Best Small Business Loans for Minorities in 2023

We reviewed and ranked the best small business loans for minority-owned businesses. We set out to find the best one by thoroughly researching five of the most popular lenders: OnDeck, Kiva, Fundbox, Live Oak, and Lendio. Knowing the top small business loan for minorities makes it possible to find the best financing options for your business.

Our Approach:

Choosing the best business loan for minority-owned businesses comes down to three things:

1. Needs of your business
2. If you can afford the loan
3. Whether or not your business meets loan requirements

In this business loan review, we’ll look at some of the top small business loans for minority-owned businesses and share what makes them the right choice. We’ll explore the financing details of each loan, along with pros, cons, and more. By the time you finish reading this review, you’ll know which business loan is best for your business.

Our Top 9 Business Lenders for Minorities:

1. OnDeck offers the best overall business loans for minorities because they have low credit score requirements and same day funding.
2. Kiva is the best microlender for minorities because they mainly serve minority businesses in underserved communities.
3. Fundbox has the best business loans for minority-owned businesses with low revenue because they have small revenue requirements.
4. Live Oak is the best business loan for minority-owned businesses in rural areas because they offer USDA loans.
5. Lendio is the best business loan for minority-owned businesses with time constraints because Lendio works with a network of lenders.
6. SBA 8(a) Business Development Program is the best business loan for socially disadvantaged minority-owned businesses because the SBA works with disadvantaged minorities to help them get loans.
7. Union Bank is the best business loan for underserved minority-owned businesses because Union Bank has reduced requirements for underserved minorities.
8. Indian Affairs is the best business loan for Indian-owned businesses because they guarantee loans for Indian-owned businesses.
9. NMSDC is the best business loan for established minority-owned businesses because NMSDC has financing options for well established minority-owned businesses.

OnDeck offers term loans and lines of credit for any business, but they are the best overall choice for minority-owned businesses with no established business credit or poor credit. They offer loans up to $50,000 and interest rates that start at a reasonable 10% per year.

The main advantage to OnDeck is that you only need a 600 credit score to get approved, so if your business credit is less than perfect, you still may qualify.

Here is a quick summary of OnDeck business loans:

• Term Loan
  
  • Lowest rate: 10%
  • Loan sizes up to: $50,000
• Line of Credit
  
  • Lowest rate: 10%
  • Loan sizes up to: $50,000

OnDeck Business Loan Qualifications:

• 600+ Equifax and Experian credit score
• Prefer 2+ years in business
• Strong financials

Pros

• Low credit score okay
• Money can be used for most business expenses
• Free up your cash
• Transparent fees
• Easy approval
• Don’t need collateral
• Help you build business credit
• Tailored loans
• Loyalty benefits

Cons

• Need some established business credit to qualify
• High interest rates compared to other lenders

Kiva offers a unique approach to lending catering primarily to minority-owned businesses in underserved communities. The way Kiva works is through crowdfunding. Crowdfunding enlists the help of a community of people, mainly investors, to all give a little bit of their wealth to help a business thrive. The idea is that once the business is established and thriving, it will be a source of income for others and serve the greater community.

Microfinance loans are useful when a business owner needs a small amount of capital to quickly generate business income in order to manage and grow the business. This is especially true of minority-owned businesses that may have less access to capital.

Kiva uses its vast crowdfunding network of investors to help minority entrepreneurs get funding to grow their business.

Here is a quick summary of Kiva business loans:

• Microloan
  
  • Lowest rate: 0%
  • Loan sizes up to: $15,000

Kiva Business Loan Qualifications:

To qualify for a Kiva business loan, you are required to:

• Conduct business in the U.S.
• Be at least 18 years old
• Be using the loan for business purposes

Pros

• Crowdsourcing mitigates risk for investors
• Money can be used for any business expense.
• Zero-interest loan
• Repayable over 36 months
• Stimulate growth
• Free up cash flow
• Zero-interest loan
• Funds can be used for anything.

Cons

• Responsible for helping the loan get funded
• Requires time
• Smaller loans
• Kiva doesn’t report to credit bureaus.
• If your loan is only partially funded, you get nothing.

Fundbox is the best quick cash lender for minority-owned businesses. Sometimes minority businesses need fast access to capital to make purchases, pay employees, and to stay in business. Fundbox lends capital to minority businesses with less than perfect credit and makes funds available on demand.

Fundbox offers line of credit loans, which are easy to qualify for, offer flexible terms, and are useful for taking care of short-term business needs.

Here is a quick summary of Fundbox business loans:

• Line of Credit
  
  • Lowest rate: 4.66%
  • Loan sizes up to: $100,000

Fundbox Business Loan Qualifications:

• 500+ credit score
• 3+ months in business
• $25,000 in annual revenue

Pros

• Larger credit limits
• Free up your cash
• Fund only what you want
• Transparent fees
• Easy approval
• Funds available on demand
• Access to a revolving credit line
• Only pay for what you use
• No early repayment penalty
• Auto debit from your bank account

Cons

• Not a long term finance solution
• No early payment incentive
• Pay most of the interest on the front-end of the loan

Live Oak offers three types of loans to help minorities operating in rural areas: SBA loans, USDA loans, and commercial loans. Small Business Administration (SBA) loans are government-backed loans, great for minorities needing startup capital or money to spur future business growth. USDA loans are also government-backed loans designed to help businesses serving rural areas. Commercial loans are useful when SBA and USDA loans cannot cover the full amount of a business’s financial needs.

Here is a quick summary of Live Oak business loans:

• Term Loan
  
  • Lowest rate: 5.50%
  • Loan sizes up to: No cap.

Live Oak Business Loan Qualifications:

• Must have a Live Oak business bank account
• Must visit a branch to determine if you qualify
• Must meet SBA and USDA qualification requirements

Pros

• Work one-on-one with a lender to get approved
• Free up your cash
• Financing that grows with your business
• Get funded with unestablished business credit
• Low rates fixed by SBA and USDA
• Easier to qualify because these loans are guaranteed

Cons

• Rates are determined on a case-by-case basis.
• Must deal directly with the lender before applying for financing
• Longer process than online lenders

Lendio helps time-constrained minority business owners get approved for business loans by working with a network of lenders rather than lending out capital directly. You fill out one application and submit your business docs. From there, Lendio’s partners compete for your business. Lendio finds lenders for minority-owned businesses that meet their unique requirements.

Here is a quick summary of Lendio business loans:

Lendio is not actually a lender; however, they do partner with approximately 15 private lending partners that offer many types of business loans. Lendio helps minority businesses get funding regardless of credit.

Here’s some information to help you decide if Lendio is the right place to apply for a loan:

• Interest rates: Varies depending on the type of loan, business needs, and other factors. There are no set minimums.
• Average loan size: $96,000

Lendio Business Loan Qualifications:

• 500+ credit score
• 2+ years in business preferred
• Six months bank statements
• Business checking account

Pros

• Low credit score approval
• Money can be any business expense
• Free up your cash
• Transparent fees
• Easy, fast approval
• Don’t need collateral
• Average loan is $96,000
• Get better rates as lenders are competing for your business
• Great customer support

Cons

• Six months of bank statements
• Two years of tax returns
• Soft credit check before being approved
• Fewer lending partners than prior to COVID-19

The SBA offers help to many different types of small businesses. One program they operate is the SBA 8(a) Business Development Program. This program has been designed to help minorities who are socially disadvantaged, giving them a leg up to compete for business they otherwise would not receive.

Here is a quick summary of SBA business loans:

• Sole-source contracts
• Access to a Business Opportunity Specialist
• Mentor-Protégé Program
• Business training, counseling, marketing assistance, and high-level executive development

SBA 8(a) Business Development Program Qualifications:

• Own a small business
• Must not be a previous participant of the 8(a) Program
• Be a US citizen and own 51% of the company and be someone who is economically and socially disadvantaged
• Net worth is $750,000 or less
• Average adjusted gross income for three years is $350,000 or less
• $6 million or less in assets
• Manage day-to-day operations and be a long-term decision maker
• Demonstrate good character
• Show potential for success
• Be able to perform successfully on contracts

Pros

• Be more competitive
• Gain access to funding you otherwise wouldn’t
• Learn more about successfully operating a business
• Get government contracts to help your business grow
• Compete for sole-source contracts that have been set aside.
• Gain access to a Business Opportunity Specialist
• Take advantage of the SBA's mentor-protégé program.
• Receive business training, counseling, marketing assistance, and high-level executive development

Cons

• Must be certified
• Must meet strict requirements

Union Bank offers the best loans for minority-owned businesses operating in underserved communities. Union Bank offers special financing through a special purpose credit program under the Equal Credit Opportunity Act. This program is designed to help minority-owned businesses operating in underserved areas get the financing they need to create a growth strategy for their business.

Here is a quick summary of Union Bank business loans:

• Traditional Term Loan and Line of Credit
  
  • Lowest rate: Undisclosed
  • Loan sizes up to: $1 million

Union Bank Business Loan Qualifications:

• Must have a Union Bank business bank account
• Must visit a branch to determine if you qualify
• 51% of the business must be minority-owned

Pros

• Work one-on-one with the lender to get approved
• Free up your cash
• Financing that grows with your business
• Easier to qualify for if you’re a minority
• Borrow large sums of money
• Secured and Unsecured options
• 18-84 month repayment term

Cons

• Rates are determined on a case-by-case basis.
• Must deal directly with the lender before applying for financing
• Longer process than online lenders for amounts over $250,000

The Indian Affairs Division of Capital Investment offers a loan guarantee program designed to help Native American business professionals. The program has a loan guarantee component, which makes it far easier for Native Americans to get funding for businesses.

Here is a quick summary of the Indian Affairs Division of Capital Investment Loan Guarantee Program:

• Facilitates loan financing for borrowers
• Helps secure reasonable interest rates
• Reduces risks for all parties involved
• Optimizes resources
• Creates strategic partnerships
• Provides outreach help
• Inspires entrepreneurship
• Bring business opportunities to reservations.

Indian Affairs Division of Capital Investment Business Loan Program Qualifications:

• Must fill out required documentation
• Must be of Indian origin

Pros

• Work in partnership to get loans approved.
• Build relationships with investors
• Gain access to support
• Loan guarantees to make financing easier
• Lower interest rates

Cons

• Lots of paperwork to complete
• Must commit to the program

The National Minority Supplier Development Council (NMSDC) offers two loan programs designed to help minority businesses get the funding they need to compete. This loan program is designed specifically for businesses that have been established for a minimum of three years or longer.

Here is a quick summary of NMSDC business loans:

• Term Loan
  
  • Lowest rate: based on the risk analysis and market interest rates
  • Loan sizes up to: $750,000

NMSDC Business Loan Qualifications:

• Must be an NMSDC certified minority business
• Must be a supplier in NMSDC corporate member or government supply chain
• Minimum 3+ years in business
• Financially sound

Pros

• Access to capital
• Business advice
• Networking opportunities
• Fair rates
• Designed with minorities in mind

Cons

• Rates are determined on a case-by-case basis.
• Must deal directly with the lender before applying for financing
• Longer process than online lenders

Minority-owned businesses often discover financing to be a slippery slope given most lenders require a high credit rating and established business credit. These lenders we’ve presented are the best business loans for minority-owned businesses because they have a proven track record of helping underserved markets and minority-owned companies.

The best on this list is OnDeck, given they don’t require collateral and can get you funded up to $50,000 with relatively low rates (think 10%). OnDeck can also get you funded fast with far fewer hassles and more favorable terms.