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Building a successful business from the ground up can be challenging for everyone, regardless of their background. However, recent research suggests that despite Latino-owned businesses being the fastest-growing segment within the U.S. small business ecosystem, they are more likely to have their loan application denied outright, in comparison to White-owned businesses.
This comes at a time when 86% of Latino business owners are feeling the immediate negative impacts from the pandemic, a rate that is higher than other ethnic groups. So, how can a Hispanic-owned business get ahead? Despite the alarming statistics, there thankfully are a number of great financing options available, including minority business loans. We share each of these options with you below.
SBA Loans
Loans backed by the U.S Small Business administration (SBA) aren’t easy to obtain, but that doesn’t mean they’re not worth applying for. The money is guaranteed to the business owner by the government, so expect the application process to be lengthy and slow-moving. If you’re the lucky recipient of an SBA loan, however, the perks are certainly worth it. These include everything from generous repayment terms and lower than average interest rates, to abundant resources provided by the federal government.
Minority Business Loans from Non-profits
There are also several non-profit organizations offering minority business loans, including to Hispanic-owned businesses. These target low to moderate-income business owners who have difficulty accessing capital through traditional channels. The loan amounts vary, but due to their non-profit nature, are generally smaller than other traditional providers. This makes them a great option for those requiring a small cash injection to help their business thrive.
Some non-profit minority business loan avenues include the Small Business Administration 8(a) Business Development Program, SBA Community Advantage Loans, Union Bank’s Business Diversity Lending program, Accion, and Accompany Capital (previously the Business Center for New Americans).
Requirements vary by lender, so it’s important to always check the fine print before you sign on the dotted line.
Business Grants for Minorities
There are also a number of impressive business grants available for Hispanic business owners. A business grant differs from a business loan in one major way: business loans must be paid back, often with interest, whereas you don’t have to pay back a small business grant. The money you receive from a grant aims to help you start up your small business and/or invest in necessary resources.
While they might sound too good to be true, business grants – including those for minorities – are notoriously competitive, making them highly desired, yet incredibly difficult to obtain.
Grants.gov is the largest repository of federal government grants and is certainly worth a visit for Hispanic business owners seeking funding through this method. This website offers guidance on 1,000 or more programs from 26 grant-making agencies in the federal government.
Term Loans from Direct Lenders
Term loans also shouldn’t be overlooked when considering funding for your Hispanic-owned business, particularly from non-bank lenders. They’re actually a simple solution for those who prefer fixed payments and flexible durations, allowing business owners to decide the length of their loan.
Although traditional bank loans are known to have strict requirements, such as a minimum of multiple years in business and a high credit score, alternative lenders are less stringent. Here at Zinch, for example, we require a business eligible if they’ve been operating for at least 6 months in business and have a minimum of $10,000 in monthly sales. There are also no restrictions on how you choose to use the money. Common uses include the purchase of inventory, purchase of equipment, remodeling, expansion, advertising, and paying off debt and taxes.
Merchant Cash Advances
A merchant cash advance (MCA) is another funding option for Hispanic-owned businesses. It’s also a flexible solution, making it ideal for businesses with variable sales. Payments are calculated as a percentage of your credit/debit card sales, so if your sales go down (for whatever reason) so do your payments.
Lenders such as Zinch, for example, don’t need business owners to provide any form of collateral or personal guarantee to secure the loan. Instead, our decision depends on your business sales, not on your personal credit. The additional requirements are minimal: business owners must have had 6 months in business and at least $10,000 in monthly sales.
Are you seeking quick and easy funding for your Hispanic-owned business? Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
