Getting a business loan is a tricky affair. There are many regulations, stipulations, and provisions, which result in mountains of paperwork. It can be overwhelming. Luckily, there are associations out there to help you with the process. These associations want you to succeed. It's wise to let them help. This post will cover different programs, rates, what to do if your credit is lackluster, and general tips and tricks for getting approved. Let's get started.
Understanding Business Loan Rates
It's important to first understand the current loan rate environment. Small business loan rates vary widely but what we'll focus on are the rates given through the Small Business Administration (SBA). Get familiar with this entity. It's an agency founded by the federal government which offers government-insured loans for distribution through private banks. With this insurance, it's easier for private banks to issue small business loans. They can take more risk in approving you.
SBA loan rates vary. Special grants are given for many reasons like certain industries, minority business owners, veteran business owners, or those who live in certain geographic areas. Getting an SBA business loan is definitely possible as a person in a minority group.
Does "small business loan, bad credit" ever belong in the same sentence? Yes. Getting a business loan isn't dependent on a stellar credit score. Banks also look at other factors such as years of experience in the industry, the potential of a business plan, collateral, suppliers, product or service, and more. Don't let a bad credit score stand between you and your dreams.
Small Business Loans for Women and Other Minorities
According to The Atlantic, 29% of America's small businesses are owned by women. This number is steadily rising. However, many organizations believe this number doesn't represent the number of women who want to own small businesses. There are organizations to help. Circling back to the SBA, the SBA includes the Office of Women's Business Ownership. This branch of the SBA manages Women's Business Centers all across the US where women can get help applying for SBA-backed loans. While the SBA doesn't offer any female-only loans, they do what is possible to level the playing field.
There are also many business loan companies specifically targeted at helping women. Go to the National Association of Women Business Owners website for more information.
Women and other minorities are also encouraged to take part in the SBA 8(a) Minority and Women Business Certification program. The SBA also has a Mentor-Protégé Program wherein, mentoring and financial assistance can be procured.
Union Bank offers money specifically earmarked for minorities. This option is available for minorities seeking loans up to $2.5 million. These products have their own set of qualification standards.
The National Minority Supplier Development Council allows minorities to get certified in their program. Once that happens, access to small business loans become more available. The NMSDC partners with many quality entities able to give small business loans.
Small Business Loan Help for Everyone
There are many, many programs available for anyone - even if applicants are not female or a minority member. Most banks have programs to educate and enhance your odds of receiving a loan. You can check out the Office of Entrepreneurship Education to see the many ways you can receive assistance. And don't forget that you may be a minority and not even be aware. It's kind of like how in high school you didn't know there was such a thing as a Hackensack scholarship. Teens, for instance, can get quite a lot of assistance when preparing to get a small business loan.
Not Everyone Wants to Help
Although many banks and government entities aspire to help women and minorities, there are also scams looking to do quite the opposite. Once word gets out that you're looking for a small business loan (especially if you have bad credit) companies may start approaching you via email, telephone, or any other contact methods and personal information they have somehow acquired. If this happens, simply Google the company name + 'scam' to see if it really is a scam. Helpful watchdog websites include:
- Federal Trade Commission
- National Fraud Information Center
Final Thoughts about Getting a Small Business Loan as a Woman or Minority
Help is out there. Don't get discouraged. Use the organizations listed above to help you further. Good luck and be sure to circle back to MoneySavingPro.com when you're ready to choose a loan. We can show you how to weed out the beauties from the beasts.