Benefits of Minority Business Loans

The Minority Business Development Agency is a federal organization that guarantees minority business loans for racial minorities, women and ethnic minorities. The MBDA does not provide the actual loans, but it does guarantee the loans private banks and lenders extend to minority individuals who are starting or expanding small businesses. This targeted small business loan offers many advantages to minority owned businesses. 

Makes Getting a Loan Easier

The first step to getting a minority small business loan is getting approved by the MBDA. Similar to getting an FHA loan, once you are guaranteed, you can shop around with private providers. These private providers will have additional incentive to extend loans to you as they know those loans are guaranteed by the Federal government. The guarantee means the government will purchase the loan on the secondary market. This makes the loan much less risky for the lender. Less risky loans always have a better chance of approval from qualified lenders. 

Makes Loans Less Expensive

An additional benefit to obtaining a loan under less risk is it will be less expensive over time. You will be quoted lower interest rates and given more flexible loan standards with a guaranteed loan. Small business loans are often the most expensive loans a person will ever seek. While a mortgage loan is on average $250,000 for most purchasers, a business loan is more likely to be in excess of $1,000,000. A small percentage point will make a big difference on these larger loans. The more flexible loan terms mean you may have opportunities to pay off the loan early. You may also find benefits such as deferral in times of financial hardship for the company.

Provides Assistance Preparing Business Plans

One of the most significant benefits to seeking a loan through the MBDA is the additional business assistance you will receive. Professionals who have extensive experience in the loan and finance field will look over your application in depth. Those same people, because they are charged with the responsibility to encourage growth of minority owned businesses, have an incentive to help you succeed. They do this by assisting you in the creation of your business plan. They will also help with marketing. In some cases, they may be able to assist you in determining a financial package that will help you immensely.

Where to Go for Minority Small Business Loans

Your local small business development corporation should have resources to assist you. You may also look to the MBDA's website at www.mbda.gov  to find sample applications and documents. Bank of America is recommended as a finance option for minority business owners. Many have also found successful loan programs at Wells Fargo. Any lender is a potential MBDA lender, though, so do not be afraid to approach a smaller, local bank to seek financing. If you already have an established relationship with a lender, ask about their MDBA program to see if you can further reduce your expense based on this relationship.