Study Shows Microloans Help Minority Business Owners Grow Their Business

Ever since the Great Recession began in 2007, more and more minority business owners are opting to start their own business. According to a recent study conducted by four college professors, “Business Credit for U.S. Subprime Borrowers: How Much Does it Matter for Entrepreneurial Success,” self-employment amongst minority business owners grew nearly 30% between 2000 and 2011. Nearly 22% of all self-employed individuals are minorities. This is encouraging news for minority individuals who want to start a business. However, many of them get classified as “subprime” or “non-prime” borrowers by traditional banks.


Subprime borrowers – by definition – have less than perfect credit and traditional banks make it difficult, if not impossible, for them to obtain adequate financing to start or grow their business. Some may be discouraged by this but all is not lost. Whether you are a minority business owner or not, the key is to educate yourself.  There are a number of business financing options available to you if you have a “less than perfect” credit history. Also, according to the same study, entrepreneurs with less than perfect credit can benefit greatly from applying for and obtaining microloans to start and grow their businesses. The study revealed that:

  • There are lenders that lend, without hesitation, to minority business owners who are considered subprime borrowers.
  • These lenders often have less stringent credit criteria for approving loans therefore enabling minority entrepreneurs with less than perfect credit to get approved for the funding they need – or for a portion of the funding they need.
  • Many individuals have a better chance at obtaining microfinancing and microloans from micro lenders to help them start or grow their business than they do obtaining small business loans from traditional banks.

The study also found that minority business owners with less than perfect credit experienced the following benefits from working with micro lenders to obtain microfinancing [this is the really cool part]:

  • Long-term financial success was more likely.
  • Higher survival and sustainability rates.
  • Higher revenue generation.
  • The ability to create more jobs and hire more employees.

Take the First Step – Where to Go to Apply for Microloans

Now that you know you still have access to funding as a minority business owner with less than perfect credit, and you understand the benefits you can experience by obtaining microloans, it’s important to know where to go to obtain that financing. Minority small business owners can obtain microloans from micro lenders in their area and also organizations such as Accion USA. The SBA provides a list of micro lenders in each state on their website. This list includes SBA intermediaries that offer SBA guaranteed loans to minority individuals with less than perfect credit.

Keep in mind, you should also search your county, region, and state for micro lenders as the SBA list is not exhaustive.  There are amazing micro lenders out there like Justine Petersen and the Opportunity Fund.  They tend to lend in their backyard, but you will find plenty of micro lenders out there if you look for them. I really like what the Justine Petersen group is doing because they also strategically help with the building or restoring of your personal credit which is a vital part of the roadmap toward additional, lower-cost financing options.

If you’re a minority – or non-minority – small business owner with less than perfect credit and you’re ready to start or grow your business, take the first step by reaching out to a Micro lender in your area. I’m sure you’ll be happy you did.

Photo credit:  401(K) 2013


Tom Gazaway is the founder & CEO of Hawkeye Management. His company helps small business owners obtain financing to grow their businesses. In 2013, Hawkeye Management made the Inc 500 list of the 500 fastest growing privately held companies in the U.S.

Tom has written for Small Business Trends,, Dun & Bradstreet Credibility Corp, SCORE, and has written many reports, white papers, and eBooks about small business financing that are available on his blog, The Business Finance Lounge.

You can find him on Twitter, Facebook and Google+.

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