A business begins with a great idea that will provide a product or a service to a community. Although every great idea deserves to be explored, not everyone has the same opportunity to develop his or her business ventures. Even though minorities currently make up 33 percent of our population, minorities own only 18 percent of the 23 million U.S. firms. In an effort to balance these figures, some lending institutions and loan programs have special programs in place to provide grants and loans to minority-owned businesses.
Loans for Minorities
Accion USA: Accion is a microfinance organization specializing in small business loans that serve minority populations. Loans range in amount from $500 to $50,000, have terms up to 60 months, and offer fixed annual interest rates from 8 to 15 percent.
Basic 7(a) loan program: The Small Business Administration (SBA) backs this loan program for existing and start-up small businesses to provide an avenue to receive financing when others are not available. 7(a) loans are the most flexible and most commonly used type of small business loan. Because the loans are provided by a lender, but guaranteed in part by the SBA, borrowers must meet the requirements of both the lender and the SBA.
The Microloan Program: This program provides short-term loans to small businesses through intermediary lenders, typically nonprofit community-based organizations. Six years is the maximum term for these loans, and $35,000 is the maximum amount. Interest rates depend on the lender, but are generally 8 to 13 percent.
CDC/504 loan program: This program is designed to provide funding for "brick and mortar" projects, purchasing land, buying existing buildings, modernizing, and purchasing machinery equipment. A Certified Development Company (CDC), a private, nonprofit corporation, works with the SBA and private lenders to provide financing.
Grants for Minorities
Grants are not provided by federal agencies for small businesses; however, some states offer small business grants to encourage small businesses in the local area. Check with your state's economic development agency, and your local non-profit organizations to see if there is anything available in your area.
Additional resources are available to open doors for minority owned businesses. Minority Business Development Centers (MBDC) offer training, one-on-one help, and other links to services and information that aid minority businesses. There are currently five regional offices. To find more information, visit their website at www.mbda.gov.
The Small Business Administration, along with many lenders, are encouraging minority owned businesses to apply for financing and increase their presence in the business world. Discussing your options with a financial advisor is a good idea to help you determine which programs may benefit you.
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