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Minority Business Loans: Your 10 Options

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Minority business loans

A critical component of starting a business is capital. While it’s hard enough for all new entrepreneurs to secure financing, women and business owners of color are often at a greater disadvantage. Minority-owned businesses are denied financing from traditional banks at higher rates than white-owned businesses, according to a Kauffman Foundation report. These low approval rates often discourage owners of these firms from applying for bank funding, putting them at risk of turning to predatory business lenders. When minority businesses do receive small business loans, owners may end up paying higher interest rates. Minority businesses typically receive smaller loan amounts as well.

Minority-owned businesses make up 29% of all firms in the U.S., according to data from the U.S. Census Bureau. If these businesses achieved economic parity, the Census Bureau estimates 13 million additional jobs would be realized by the U.S. economy.

The good news is there are already many loan programs specifically designated for entrepreneurs of color. Rates and fees mentioned below are accurate as of the date of publishing. Here’s a look at some available options.

10 minority business loans to consider

1. SBA Microloan Program

The U.S. Small Business Administration’s microloan program provides funding to minority-owned businesses, as well as women, low-income and veteran business owners, who may have trouble qualifying for traditional bank financing. Nonprofit lenders administer microloans in amounts of $50,000 or less. Microloans have a maximum term of six years and interest rates typically range from 6.5% to 9%. The average in fiscal year 2017 was 7.5%. SBA microloans can be used to purchase supplies, furniture, fixtures and equipment and to cover other working capital expenses.

2. SBA Community Advantage Loan Program

Another SBA program for underserved business owners is the Community Advantage loan program. Nonprofit lenders provide financing for small businesses in underserved areas. Qualifying business owners can receive up to $250,000 to cover any business expense. Community Advantage loans have a maximum term of 10 years for working capital loans and 25 years for fixed-asset or refinanced loans. The maximum interest rate on these loans is the current prime rate plus 6%. Underserved markets eligible for Community Advantage loans include businesses in low-to-moderate income communities, businesses where more than half of the full-time workforce is low-income and veteran-owned businesses, and those living in Opportunity Zones or areas defined as “mostly rural” or “completely rural” by the Census Bureau.

3. SBA 8(a) Business Development Program

Although not a loan program, the SBA 8(a) business development program also helps underserved business owners receive funding. The program ensures at least 5% of all federal contracting dollars are awarded to small, disadvantaged businesses each year. Economically or socially challenged business owners can be certified as an 8(a) small business if they own at least 51% of the company and have a personal net worth of $250,000 or less or an average income of $250,000 or less in the past three years. Qualifying businesses can compete for contracts and receive mentorship from an SBA-approved business owner.

4. Community Development Financial Institutions

The Community Development Financial Institutions Program combines federal resources and private funding to serve small businesses in underserved communities across the country. Community Development Financial Institutions are private banks, credit unions, loan or microloan funds or venture capital providers that help businesses in low-income communities access capital. There are more than 1,000 CDFIs operating throughout the U.S. Some CDFIs partner with major banks like Bank of America to provide larger loans, sometimes up to $1 million.

5. Business Center for New Americans

The Business Center for New Americans provides financial assistance for immigrant and refugee business owners in New York. The BCNA is a certified CDFI and is an SBA-backed microlender. Loans from the BCNA range from $500 to $50,000 with a maximum term of three years. Interest rates range from 8.25% to 10%, depending on the loan amount. There’s no minimum credit score required to qualify for a BCNA loan, but business owners must be able to show how they’ll repay the debt.

6. Valley Economic Development Center

The Valley Economic Development Center is another CDFI that works with business owners who may not qualify for traditional financing. VEDC offers three different loans ranging from $500 to $500,000 with terms from six to 60 months. Interest rates start as low as 7.75%. VEDC loans can be used to cover business expansions, working capital costs, new equipment purchases or to refinance existing debt. While VEDC works with all types of small businesses, the center focuses on women and minority business owners. VEDC has offices near Los Angeles, New York and Chicago.

7. Union Bank Minority Small Business Loans

Union Bank’s Business Diversity Lending program provides loans and lines of credit to qualifying small business owners who fall into the following ethnicity and race categories: Hispanic or Latino; American Indian or Alaskan Native; Asian; Black or African American; Native Hawaiian or other Pacific Islander. Secured and unsecured financing options are available at both fixed and variable rates. To qualify, businesses must have been in business for at least two years and have annual sales of $20 million or less. Business owners can borrow up to $2.5 million. Find your nearest Union Bank branch here.

8. The Affiliated Tribes of Northwest Indians Revolving Loan Fund

The Affiliated Tribes of Northwest Indians provides loans to Native American-owned businesses that have trouble qualifying for traditional financing. ATNI aims to grow businesses and bring jobs to distressed Native American communities. The Revolving Loan Fund supplies loans up to $125,000 with a 10-year term maximum. Loan interest rates are fixed but may be higher than bank rates. Business owners can use RLF loans to purchase equipment, inventory, new buildings or to cover any working capital expenses.

9. Latino Economic Development Center

For Latino business owners near Baltimore and Washington, D.C., the Latino Economic Development Center provides loans that can be used for working capital, equipment, inventory, advertising and marketing. The LEDC issues loans between $5,000 and $50,000. Terms range between one and five years and interest rates span 9% to 14%. When approving loan applications, the LEDC considers the strength of the business, available collateral, character references and credit score of the owner, although there is no minimum credit score required. Startups can also apply for these minority business loans.

10. Carolina Small Business African American Loan Fund

The African American Loan Fund from the Carolina Small Business Development Fund offers loans to African-American-owned businesses in North Carolina. Loan terms range from $25,000 to $250,000 and can be used to cover business acquisitions, equipment, commercial real estate purchases and debt refinance. Interest rates are typically lower than 10%. To qualify, business owners must have at least one year in business, one to 200 employees and an annual revenue of at least $75,000. Startups with fewer than 12 months in business may also apply, as long as the owner has established personal credit.

More resources for minority small business owners

Minority-owned businesses may need more than money. Many organizations offer research, mentorship and other support for minority small business owners.

Minority Business Development Agency: MBDA is part of the U.S. Department of Commerce and promotes the growth of minority-owned businesses throughout the country by utilizing public and private sector programs, policy and research. MBDA Business Centers are available to business owners looking for help in a range of areas, from securing capital to accessing new markets. Find your local MBDA Business Center here.

Minority Chamber of Commerce: The Minority Chamber of Commerce is a nonprofit organization providing business education, networking and advocacy. The organization hosts seminars and workshops related to a range of business topics, from management to finance. The Chamber has offices in New York, Washington, Atlanta, Miami and on Puerto Rico.

Minority business accelerator programs: Many cities have accelerator programs for minority-owned businesses, providing them with resources and mentorship over a set period of time. For example, the Cincinnati Chamber accelerator program boosts Hispanic and African-American-owned businesses through coaching and networking.

The bottom line

Starting a business can be challenging for all entrepreneurs, but minority-owned businesses often face additional hurdles. Historically, lack of capital has been one of the major obstacles standing in the way of entrepreneurs of color achieving their dreams.

Several national programs exist to help minority-owned firms secure financing to run their operations. Owners can apply for minority business loans that would best fit their needs and take advantage of community resources that are available for additional business support.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]

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Small Business

Brick-and-Mortar vs. Online Banks: Which is Better for Small Businesses?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Separating your personal and professional finances is crucial when starting a business, and changes in technology are making it more convenient to do so. Not only could you turn to traditional brick-and-mortar banks, but you could take advantage of the resources that digital banks offer.

Opening a business bank account would allow you to clearly track your income and expenses without putting your personal spending in the mix. Managing a business bank account would also help you build your credit profile — you could become eligible to open a business line of credit or credit cards connected to your account.

Whether you choose an online bank or a brick-and-mortar bank would depend on which type fits your needs as a business owner. Keep reading to find out what kind of bank would be best suited for you.

Small business banking: Brick-and-mortar vs. online banks

A key difference between traditional and online banking is the flexibility that digital banks provide, said Barry Coleman, vice president of counseling and education programs at the National Foundation for Credit Counseling. Small business owners could have around-the-clock access to online banking services as long as they have a device and an internet connection.

“This can certainly help busy business owners who are strapped for time by allowing them the option to bank on their schedules,” he said.

Brick-and-mortar banks

Although most brick-and-mortar banks now offer online banking features, consumers still must make some transactions in person, Coleman said, such as cash transactions that require personal identification. When opening a business checking account with Chase, for example, customers must meet with a business banker before enrolling in online and mobile programs. Still, this could be a draw for some business owners.

“Some consumers are simply more comfortable having a physical banking location where they can perform transactions and speak to banking associates in person,” Coleman said.

New business owners could also benefit from the guidance that bankers provide, said Grier Melick, business consultant at the Maryland Small Business Development Center. Establishing a personal relationship with a banker could also be beneficial if you plan to apply for a small business loan. You may have a better chance of being approved for funding if the bank already knows and trusts you.

“Oftentimes, small business owners do not know everything that they need to from a business banking perspective,” Melick said. “Having some direct human involvement can help with that.”

Online banks

Online banks have lower overhead costs than traditional banks, and those lower costs typically result in higher interest rate yields on deposits for digital banks than branch-based banks, he said. For instance, a high-yield business savings account could have an APY as high as 2% and no minimum account balance.

However, brick-and-mortar banks have the advantage of allowing customers to make cash deposits or withdrawals; an online bank typically wouldn’t offer that feature, Coleman said. However, online banks sometimes belong to free ATM networks, like Allpoint, which would allow you to avoid the withdrawal fees that you’d incur at other ATMs.

Best of both worlds

It’s possible to have accounts at both types of banks, Melick said. For example, the owners of a brick-and-mortar store may start with an account at a local bank branch, then open a digital account when they decide to start selling online.

“Instead of severing ties with the bank, they could open an online account as well to handle their other revenue streams,” he said.

You could be subject to banking fees at both traditional and online banks, Coleman said. However, online banks generally charge considerably fewer fees and you may be able to avoid overdraft, monthly maintenance and ATM fees that come with a traditional bank account.

Here’s a quick look at how the two types of banks stack up.

Online banksBrick-and-mortar banks
24/7 access to accounts and banking features.Online banking features typically offered, but some transactions may have to be completed in-person during bank hours.
High-yield accounts available.Lower interest rates because of overhead costs.
Customers cannot complete in-person cash transactions or meet with bank representatives.Customers can make cash transactions, and bank representatives are available for meetings.

Digital services on the horizon for traditional banks

Online banks are growing in numbers and popularity, Coleman said. Traditional banks have taken this trend as a cue to bolster digital offerings for consumers.

“As a result, we are seeing traditional banking introduce more digital options for providing services,” he said.

The presence of digital financial technology is expanding within the financial services industry, comprising 7% of the total equity of U.S. banks, according to research from consulting firm McKinsey. To keep up, traditional banks must consider ramping up digital efforts in areas such as design, innovation, personalization, digital marketing, data and analytics to provide value to customers.

A few traditional banks rolling out expanded digital services include:

Bank of America

Earlier this year, Bank of America created Business Advantage 360 for customers who have business deposit accounts with the bank. The free tool provides a digital dashboard showing business owners their major expenses and transactions, as well as automated cash flow projections that can be adjusted to account for new sales or other data. Users can also connect with small business bankers through the dashboard.

PNC Bank

PNC Bank rolled out a digital business lending platform this year in partnership with OnDeck, an online small business lender. Leveraging OnDeck’s digital loan origination process, PNC aims to provide customers with business financing in as few as three days, a significantly faster timeline than how long it would take to process a conventional bank loan.

Popular Bank

Similarly, New York-based Popular Bank announced a partnership last year with Biz2Credit, an online lender serving small businesses. Popular Bank leans on Biz2Credit’s technology to digitally process loan applications outside of regular bank hours, effectively speeding up time to funding.

As the lines begin to blur between online and brick-and-mortar banks, business owners may find themselves with an increasing amount of digital opportunities. However, a demand for brick-and-mortar banking will likely remain. Small business owners who borrowed from an online lender reported feeling less satisfied than those who borrowed from a community bank — 49% vs. 79% — according to a Federal Reserve survey.

“Whether consumers turn to online only banks, or traditional banks that offer online products and services, the availability of online options will more than likely continue to grow,” Coleman said.

Which bank is best for your small business?

Whether you choose an online bank or a brick-and-mortar bank to house your business funds would depend on your personal preference, Coleman said.

No matter which you pick, make sure the Federal Deposits Insurance Corporation insures your bank of choice, he said. Single consumer accounts, joint accounts and business accounts, among others, would be protected at FDIC-insured banks in the event of bank failure. Deposits up to $250,000 should be safe and covered.

If you like having the ability to sit down with a banking professional to discuss your business needs, a branch-based bank could be the better choice, Coleman said. The physical presence that traditional banks provide could add a level of trust and reassurance. Keep in mind, though, that most locations have standard business hours that may not be conducive to your schedule as a business owner, he said.

A digital bank would allow you to complete your banking activities on your own time, said Coleman, though traditional banks oftentimes provide online services as well. He also noted that you may want to avoid using a public WiFi network to make business transactions, as those networks may not be secure and your information could be vulnerable.

A digital bank wouldn’t offer the same in-person service as a traditional bank, Coleman said, but you may not feel like you’re missing out.

“If the business owner already knows what they are looking for in a bank, and the online bank meets their needs, then they may prefer the online bank for its convenience, potential lower fees and higher interest on deposits,” he said.

All business owners should at least consider opening a high-yield savings account for cash that isn’t needed for daily operations, Melick said.

“Small businesses need to make sure that every penny they make works for them,” Melick said. “Oftentimes, the best way it can is through online banking accounts.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]

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Small Business

Business Acquisition Loans: What They Are and Where to Find Them

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Buying an existing business can be an effective strategy to grow your operation. But if you don’t have enough cash to make the purchase, a business acquisition loan could help you finance the deal.

There were more than 17,500 mergers and acquisitions in North America in 2018, according to the Institute of Mergers, Acquisitions and Alliances.

Continue reading to find out where you could find a loan to buy a business — and how to boost your approval chances.

Types of business acquisition loans

There are several ways to finance a business acquisition. In some cases, the seller may loan you the money and accept payments taken from your business profits. Or, you could assume the business’ existing debt by purchasing both its assets and liabilities.

You could also pursue a leveraged buyout, which involves using business assets to fund the purchase. However, a leveraged buyout typically requires additional financing, such as a business acquisition loan.

Business purchase loans come in a variety of forms. Here are a few for which you could apply.

Term loans

A long-term business loan can finance a wide range of purchases — generally between $25,000 and $200,000. Long-term loans have fixed monthly payments and fixed interest rates, which allow you to plan for regular payments. You could be required to provide a 10% to 30% down payment. These loans typically must be paid back in three to 10 years and often have lower interest rates than financing products with shorter repayment terms, such as short-term business loans that must be paid back between three and 18 months.

Lenders may require substantial paperwork from applicants, which could slow down how long it takes to get funding. Some businesses could have trouble qualifying since borrowers usually need two years in business, a strong credit profile and collateral to be eligible for long-term loans.

SBA loans

The U.S. Small Business Administration guarantees a portion of loans made to small businesses through partner lending institutions. SBA loans range from $500 to $5.5 million for qualifying small businesses. You may be required to make a 10% to 20% down payment. The 7(a) loan program is the SBA’s primary financing option and may be best suited to fund business acquisitions. The standard 7(a) loan is available for up to $5 million. The SBA guarantees 85% of loans that are $150,000 or less, and up to 75% of loans exceeding $150,000.

Repayment terms for 7(a) loans could be up to 25 years for real estate purchases and up to 10 years for equipment purchases or working capital. Interest rates can be fixed or variable and would be based on the prime market rate, plus a markup rate. The SBA caps the percentage that lenders can add to the prime rate to limit how much interest borrowers must pay.

Equipment financing

Equipment loans are designed to finance the purchase of business assets, which could be useful if you’re buying a business based on the value of its equipment. The equipment would act as collateral on the loan, which could lower the interest rate and make payments manageable. Interest rates could range between 6% and 12% depending on factors such as your terms and down payment. Borrowers typically have to make a 10% to 20% down payment and need good credit to qualify for financing.

Repayment terms for equipment financing generally range from six months to 10 years. In some cases, the terms of an equipment loan could exceed the useful life of the asset.

Where to find a loan to buy a business

Business acquisition loans are available from traditional banks and alternative online lenders. To give you a starting point, we’ve rounded up a few lenders that specialize in business acquisition financing or SBA lending.

Live Oak Bank

Live Oak Bank is an SBA lender offering acquisition loans to veterinarians, pharmacists and investment advisors. Live Oak Bank is headquartered in Wilmington, N.C., but it lends to businesses nationwide.

Live Oak Bank issues SBA 7(a) loans up to $5,000,000 to buyers of companies with $250,000 to $1.25 million in EBITDA, or earnings before interest, taxes, depreciation and amortization. Those loans have 120 month repayment terms, and interest rates are subject to the SBA cap. If you’re acquiring a business with more than $1 million in EBITDA, you could be eligible for a companion acquisition loan up to $2.5 million from Live Oak Bank. Companion loans have repayment terms between five and seven years. The interest rates, according to Live Oak Bank, may be higher than rates for SBA-backed loans.

Ameris Bank

Ameris Bank, with locations across the South, offers financing for business acquisitions. Businesses of all sizes can apply for funding. Repayment plans can be set up on an annual, semiannual or monthly schedule. Rates and terms are competitive, according to Ameris Bank, and would depend on your profile as a borrower.

It is also an SBA preferred lender and issues SBA loans to finance business acquisitions. Applicants would be required to provide at least 10% equity to qualify for an SBA loan. Repayment terms could be as long as 300 months, and rates would be subject to the SBA cap.


Smartbiz is an online marketplace specifically for preferred SBA lenders. Smartbiz matches lenders to applicants who may have trouble qualifying for loans from their local bank. Loans are available for up to $5,000,000 with interest rates between 6.50% and 8.75% and terms between 120 and 300 months.

Borrowers must have at least two years in business, good credit, no recent bankruptcies and sufficient cash flow to repay debt. Smartbiz can process an application and disburse funding in as few as seven days.

Banner Bank

Banner Bank, which has locations in California, Idaho, Oregon and Washington, offers merger and acquisition financing to business owners looking to grow through acquisition or to buy out a business partner. Loans come with fixed or variable interest rates and terms up to 84 months. Applicants would need to set up a meeting with a relationship manager at their local bank branch to find out if they qualify.

How to get a business acquisition loan

When applying for an acquisition loan, the lender would likely dig into details about your business, as well as the business you plan to buy.

Be prepared to share the following information about your company with lenders:

  • Personal credit history: Having a strong personal credit profile and a FICO Score exceeding 680 would make you appear more attractive as a borrower and could help you get a lower interest rate.
  • Professional experience: Your success as a business owner would impact whether a lender would issue you a loan to acquire and manage another business. If you do not own a business, relevant industry or career experience could be valuable.
  • Business plan: A lender would review yours to make sure you have a strategy to grow your existing business and the acquired business.
  • Financial documents: To illustrate your record of operating profitably, you would need to submit financial statements such as your balance sheet, income statement and cash flow statement. A lender would want to see if your business will generate enough cash flow to repay an acquisition loan.
  • Industry: Lenders view some industries as riskier than others. Professional service providers tend to be safer borrowers, while volatile businesses such as restaurants, retailers or vice-related companies could be considered risky.

The industrial sector has seen the highest percentage of business transactions since 1985. Behind industrials is the technology and financial sectors. On the other hand, mergers and acquisitions are less frequent in the telecommunications, retail and real estate industries.

Regarding the business you plan to acquire, a lender would likely evaluate:

  • Business credit profile: The business should have a strong credit profile that shows a history of making on-time payments to vendors and suppliers.
  • Financial statements: The company’s balance sheet, profit and loss statements, tax returns, current debt liabilities and cash flow analysis would give the lender a look at the viability of the business.
  • Projections: Revenue and sales projections for the next few years would also help a lender understand the potential value of the acquisition.
  • Valuation: The valuation of the business would show how much the deal is worth, which would affect your loan amount.

Before giving you the green light, a lender would want to make sure you’re buying an established business that would generate enough revenue to allow you to repay your debt. With this information, you could make sure the loan application process goes smoothly and increase your chances of approval.

The bottom line

Business acquisition loans can fill the gap when you want to purchase a company but don’t have enough funds to do so. Term loans, equipment loans and SBA loans could be used to cover a business acquisition. You could apply for financing from a traditional bank or online business lender to obtain the necessary money to finance the deal.

Be sure to shop around before accepting an offer. Wait for a loan that not only provides the amount of funding you need but comes with repayment terms and interest rates that work best with your small business.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]