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How do Minority Business Loans Work?

When starting up a new business, or expanding an existing one, one of the best routes to take is by getting a business loan. This is especially true for women and minority business owners, as they are much more likely to get approved for a business loan over everyone else. There are slight differences between standard loans and minority loans, so making sure you understand the difference before applying for anything is imperative.

Who Can Apply for a Minority Business Loan?

There are different categories of minorities that can apply for business loans. Typically people automatically think of minority races, but that is only a small percentage of people who technically qualify for these types of loans. Women often own fewer businesses than men, making them a minority when it comes to filling out business loan applications. People who partake in a different lifestyle than what most would consider standard can also apply. The more unique a person is, the more likely he or she is going to be able to qualify under one of the many minority loan programs available within the United States.

What Makes a Minority Business Loan Different?

Minority business loans are only ever able to go out to someone that qualifies under the program’s guidelines. The lender must decide what makes a person a minority, then must be able to provide proof that all of the loans that go out under that program also qualify. This helps keep money in smaller communities, and helps those who own their own business get off the ground.

Important Resources to Have When Applying

The first thing you should make sure to have in hand before applying for a business loan is a plan for your business. You will want to write out the plans, goals, and methods you intend your business to be able to carry out. From there, you will also want to have a recent copy of your, if you are starting a sole proprietorship, or your business’ credit report. If you are starting a new company, you will only need your own credit report. The better your credit history is, the better luck you will have when it comes to getting a business loan.

You should also have projections for what you expect your cash flow to be, including the budget you plan to be able to put toward your business. Most lenders want this to include current assets you own and the debts that you have yet to pay off entirely. This helps them see how financially responsible you are before making a decision on your loan. Finally, you will also want your last few year of tax returns for both you and your company. This will show stability and help the lender see what type or risk you pose.

Minority business loans can help someone get the leg-up he or she needs to get a new business off the ground, or to expand an existing business into a new direction or toward a new audience. Even if a business is owned only in part by a minority, most times the business will still qualify for the required loan. Take the time to learn the programs you may qualify for before deciding on one program to apply for. This way you can ensure you will get the best rates, repayment conditions, and the most money that can go directly into your business. Don’t be afraid to go out and see what types of programs could help you. You may even surprise yourself at what you find, and maybe you will be able to bring the next big thing to the masses, all with the help of a minority business loan.