For female- and minority-owned businesses, a recent House bill may help coveted Small Business Administration-backed funding become more attainable. SBA loans like the microloan program are usually competitive to get but can offer good terms to borrowers since the SBA backing reduces the risk for lenders and may make them more inclined to take borrowers on. The bill would help more loans, especially start-up microloans, to be made by raising outstanding loan limits and increasing training opportunities. To learn more about Small Business Administration loans and why they can help support businesses owned by women and minorities, read on.
Women-Owned Firms Often Have Less Capital
Despite making up about 40% of the United States’ small businesses, companies owned by women only receive an estimated 5% of traditional bank business loans. In many cases, this means that companies started by women have less capital to work with than companies started by men do. By some estimates, new women-owned businesses often start with only half the capital of typical men-owned businesses.
Minority-Owned Businesses Are Denied Loans More Frequently
Despite recent growth in the number of businesses owned by minorities in the United States, it may often be more difficult for these companies to secure funding. In fact, by some estimates from the United States Department of Commerce, businesses owned by minorities are denied loans up to three times more often than average.
SBA Loan Accessibility Could Help Alleviate Inequality
Making SBA-backed loans more accessible to businesses owned by women and minorities could potentially help to remedy some of these inequalities. Given access to much-needed loans, businesses can get established, expand, and thrive. With their reduced down payment requirements, typically longer-term lengths, and capped interest rates, SBA loans can help business owners overcome economic disadvantages and build successful companies. While the loans can sometimes involve a lengthy application process, the efforts could be well worth it in the end.
SBA loans have long been known for frequently providing good terms to borrowers due to the Small Business Administration’s guarantee of a percentage of the loan, and a new House bill could help these loans become more accessible to women and minority business owners. Numerous advantages like long repayment terms, fixed interest rates, and low fees can help business owners achieve their goals. If you run your own small business, consider whether applying for one of these loans could be the right move for your company.