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    How To Overcome the Challenges of Black Business Owners Loans

    There is no shortage of statistics documenting the difficulties faced by black entrepreneurs in securing loans and other capital. Launching a small business takes money, even if you streamline your budget. Fortunately, a few corporations and nonprofits have taken action to level the playing field for black-owned and minority businesses.

    The Lending Landscape for Black Business Owners 

    Securing capital to launch a small business is challenging. Many entrepreneurs must utilize their own savings account, borrow money from friends and family, or use credit cards to fund their startups. For black entrepreneurs, the landscape is more complicated.

    A study by the Kauffman Foundation found that black entrepreneurs do not apply for startup loans from banks, being sure that their applications will be rejected. Moreover, black entrepreneurs receive less than 1% of venture capital from angel investors. The Foundation study found that among all founders, black entrepreneurs rely the most on credit cards to fund new businesses.

    According to McKinsey, 20% of black Americans launch new businesses, a percentage that outpaces all other segments of the population. Yet, they have the highest failure rates. After depleting savings, money from friends, and credit cards, black-owned businesses find it nearly impossible to secure operating capital to keep their new businesses afloat.

    Difficulty Accessing SBA Loan Assistance

    Most black-owned small businesses are in the small retail, hospitality, and services industries. These were the first to feel the negative impact of COVID-19. The National Bureau of Economic Research found that 41% (440,000) of black-owned businesses were forced to close between February and April. 

    Additionally, many black-owned businesses could not access funding through the CARES Act because they had not established business relationships with banks. Their preference for servicing existing customers marginalized black-owned small businesses at one of the most crucial times for them.

    These very businesses also encountered trouble accessing the second round of CARES Act funding, even though $60 billion was set aside for minority and underserved borrowers.

    Discrimination Against Black Small Business Loan Applicants 

    According to a 2019 report from the Federal Reserve Bank of Atlanta, only 31% of black-owned businesses received bank funding that was applied for, compared with 49% of white-owned businesses. A recent Los Angeles article indicated that even when there is home equity, access to startup capital is not the same for black-owned businesses.

    There are several impediments to accessing bank loans. Small business size is one, and inherent discrimination is another. There is also the expectation of a certain level of financial literacy. Many black entrepreneurs are denied because they are unable to accurately navigate the complicated loan process.

    Online lenders enable black-owned businesses to break the barrier of discrimination. A non-biased, simplified online application process opens the door to startup and operating capital. The requirements for business history and credit rating are more relaxed. Decisions are made, and cash is distributed promptly.

    The Best Loans for Black Business Owners

    Funding Circle

    • Startup and operating loans $25,000 to $500,000
    • Competitive Interest rates and fees, loan terms from six months to five years.


    • A PayPal loan program
    • Applicants need nine months of business history and annual revenue of $42,000
    • A minimum credit score of 550 is required.


    • A business line of credit to a maximum of $100,000
    • No annual revenue or minimum credit score required
    • Must have a bank account, or accounting software that can be linked digitally to Fundbox

    National Funding

    • Small business loans from $5,000 to $500,000, equipment leasing and financing up to $150,000
    • It can be used to cover unexpected expenses, manage cash flow gaps, or take advantage of opportunities such as buying a new location or hiring seasonal workers.


    • Visa grants of $10,000 to Black-women-owned businesses
    • Small businesses and sole proprietorships are eligible to apply. Recipients also receive coaching.

    Lowe’s Companies

    • A $25 million fund to provide financial support to minority-owned businesses and historically underserved communities
    • Grants can be used to pay rent, utilities, meet payroll, upgrade equipment and technology infrastructure, pay vendors, and other short-term operational costs.


    • Grants for Black women-owned businesses in the beauty industry
    • Grants range from $10,000 to $30,000.


    Black business owners face systemic challenges accessing capital from banks and investors. Even PPP loans designed to help small businesses were issued by banks with inherent biases and favoritism toward large customers. 

    Fortunately, new grant programs dedicated to helping Black entrepreneurs and the online lending industry offer the best opportunities to access financing for this ambitious group of business owners.