Breaking Barriers:
Accessing SBA 7(a) Loans for Minority-Owned Businesses
According to the senate committee on small business and Entrepreneurship, minority-owned businesses have grown at astounding rates, creating 4.7 million jobs and accounting for 50 percent of the new companies in the last ten years. With access to loan programs such as the SBA 7a loan guarantee, minority businesses have a unique opportunity to flourish in the years to come. Despite this, there remains a disparity between the number of minority-owned businesses and the national population of minorities. Further, the average gross income of minority businesses has begun to decline despite tremendous growth in the number of these businesses.
The bottleneck that prevents minority-owned small businesses from competing with the majority is access to capital and resources to ensure consistent growth. For minority business owners, now is the perfect time to grow. The secret to success is access to online small business lenders such as BitX. We will provide the knowledge and financial backing to ensure your minority-owned small business will flourish in the years to come.
What are SBA 7a Loans?
With all the different loan options available, you may be wondering what SBA 7a loans are and how they work. In short, SBA loans are the holy grail for affordably growing your small business. The small business association (SBA) offers the 7a Guarantee Program to assist small businesses in getting affordable and dependable financing by setting the loan guidelines and finding small business lenders who loan the required finances.
Unlike other loan programs, the SBA doesn’t lend any money itself. Instead, the SBA finds lenders willing to finance and provides the lenders with increased assurance that the loan will get paid back. Depending on the loan, the SBA can guarantee up to 85% of a loan’s value on day one.
The best part about SBA 7a loans is that they’re more flexible, affordable, and have longer terms than other financing options.
The Financial Gap for Minorities
Minorities make up a significant percentage of the 32 million U.S. small businesses, representing roughly 18%, according to a 2020 SBA report. That percentage has been growing over the past decade and will continue to flourish in the future. Despite the rapid growth of minority and women-owned businesses, accessing finance is challenging for minority business enterprises (MBEs).
Data from the Minority Business Development Agency (MBDA) found the following:
- 40% of White-owned firms received complete financing, compared to
- 31% of Asian-owned firms
- 20% of Hispanic-owned firms
- 13% of Black-owned firms, with these trends persisting among minority firms with the same or better credit scores as the majority competition
Even when businesses can get loans, the amounts are lower, with higher interest rates for MBEs across the board. But if you’re the owner of MBE, don’t be discouraged. If you know your options and where to look, there are excellent ways to close the gap and get the business financing you deserve.
How SBA Loans Can Close the Gap
While the 7a loan is eligible for everyone, and currently no loan programs specifically for minorities, the SBA guarantee program is the best option for MBEs. The 7a loan is fast, allowing funds within 5–10 days with some of the lowest interest rates available.
Additionally, capital from SBA loans is flexible. MBEs can use these resources for real estate, equipment financing, repairing existing capital, and more. These considerations make SBA 7a loans the perfect option for minority small business owners with exceptional credit and a sound business plan who have rejected funding from traditional lenders.
SBA 7a Loans are the Solution for Minority-Owned Businesses
How Much Can Minority-Owned Businesses Get with These Loans?
The maximum amount for a 7a loan is $5 million. However, there is a lot of versatility in the types of 7a loans with many viable options. When deciding on which type of 7a is best for you, consider the following:
- SBA guarantees 85% for loans up to $150,000, and 75% if higher.
- Accelerated turnaround loans go up to $350,000 at a 50% guarantee.
- You won’t require collateral for loans up to $25,000.
- Lenders institute a collateral policy between $25,000-350,000, and over $350,000, the loan is collateralized to the maximum.
What Are the Requirements for SBA 7a Loans?
If SBA 7a loans sound too good to be true, they require a rigorous application process. The SBA is a reliable institution that ensures healthy small businesses flourish and stay on track for success. To ensure they and the lenders they support make the best decisions, they are more stringent in their application process than traditional lenders.
However, minority and women business owners have an edge with SBA loans. More traditional lenders would refuse MBEs with excellent credit and income. The SBA does not discriminate and offers a competitive advantage to minority-run businesses making a financial difference globally.
For minority small business owners, it’s necessary to understand the SBA loan requirements:
- Have a good credit score, “good” being greater than 680-700
- Be ready with collateral for loans greater than $25,000
- Own a USA-based for-profit business for at least two years
- Have the necessary paperwork and documents ready
- Be ready with a plan on how to spend the financing
Apply for an SBA 7a Loan Today
For financial assistance and expert knowledge of small business lending, BitX Funding is the best option. Our specialization connects small business owners with lenders who compete for their businesses. We are passionate about helping your company reach its full potential because we know that small business owners drive the economy.
We know it can be difficult for minority and women business owners to secure the appropriate funding, despite having the same or better credit and business plans than their competition. That’s why we provide small business loans to make your business stronger. For questions and resources about lending options to help your business thrive, BitX Funding is here for you.
