Did you know that nearly 1.3 million businesses operating in the U.S. are minority-owned? While that’s less than 35% of total businesses, this segment of business owners is growing each year and contributing significant revenue to the economy and local communities.
As minority entrepreneurship rises, having access to funding from responsible sources to move forward and grow continues to be a significant challenge.
In this guide, you’ll learn more about the challenges facing entrepreneurs of color, what programs and opportunities are available for support, and more.
The lending landscape for minority business owners
While entrepreneurs of color face the same challenges as their non-minority counterparts, they experience additional obstacles related to running a minority-owned business. One of the main challenges? Funding.
According to the Federal Reserve’s Small Business Credit Survey (SBCS), these are the key findings:
- Minority-owned businesses were significantly more likely to report discouragement from applying due to anticipated denial.
- Minority-owned businesses are less than half as likely as comparable white-owned businesses to receive full financing approval.
- While white-owned denial rates have held relatively steady at 18-20%, minority denial rates have decreased from 42.45% in 2020 to 33.36% in 2024.
Despite the tremendous positive impact minority-owned businesses have and could have on the economy, lending disparities still exist. According to research from the U.S. Census, here are a few reasons why:
- Lower net worth: The median white household income is from four times to over six times that of the median income across minority groups.
- Lower approval rates: Minority-owned firms experienced approval rates roughly 20 percentage points lower than non-minority firms.
- Limited collateral: Minority business owners have fewer collateral options, making it harder to secure affordable financing.
- Insufficient credit history: On average, minorities have lower credit scores, making it harder to receive a loan with optimal conditions.
Fortunately, there are special programs and opportunities that are designed to give minority entrepreneurs a boost to level the playing field. Let’s take a look at what’s available and how your business can leverage these opportunities.
Special programs and opportunities for minority entrepreneurs
There are many loan programs, business certifications, government contracting opportunities, and educational programs available for minority-owned businesses. Here are some of the key ones that can help your minority-owned business:
MWBE Certification
Many states have their own program for Minority- and Women-Owned Business Enterprise (MWBE) certification, which can give your business priority access to government contracting opportunities.
For example, New York State signed into law the Minority- and Women-Owned Business Enterprise (MWBE) certification program to promote equal economic opportunities and eliminate barriers to minority- and women-owned businesses in state contracts. Under the statute, “state agencies are charged with establishing employment and business participation goals for minorities and women.” The law says that all state contracts must award 30 percent of the funds to MWBE-certified businesses.
MWBE requirements vary by state, but here are the key requirements:
- At least 51 percent owned and operated by women and/or minority owners
- Must be U.S. citizens or lawful permanent residents
- A for-profit business physically located in the U.S. (or its trust territories)
- Management and daily operations must be run by women or minority owners
Once your business becomes MWBE-certified, you’ll have access to a few important advantages that will lead to increased exposure, more opportunities for contracting and subcontracting, better access to capital, and enhanced education. More specifically, your business will:
- Be listed in the public Directory of Certified Minority and Women-Owned Business Enterprises
- Be able to bid on contracting and procurement opportunities with federal and state authorities and agencies
- Gain access to a statewide network of services, including workshops, webinars, classes, etc.
8(a) Business Development Program
To help achieve its goal of awarding at least five percent of all federal contracting dollars to small, disadvantaged businesses every year, the Small Business Administration offers the 8(a) Business Development Program.
For your business to qualify for this program, it must meet the following eligibility requirements:
- Be a small business
- Be new to the 8(a) program
- Be at least 51 percent owned and operated by economically and socially disadvantaged U.S. citizens
- Owner must have a personal net worth below $850,000
- Owner must have an adjusted growth income below $850,000
- Owner must have less than $6.5 million in assets
- All principals must demonstrate good character
- Demonstrate a strong potential for success
Once your business is accepted into the 8(a) Business Development program and is fully certified, it can:
- Compete for set-aside and sole-source contracts
- Receive one-on-one business development assistance for their nine-year term from dedicated Business Opportunity Specialists focused on helping firms grow and accomplish their business objectives
- Access mentorship from experienced and technically capable firms through the SBA’s mentor-protege program
- Connect with procurement and compliance experts who understand regulations in the context of business growth, finance, and government contracting.
- Pursue joint ventures with established businesses to increase capacity
- Qualify to receive federal surplus property on a priority basis
- Receive free training from SBA’s Empower to Grow program
HUBZone program
A HUBZone is not specifically a minority-business program, but eligibility is based on historically underutilized business zone designated by the SBA. To qualify for the HUBZone program, your business must:
- Be a small business according to SBA size standards
- Be at least 51% owned and operated by U.S. citizens, a Community Development Corporation, an agricultural cooperative, an Alaska Native corporation, a Native Hawaiian organization, or an Indian tribe.
- Have its principal office located in a HUBZone
- Have at least 35% of its employees living in a HUBZone
Small Business Development Centers (SBDCs)
SBDCs are local and regional organizations funded by the U.S. Small Business Administration to help small business owners. They offer free consulting services and low or no-cost business training to all entrepreneurs. Some examples of the types of services they offer include:
- Personalized consulting: You can meet one-on-one with an SBDC staff member to get advice on your business plans, financials, projections, opportunities, and more.
- Educational events: SBDCs offer events focused on launching and growing small businesses with experts on topics such as choosing a business entity, financing your venture, and marketing.
- Workshops and webinars: This includes workshops and webinars on topics that are essential for small business success, like human resources issues, tax topics, and how to grow.
- Networking opportunities: You can attend networking events to help you meet and connect with other entrepreneurs in your area or industry.
There are nearly 1,000 SBDC network centers located throughout the U.S., and they’re often located on public college campuses or in community centers. In addition, many free SBDC workshops and one-on-one meetings can also take place online.
Here are just a few offices they have:
- 20 regional offices and 70 satellite offices in New York State
- 12 regional offices in New Jersey
- 15 regional offices in Pennsylvania
- One office in Connecticut
- 37 offices in Illinois
- Four offices in Delaware
If your business is located outside this area or you want to find specific information on your closest SBDC, enter your ZIP code into this SBDC center locator.
CDFI Loan Programs
Community Development Financial Institutions (CDFIs) are mission-driven financial institutions certified by the United States Department of the Treasury’s CDFI Fund. These include banks, venture capital funds, loan funds, and credit unions.
The benefits of securing a loan through a CDFI include:
- Low interest rates
- Higher likelihood of approval
- Simple, straightforward loan products
- Technical and training assistance including mentorship and advisory services
Veteran, minority, and women business owners often choose to work with a CDFI lender due to flexible approval requirements and ongoing guidance and support. As mission-driven lenders, CDFIs are considered non-profit entities and work to support the businesses they serve.
The Treasury Department offers a searchable award database where you can find a CDFI lender near you.
Minority Business Development Agency (MBDA)
The Minority Business Development Agency (MBDA) is a federal agency that was created to support the growth and competitiveness of minority-owned businesses in the U.S. They have local business centers that help you connect with expert support on securing contracts, accessing capital, and building capacity, as well as offer various loan programs and grant opportunities.
Pursuit helps all small business owners achieve their potential
Pursuit understands the challenges women- and minority-owned businesses face, and we work to overcome them with you. As a mission-driven, non-profit lender, we help small business owners discover how the right financing from the right lender supports success.
We offer more than 15 small business loans and a line of credit, from $10,000 to $5.5 million, for working capital, equipment, commercial real estate, and more. We serve small businesses in New York, New Jersey, Pennsylvania, Connecticut, Illinois, and Delaware.
Contact us to learn more.
