Business loans and resources for African Americans

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June 13, 2017 | Updated September 25, 2017


Key Points

African Americans can access specialized business loans

  • The SBA 8(a) Business Development Program helps minority businesses win government contracts.
  • The DOT also provides assistance for minority businesses seeking government contracts, as well as a short-term loan program.
  • Community Development Financial Institutions (CDFI) offer small business loans that are easier to qualify for.

African-American-owned businesses are a fast-growing segment of the U.S. economy. Between 2002 and 2007, African-American-owned businesses increased 60 percent, more than four times the growth rate of businesses owned by Caucasians. According to the latest Census Bureau report on minority businesses, nearly 10 percent of U.S. small businesses are African American-owned.

Yet with the tightening of credit after the 2008 financial crisis, access to capital became difficult for African-American-owned businesses, many of which did not meet annual revenue or other lending criteria under revised underwriting requirements. From 2009 to 2013, U.S. Small Business Administration (SBA) loans to African Americans fell 47 percent despite total SBA loans issued increasing 25 percent.

The figures are improving, however. According to March 2017 data from the SBA, 4 percent of its popular 7(a) business loans were granted to black Americans, up from 2 percent in 2013. Some 26 percent of 7(a) loans were issued to minorities as a whole. Today, there are several government-backed and private-sector business loans and development programs that African-American business owners can utilize to access capital.

SBA 8(a) Business Development Program

The SBA offers specialized business development resources for small businesses that are at least 51 percent owned by a socially or economically disadvantaged individual. Black Americans are one of the minority groups to meet this SBA criteria, along with Native Americans, Hispanics, Asian-Pacific and Subcontinent-Asian-Americans. Businesses accepted into the 8(a) program are able to bid on sole-source government contracts of up to $4 million for goods and services, and $6 million for manufacturing. Rather than an educational tool for new entrepreneurs, the 8(a) program is designed to give established and competitive minority-owned businesses a leg up in winning government contracts.

DOT Disadvantaged Business Enterprise Program

The U.S. Department of Transportation (DOT) Disadvantaged Business Enterprise (DBE) program assists businesses owned by socially and economically disadvantaged individuals in winning federal, state and local procurement contracts in public infrastructure. The DOT also guarantees a Short-Term Lending Program (STLP) to help small businesses obtain the capital necessary to bid for such contracts. Loans of up to $750,000 are issued through participating private lenders and backed by the DOT. African-Americans and other minorities can access both programs, subject to cash flow, credit and other eligibility requirements.

Community Development Financial Institution (CDFI) loan

CDFIs are community-based lenders that provide financing to economically disadvantaged individuals with support from the U.S. Department of Treasury’s CDFI Fund. There are 1,000 CDFIs across the country, with locations in all 50 states and territories. While smaller than traditional lenders, these local organizations offer financing that is typically easier to qualify for than a conventional bank loan, often in conjunction with business development, legal and other advice. Close to 60 percent of CDFI small business loans are under $100,000. CDFIs offer a variety of different specialized loan programs, such as the National African American Small Business Loan Fund offered by the CDFI lender VEDC targeting African American-owned small businesses in New York, Chicago and Los Angeles.

Other Business Development Resources

The U.S. Department of Commerce Minority Business Development Agency (MBDA), National Urban League Entrepreneurship Center Program and U.S. Black Chambers all provide mentorship and training resources for African-American entrepreneurs and small business owners. Many of these organizations also share available grants and contract opportunities to help facilitate African-American small business growth.

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