To qualify, businesses must be at lesat 50% women-owned and based in the U.S. or Canada.

National Association for the Self-Employed. Join NASE, and you can apply for quarterly Growth Grant opportunities. There are no time-in-business requirements for these grants of up to $4,000, but you’ll need to provide details about how you plan to use the grant and how it will help your business grow.

FedEx Small Business Grant Contest. This annual competition awards grants to small-business owners in a variety of industries. You can sign up to receive an email when each application period opens. To be eligible, you’ll need to have been selling your product or service for at least six months. Be mindful, though, that each grant cycle receives thousands of applications.

Fast Break for Small Business. This grant program is funded by LegalZoom, the NBA, WNBA and NBA G League and administered by Accion Opportunity Fund. You can win a $10,000 business grant plus free LegalZoom services. Applications open during the NBA season, which runs from fall to early summer each year.

Alternative funding sources for startups

New businesses likely won’t be able to rely on startup business grants for working capital. The following financing sources may help accelerate your growth or get your startup off the ground:

SBA microloans

SBA microloans offer up to $50,000 to help your business launch or expand. The average microloan is around $13,000, according to the SBA.

The SBA issues microloans through intermediary lenders, usually nonprofit financial institutions and economic development organizations, all of which have different requirements. You can use the SBA’s website to find a lender in your state.

Friends and family

Asking friends and family to invest in your business may seem daunting, but it’s very common. Make sure you define whether each person’s money is a loan and, if so, when and how you’ll pay it back. Put an agreement in writing if possible.

Business credit cards

Business credit cards can help you manage startup expenses while your cash flow is still unsteady. You can qualify for a business credit card with your personal credit score and some general information about your business, like your business name and industry.

You’ll probably need to sign a personal guarantee, though, which is a promise that you’ll pay back the debt if your business can’t.


If your business has a dedicated customer base, they can help fund you via crowdfunding. Usually businesses offer something in exchange, like debt notes, equity shares or access to an exclusive event.

There are lots of different crowdfunding platforms that offer different terms, so look around to find the model that works best for you.


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