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Minority Business Loan - A Minority Business Loan Can Make an American Dream a Reality

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The word minority is used to describe different sociological groups. Most people associate the word with a socially subordinate group in terms of education, ethnicity, language, education, culture, and religion. There are other minority groups like people with disabilities; economic minorities like the working poor and the unemployed; age minorities that don’t fit the profile of a typical working age, and sexual minorities. The one thing that all minorities have in common is the ability to dream about economic and social freedom; every minority wants to experience success and a minority business loan can make that dream a reality if a few steps are taken to secure the loan.

There are a number of business and government organizations that earmark funds to lend to businesses started by ethnic minorities as well as women. The only federal agency set up to foster the growth of minority-owned businesses is the Minority Business Development Agency (MBDA). The Minority Business Development Agency provides funds for a network of Minority Business Development Centers (MBDC) around the country which include the Native American Business Development Center, Minority Business Development Centers, and Business Resource Centers. These centers provide minority entrepreneurs with the tools they need to be successful. Those tools include assistance in writing business plans, management and technical advice, marketing tips, and basic financial planning information. The centers help minority business owners secure the funds they need to support their business venture using a minority business loan of some kind.

In order to secure a minority business loan the lender must believe the loan will be repaid according to the agreement. Every loan carries a certain amount of risk so banks and other lenders want to reduce those risks as much as they can. Lenders look for minority businesses that show potential and they want committed individuals that have solid business and personal financials. Applicants must supply lenders with verifiable information like gross annual sales, account balances, length of time in business, and profit and loss statements.

If the business is new the lender usually wants to see a business plan, cash flow projection for the first twenty-four months, and a personal financial statement. The personal information they need includes: credit card debt, liquid assets, tax returns, real estate holdings, and personal loan obligations. Lenders will study personal spending habits, and how installment and credit card debt has been handled. If personal debt obligations are high lenders may reject the loan application because those individuals are less likely to withstand a reduction in income in a slow business economy.

The business summary submitted must be complete and should include the nature of the business, how the minority loan is going to be used, and how much working capital will be needed and how it will be allocated. Lenders also want to know how the applicant will make their business different from competitors. Too much information may hinder the loan process by overwhelming the loan officer, so documents like leases and proof of insurance on certain items should be given when asked for rather that including them with the initial information.

The Small Business Association (SBA) can make minority loans up to two hundred and fifty thousand dollars. The SBA usually requires the same information that other lenders need, but once the application is approved it’s guaranteed by the government. The SBA will send the applicant to an approved lender, but almost any bank is a potential lender once a minority loan is approved by the SBA.

Wells Fargo Bank is a minority and woman friendly lender that has pledged to lend a billion dollars to African-Americans, women and Hispanics. To qualify for a minority business loan with Wells Fargo the business must be at least two years old, be profitable, have good business and personal credit records, and no bankruptcy filings in the last ten years. Wells Fargo offers business lines of Credit to qualified business minorities that start at five thousand dollars and they go as high as one hundred thousand dollars.

There are also small business investment companies (SBICs) that give business loans to minorities. SBICs are licensed and regulated by the SBA and usually require the same information in order to be approved for a loan.

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