 |
 |
 |
 |
 |
 |
| "Minority Business Loans... Do they really exist?" |
| Resources |
| "Empowering Small Businesses" |
|
|
|
|
|
|
| Resources |
During a number of my seminars I have been asked questions
about minority business loans. At first it used to catch me off-
guard, as I have not heard of minority business loans as a loan
product (example of loan products are a line of credit or a term
loan) or lenders that specifically make minority business loans.
From my commercial lending experience I knew that most lenders
extended loans to minority businesses (whether owned be a
minority individual, employing minorities, or operating in an area
that is home to minority groups). Minority can mean a member of
an ethnic group, person of a particular gender, or some other
definition. Lenders use the term “minority loans” as a marketing
tool or sometimes marketing ploy to attract loan applicants. In
addition, many commercial banks receive credits (called CRA
credits) from regulators for extending loans to businesses located in
so called low and moderate income areas, many of which also
happen to be minority neighborhoods.
“But how about minority loans?” - I heard again and again, partly
because many entrepreneurs have seen ads that talk about minority
loans or more often heard this term used by other business owners.
This article will investigate if minority business loans really exist and
what they are about.
Part I
First of all, I researched the internet by inputting the phrase
“minority business loans”. During the first half of my research I
focused on non-paid links located on the first 3 pages (most
people don’t go past the first few pages).
My initial reaction was that I will never search for minority loans on
the internet again. Of course, I am exaggerating, but there was just
too much nuisance unrelated to the topic of research. Here are my
findings:
• Out of 30 entries on three pages that came up in my search,
only seven were more or less related to minority small business
loans. These sites belonged to non-profit organizations or
municipal government entities that were there to provide financing
to underprivileged, low to moderate income areas. They are in
essence economic development engines within their respective
states (OH, WA, WI, and MS) to help small and minority-owned
businesses secure financing and obtain training. Most of the seven
were not created to provide financing exclusively for minority
businesses but to all small businesses that can meet certain criteria.
In addition, many such programs have limitations on loan size and
exist as sources of financing in addition to loans provided by
traditional lenders.
You may ask who would be pursuing the above financing options.
The likely candidates are businesses that are unable to secure any
financing from commercial banks and financing companies or are
not able to secure all the necessary financing. For example,
Minority Business Development (MBD) Loan Program by
Wisconsin Department of Commerce offers partial loan financing
to qualified business applicants that must also be certified by the
state as minority businesses. Suppose that you need a $100,000
financing but are only able to invest $5,000 of your own equity. A
commercial bank may be willing to lend you only $45,000. You
need additional $50,000 to fully fund your project, and this is when
the MBD Loan Program can fill in the void.
• Five out of 30 sites contained informational articles that only
touched upon the topic of minority business loans and were more
focused on equity financing or other vaguely related topics. I did
not find those articles helpful in answering the question at hand. As
a matter of fact they seemed to have been written by one author
but then plagiarized by several sites because there was no
reference to the original author or point of origin.
• Five more sites were about SBA guarantee loan programs,
including links to the SBA site. However, SBA guarantee
programs are not created exclusively for minority businesses. Yes,
many businesses that end up needing SBA guarantee or disaster
loans tend to be in what is traditionally viewed as minority
communities, but it is not always the case. I also found a couple of
non-bank lenders that lend money under SBA guarantee programs
but explicitly promoted them as minority loans. When I spoke with
their representatives, I confirmed what I already knew – their loan
products are geared toward a wide range of businesses, not just
minorities. In my opinion it is not an honest representation of their
products and is misleading.
• One company actually had a statement on its website that it
offered minority business loans. However, as its representative told
me, they do not discriminate against anybody, and do not offer
loans solely for minority businesses. As a matter of fact, what that
company offers is not a loan product at all. The company advances
money in anticipation of your credit card sales, which is not really a
loan product but more of a factoring service. It is called credit card
factoring. This again was rather misleading.
• Last but not least, a number of sites had nothing to do with
minority business loans or minority businesses for that matter. One
example is several sites related to student loans and did not have
anything to offer to minority businesses.
Part II
The second part of my analysis was to look at paid advertising
links that come up under “minority business loans”. My search
returned 32 entries (again on the first 3 pages), but I focused only
on those that were explicitly advertising “minority business loans”.
This helped narrow my search to 8 distinct companies:
www.eloan.com
“Government minority business loans” from an Eloan ad have led
me to a site where you can finance business and personal needs –
“Weddings, a new baby, starting a business: Financing for life”. A
call placed to Eloan revealed that it does not extend business
loans, let alone minority business loans. However, a rather helpful
representative suggested that if I want to take out a home equity
line for business purposes, she would be able to help me with that.
www.businesscreditsources.com
This entity (Beyond Breakeven, Inc.) seems to be focused on
business acquisition loans but I could not really find any information
on minority business loans. No representative was readily available
to answer my questions.
www.forwardline.com
A spoke with a very helpful representative from Forward Line (a
credit card factoring company) who explained that they offer
factoring financing to any qualified business but their product is not
just for minority owners. In addition, as I mentioned previously
factoring is not really considered to be a loan product.
www.ibank.com
Ibank is a loan lead generator. While nobody was available to take
my call, I could not find any evidence that they are focused on
minority business loans or carry minority loans as a distinct
product. It appears that if you are a minority business owner you
can apply for a loan through Ibank, but that’s about it.
www.financialhelpnetwork.com
This entity appears to be one of many websites that acts as a lead
generator, or rather carries ads from sponsors. The site is run by
InterSearch Group. It points to various lenders advertising minority
business loans – that’s all. Sponsors choose key words that they
want to be advertised under. However, I failed to find “minority
business loans” by going to several advertising links.
www.loan.financechoice.net
This site is another one that carries ads. The company behind it is
in Australia.
www.ebusinessloans.biz
Just like a few sites mentioned previously, this site posts ads from
google and other companies. I was not even able to find out where
the site operator is located. Again, all I found is an array of
advertisements that did not focus on minority borrowers.
www.online-business-loans.com
The design of this site is the exact copy of the one discussed above
and is probably owned by the same entity.
So, as you can see, minority business loans do not exist as a stand
alone product. Many lenders welcome minority businesses, but this
is as far as it goes. You will still have to apply for a loan and be
approved. This means that your business’ ability to generate cash
flow and offer collateral as well as your personal financial condition
as the business owner will be analyzed, and the decision to grant or
deny your loan request will be based on that data.
If you are looking for more favorable terms and consideration or
unable to secure credit from traditional lenders, I suggested looking
at programs within your state. Some of them may be focused on
providing financing when traditional lenders have said no or offer
complimentary financing to share the risk and loan amount with a
traditional lender and thus helping you get your loan financing
request approved.
I hope that you find this article helpful. I encourage your comments
and suggestions for future articles.
about minority business loans. At first it used to catch me off-
guard, as I have not heard of minority business loans as a loan
product (example of loan products are a line of credit or a term
loan) or lenders that specifically make minority business loans.
From my commercial lending experience I knew that most lenders
extended loans to minority businesses (whether owned be a
minority individual, employing minorities, or operating in an area
that is home to minority groups). Minority can mean a member of
an ethnic group, person of a particular gender, or some other
definition. Lenders use the term “minority loans” as a marketing
tool or sometimes marketing ploy to attract loan applicants. In
addition, many commercial banks receive credits (called CRA
credits) from regulators for extending loans to businesses located in
so called low and moderate income areas, many of which also
happen to be minority neighborhoods.
“But how about minority loans?” - I heard again and again, partly
because many entrepreneurs have seen ads that talk about minority
loans or more often heard this term used by other business owners.
This article will investigate if minority business loans really exist and
what they are about.
Part I
First of all, I researched the internet by inputting the phrase
“minority business loans”. During the first half of my research I
focused on non-paid links located on the first 3 pages (most
people don’t go past the first few pages).
My initial reaction was that I will never search for minority loans on
the internet again. Of course, I am exaggerating, but there was just
too much nuisance unrelated to the topic of research. Here are my
findings:
• Out of 30 entries on three pages that came up in my search,
only seven were more or less related to minority small business
loans. These sites belonged to non-profit organizations or
municipal government entities that were there to provide financing
to underprivileged, low to moderate income areas. They are in
essence economic development engines within their respective
states (OH, WA, WI, and MS) to help small and minority-owned
businesses secure financing and obtain training. Most of the seven
were not created to provide financing exclusively for minority
businesses but to all small businesses that can meet certain criteria.
In addition, many such programs have limitations on loan size and
exist as sources of financing in addition to loans provided by
traditional lenders.
You may ask who would be pursuing the above financing options.
The likely candidates are businesses that are unable to secure any
financing from commercial banks and financing companies or are
not able to secure all the necessary financing. For example,
Minority Business Development (MBD) Loan Program by
Wisconsin Department of Commerce offers partial loan financing
to qualified business applicants that must also be certified by the
state as minority businesses. Suppose that you need a $100,000
financing but are only able to invest $5,000 of your own equity. A
commercial bank may be willing to lend you only $45,000. You
need additional $50,000 to fully fund your project, and this is when
the MBD Loan Program can fill in the void.
• Five out of 30 sites contained informational articles that only
touched upon the topic of minority business loans and were more
focused on equity financing or other vaguely related topics. I did
not find those articles helpful in answering the question at hand. As
a matter of fact they seemed to have been written by one author
but then plagiarized by several sites because there was no
reference to the original author or point of origin.
• Five more sites were about SBA guarantee loan programs,
including links to the SBA site. However, SBA guarantee
programs are not created exclusively for minority businesses. Yes,
many businesses that end up needing SBA guarantee or disaster
loans tend to be in what is traditionally viewed as minority
communities, but it is not always the case. I also found a couple of
non-bank lenders that lend money under SBA guarantee programs
but explicitly promoted them as minority loans. When I spoke with
their representatives, I confirmed what I already knew – their loan
products are geared toward a wide range of businesses, not just
minorities. In my opinion it is not an honest representation of their
products and is misleading.
• One company actually had a statement on its website that it
offered minority business loans. However, as its representative told
me, they do not discriminate against anybody, and do not offer
loans solely for minority businesses. As a matter of fact, what that
company offers is not a loan product at all. The company advances
money in anticipation of your credit card sales, which is not really a
loan product but more of a factoring service. It is called credit card
factoring. This again was rather misleading.
• Last but not least, a number of sites had nothing to do with
minority business loans or minority businesses for that matter. One
example is several sites related to student loans and did not have
anything to offer to minority businesses.
Part II
The second part of my analysis was to look at paid advertising
links that come up under “minority business loans”. My search
returned 32 entries (again on the first 3 pages), but I focused only
on those that were explicitly advertising “minority business loans”.
This helped narrow my search to 8 distinct companies:
www.eloan.com
“Government minority business loans” from an Eloan ad have led
me to a site where you can finance business and personal needs –
“Weddings, a new baby, starting a business: Financing for life”. A
call placed to Eloan revealed that it does not extend business
loans, let alone minority business loans. However, a rather helpful
representative suggested that if I want to take out a home equity
line for business purposes, she would be able to help me with that.
www.businesscreditsources.com
This entity (Beyond Breakeven, Inc.) seems to be focused on
business acquisition loans but I could not really find any information
on minority business loans. No representative was readily available
to answer my questions.
www.forwardline.com
A spoke with a very helpful representative from Forward Line (a
credit card factoring company) who explained that they offer
factoring financing to any qualified business but their product is not
just for minority owners. In addition, as I mentioned previously
factoring is not really considered to be a loan product.
www.ibank.com
Ibank is a loan lead generator. While nobody was available to take
my call, I could not find any evidence that they are focused on
minority business loans or carry minority loans as a distinct
product. It appears that if you are a minority business owner you
can apply for a loan through Ibank, but that’s about it.
www.financialhelpnetwork.com
This entity appears to be one of many websites that acts as a lead
generator, or rather carries ads from sponsors. The site is run by
InterSearch Group. It points to various lenders advertising minority
business loans – that’s all. Sponsors choose key words that they
want to be advertised under. However, I failed to find “minority
business loans” by going to several advertising links.
www.loan.financechoice.net
This site is another one that carries ads. The company behind it is
in Australia.
www.ebusinessloans.biz
Just like a few sites mentioned previously, this site posts ads from
google and other companies. I was not even able to find out where
the site operator is located. Again, all I found is an array of
advertisements that did not focus on minority borrowers.
www.online-business-loans.com
The design of this site is the exact copy of the one discussed above
and is probably owned by the same entity.
So, as you can see, minority business loans do not exist as a stand
alone product. Many lenders welcome minority businesses, but this
is as far as it goes. You will still have to apply for a loan and be
approved. This means that your business’ ability to generate cash
flow and offer collateral as well as your personal financial condition
as the business owner will be analyzed, and the decision to grant or
deny your loan request will be based on that data.
If you are looking for more favorable terms and consideration or
unable to secure credit from traditional lenders, I suggested looking
at programs within your state. Some of them may be focused on
providing financing when traditional lenders have said no or offer
complimentary financing to share the risk and loan amount with a
traditional lender and thus helping you get your loan financing
request approved.
I hope that you find this article helpful. I encourage your comments
and suggestions for future articles.
| "Empowering Small Businesses" |
| Copyright © 2005-2008. D. Neil Berdiev. All rights reserved. |
| Loan Financing Guide for Small Business Owners |
| No reproduction is permitted without the author's written permission |