Qualifications for Minority Business Loans

A minority business loan helps members of socially and racially disadvantaged groups access funds necessary for their business. A minority business loan “levels” the playing field by providing necessary capital to acquire equipment, employees and other assets necessary to operate.

Minority Business Classification

A minority is classified as those individuals who are African-American, Hispanic-American, Asian-American, Alaskan Native and Pacific Islander and American Indians. A minority business is one that has at least 51 percent ownership by a member of one of these groups. The money set aside for business development for minority business owners is provided on a federal basis, through nearly every federal department and agency such as the U.S. Small Business Administration (SBA).  

Loan Programs Available

States and local governments also have programs available for minority business loans. Private companies create loan opportunities for minority business owners as well. Giving opportunities to minority businesses helps economic development in many underserved communities and increases tax revenues for cities and states.

Core Qualifications for Minority Businesses

To qualify for a minority business loan a business must be majority owned by a member of a minority group. Additionally, a minority business may need to be registered or certified as a minority business, or disadvantaged business enterprise (MBE/DBE), based on lender requirements. Once these steps have taken place, a minority business owner can take a look at the various federal, state, local and private opportunities that are available.

Federal Loan Programs

The SBA offers loans to small DBEs through the SBA 7(a) loan program. The 7(a) loans are basic loans offered to any qualifying small business that provides a guarantee to private lenders who extend loans. A MBE/DBE qualifies for the program by participating in the SBA’s 8(a) business development program for small disadvantaged businesses. Certification through the 8(a) program increases the chances for a minority business to qualify for 7(a) loans through private lenders.

State and Local Loan Programs

Many states have mimicked the SBAs loan programs with similar products designed to attract or create business opportunities for minority business owners. These programs require the business to qualify as a MBE/DBE and meet other qualifications set forth by the lending authority.

 Private businesses, investor groups and other entities that are not connected with the government create and extend loans through a variety of lending facilities. These programs are typically based on the same criteria that government agencies use.