Getting financing for your minority owned business can be a challenge. A study released by the Minority Business Development Agency revealed that minority-owned businesses are less likely to get loans than non-minority-owned businesses. Now banks are tightening the purse strings for all companies looking for loans, especially those that gross less than $500,000 a year. This means that minority businesses have to become even more creative with funding.
Owners should seek out grants geared toward minority groups, and grants that are industry and sector specific, or are regionally based. For Native American entrepreneurs, some tribes offer grants up to $100,000
Here are some other funding sources worth investigating.
- Capital Assistance
The U.S. Department of Commerce’s Minority Business Development Agency (MBDA) is slated to offer $7.8 million in funding for 27 MBDA Business Centers (MBCs). These centers offer minority owned businesses access to markets, contracts, capital and other consulting services. MBCs interface directly with minority business owners and managers at the local level. In past years, MBCs have helped clients gain access to more than $800 million
- Micro Loans
If you have poor credit, you may consider turning to a microfinance institution. Many of these institutions are funded by The U.S. Small Business Administration. Many cities have introduced their own microfinance programs. Check with your local microfinance institutions about lending requirements.
- Individual Development Accounts (IDAs)
IDAs are savings accounts that match your deposits. For every dollar saved, owners get a corresponding match. To participate, savers must complete financial education classes and use whatever they save for an asset-building purpose, plus participants learn about budgeting. For more info, review the IDA directory.
- Forgivable Loans
This type of a loan is forgivable if the borrower meets certain requirements. For example, a condition could be that they are required to hire and train personnel.
- New Market Tax Credit
If you want a commercial space or facility, take a look at the new market tax credits. This is administered by the U.S. Department of Treasury Community Development Financial Institutions Fund. The program invests in minority owned companies. The credit allows taxpaying investors to get a credit against their federal income tax liability in exchange for investing in qualified equity investments. The credit is spread across 7 years.
First American Merchant (FAM) is the online lender that gives minority owned businesses the funds necessary to start their companies. FAM specializes in business cash advances for minority companies that work in high risk industries and with bad credit. First American Merchant is the lender that will work for you and with you. Contact them today.