Minority loans include basic loans, microcredits, lines of credit, and cash flow loans, with higher loan limits and longer repayment terms available through asset-based and equipment loans. They are available from the US government, state governments, and private commercial banks. Loan types vary in requirements, with some requiring assets or a good credit history, while others are easier to obtain for start-ups or businesses with strong cash flow or equipment needs.
Minority loans come in various types, including basic loans, microcredits, lines of credit, and cash flow loans. Other types of loans that typically have higher loan limits and longer repayment terms include asset-based loans and equipment loans. Generally, minority loans are available from the US government through its Small Business Administration (SBA) and its Minority Business Development Agency (MBDA). Loans can also be obtained from special loan programs operated by US state governments and private commercial banks.
Base or term loans are a simple form of minority business loan that can range in dollar amounts up to $100,000 United States Dollars (USD). Businesses usually secure these loans using an asset, showing a good credit history and having a good reputation with existing creditors. Lenders typically prefer medium to large companies that are more established than small startup companies. The repayment is typically a fixed dollar amount over the short or long term.
Microcredits are the easiest loans for start-ups to obtain because no assets are needed to secure them. These loans are usually small amounts, typically up to $50,000 USD. New businesses usually use microloans for cash during the initial start-up phase and for day-to-day operating expenses. Microcredits often have a very short repayment period, usually within one to three years.
Lines of credit are minority loans that work like credit cards. An account is set up to be used whenever needed for the business. The amount of credit can be large or small depending on the needs and size of the business. Lines of credit vary but generally depend heavily on the company’s cash flow and revenue. The lender usually sets a maximum credit limit that the business must stay under. In order to obtain a line of credit, a business generally needs to be established, show a good credit history and have a good standing with its creditors. Most lenders, however, charge an annual service fee associated with maintaining a line of credit.
Minority loans also include those cash flow based loans. Businesses applying for these loans are typically medium to large sized, well established and profitable. Lenders usually require these companies to have good credit backgrounds as well. To determine the amount of the loan, lenders typically look at the expected profits the business will make over a given period of time. Cash flow loans are typically used by businesses to cover sudden, unanticipated changes in operating expenses or changes in the business itself, such as a restructuring.
Large, established minority companies might also apply for asset-based loans, which are typically used for capital expenditures, inventory, debt refinancing, and corporate restructuring. Sometimes, even small businesses living in a growth spurt can apply for these loans. Dollar amounts can range from over $100,000 to $1 million dollars. Typically, businesses use their existing assets or advanced accounting receivables to secure these loans. Asset-based loans are sometimes harder to get because lenders typically only consider those businesses that have strong credit and history over long periods of time.
Another type of minority commercial loan is an equipment loan. These loans are typically a little easier for large or small businesses to secure because they are based on the value of the equipment the loan will be used to purchase. Manufacturing, manufacturing and health care firms are likely to be borrowers of equipment loans. In general, an equipment loan is easier to obtain if the equipment is more general in nature and has a longer shelf life. Businesses wishing to obtain equipment loans normally need to show a good credit history and have a good standing with existing lenders.
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