Minority business loan resources and guide.

Jul 21 2020 | PayPal Editorial Staff

Like many small business owners, a challenge minority businesses face is access to capital, or the ability to borrow money for business growth and expansion. Small business loans for minorities exist, but there are additional requirements for getting approval.
Minority businesses continue to be an indispensable part of our economy. According to the U.S. Senate Committee on Small Business & Entrepreneurship, there are now more than four million minority-owned companies in the United States, with annual sales totaling close to $700 billion.1

Understanding what financing options are available can help business owners during difficult times and times of growth.  There are different programs and loans designed specifically for businesses considered minority businesses. According to the
 National Minority Supplier Development Council (NMSDC), which certifies that businesses are minority owned, to qualify for the classification of a “minority business,” a company must be at least 51% minority owned, operated and controlled. 

When a small business loan is a smart move.

Some small business owners bootstrap their companies, scrimping and making do with what they have in the early years to avoid overspending or going into debt. But operating on a shoestring budget long-term may limit growth.

If your small business can't keep up with demand for products or services and could generate higher revenues if you had money for raw materials, production, marketing, or labor, then you could consider a business loan, which may help increase your business’s revenues.

Differences between a personal and a business loan.

Some small business owners choose to apply for personal loans to fund their businesses based upon their personal credit score, income and sometimes collateral (such as their home). Although interest rates are sometimes lower for personal loans than business loans, you may risk losing your home if you use it as collateral and you default on your loan.

Some small business loans require a personal guarantee, which means that you're still personally responsible for repaying the loan whether or not your business succeeds.  For these loans, the decision to approve or deny the loan will partly depend on the success of your business and partly on your personal financial history.

Requirements for getting approved for a business loan.

When evaluating your loan application, business lenders may weigh three factors:
  • Your personal credit score.
  • How much revenue the business generates.
  • How long you've been in business.
Depending on the results, lenders may also consider:
  • Your business's credit score.
  • What kind of collateral your business has (assets like property and equipment that can be sold in the event of a default on the loan).
  • The type of small business you're operating (some lenders may not lend to particular industries, such as real estate investors).  

Financing options to consider when looking for a minority business loan.

Loans come in different shapes and sizes. The type of loan you apply for may depend on how you plan to use the money.

Do you need financing to purchase a building or equipment? Do you need money to expand your exporting efforts? Or do you need a loan so you can hire more employees?

Check the lender’s description of the types of loans that they offer before you invest time in filling out paperwork to be sure your planned use qualifies.


A line of credit is similar to a credit card, where, if approved, the lender offers you a maximum loan amount, but allows you to use it when you need it. Some businesses apply for a line of credit to have it "just in case" they need it.

A term loan is a traditional lump-sum loan, where, if approved, you receive a specific amount to be used immediately to buy what you need, such as a delivery truck, and then you repay it in installments.

An operating loan is used to finance a business’s everyday operations, such as payroll, raw materials or utility bills, rather than investing in equipment or other products.

Common minority business loan providers.

A good place to start when looking for a business loan is the bank where you have your business checking account. Your odds may be better there.

Tip:  The Small Business Administration (SBA) itself does not make loans; to assist small business, the SBA does guarantee certain loans made to small businesses by private and other institutions. 


Types of SBA loans include:
  • Microloans: These are smaller loans of up to $50,000 (the average amount is $13,000) that must be repaid within six years. Businesses and not-for-profit childcare operations can apply.
  • 7(a) loans: These are loans of up to $5,000,000.00 with several variations that determine the maximum loan amount and repayment period.
  • Community advantage loans: Business owners who live in under-served communities may qualify for loans up to $250,000.00 based on their zip code.

If you decide to work with the SBA, you might want to consider applying for the 8(a) Business Development Program. This program is designed help small, disadvantaged businesses succeed by providing technical and managerial services like mentoring, counseling, and executive development. Members of the 8(a) Business Development Program are also given an opportunity to bid on federal contracts federal contracts under the guidance of a Business Opportunity Specialist.

Other loan programs exist for the companies of minority business owners that are headquartered in certain states or cities, such as:
  • The Minority Business Development Agency provides resources for loans, grants, trusted guidance, etc. geared specifically for minority owned small businesses.
  • The Business Consortium Fund Loan for NMSDC certified minority companies.
  • The Asian Pacific Islander Small Business Program that works to develop small and micro businesses in Los Angeles with a particular focus on the Chinese, Korean, Japanese, Thai and Filipino business communities, especially those of low income immigrants.
  • Meda, a Minnesota based service provider connecting minority-owned businesses with business opportunities, access to capital, and business consulting.
If you think a business loan could provide the resources your company needs to be even more successful, start now to identify potential lenders and clean up your finances in preparation for your loan application.
 
The content of this article is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision.

1 Minority Entrepreneurs, U.S. Senate Committee on Small Business and Entrepreneurship. 

Was this content helpful?

Frequently asked questions.

Q1. Where can I find information about the new Covid Relief Bill provisions for small business?

A "Fact Sheet" on the new Bill is available on the House of Representatives Small Business Committee website. We also recommend visiting the US Department of Treasury PPP website where you can access PPP program updates as soon as they're published by the SBA.

Q2.  Will PayPal be facilitating new first time PPP loans and PPP Second Draw loans to PPP loan borrowers, under the new Covid Relief Bill?

PayPal is participating in the PPP to provide businesses access to additional PPP loan funding. This includes first time PPP loans for those who have not previously received a PPP loan, as well as Second Draw loans for those who have received a prior PPP loan. In either case, all SBA PPP requirements must be met.
 
The best place to get additional information and updates on the availability of PPP loans through PayPal is PayPal.com/PPPloan.


Q3.  When will the new one-page PPP loan forgiveness application for loans of $150,000 or less become available?

PayPal is reviewing the new Covid Relief Bill, including how it impacts the loan forgiveness process for existing PPP loan borrowers. We're unable to provide any more detailed information or answers to your specific questions until the Bill is officially enacted, and the SBA issues detailed rules, guidance, forms and instructions on its implementation. The SBA has 24 days from the Bill’s enactment to release the updated loan forgiveness form and related guidance. 

We'll provide updates on our PPP Loan Forgiveness Information page and through other PPP loan borrower communications as more information becomes available. We also recommend visiting the US Department of Treasury PPP website where you can access PPP program updates as soon as they're published by the SBA.
 

Q4.  I’ve already applied for loan forgiveness, but my loan is under $150,000. Should I stop my pending forgiveness application and reapply using the new Covid Relief bill one-page PPP loan forgiveness application form?

PayPal is reviewing the new Covid Relief Bill, including how it impacts the loan forgiveness process for existing PPP loan borrowers. We're unable to provide any more detailed information or answers to your specific questions until the Bill is officially enacted, and the SBA issues detailed rules, guidance, forms and instructions on its implementation. The SBA has 24 days from the Bill’s enactment to release the updated loan forgiveness form and related guidance. 

If you qualify for full loan forgiveness under one of the existing Forgiveness Application Forms (3508S, 3508EZ or 3508) and can satisfy all the applicable documentation requirements, you may wish to proceed with your current loan forgiveness application, rather than waiting for the new loan forgiveness application form to be released and then reapplying.  

We'll provide updates on our PPP Loan Forgiveness Information page and through other PPP loan borrower communications as more information becomes available. We also recommend visiting the US Department of Treasury PPP website where you can access PPP program updates as soon as they're published by the SBA.
 

Q5.  I’ve not yet applied for loan forgiveness but am ready to do so, and my loan is under $150,000. Should I wait to apply using the new Covid Relief bill one-page PPP loan forgiveness application form?

PayPal is reviewing the new Covid Relief Bill, including how it impacts the loan forgiveness process for existing PPP loan borrowers. We're unable to provide any more detailed information or answers to your specific questions until the Bill is officially enacted, and the SBA issues detailed rules, guidance, forms and instructions on its implementation. The SBA has 24 days from the Bill’s enactment to release the updated loan forgiveness form and related guidance. 

If you qualify for full loan forgiveness under one of the existing Forgiveness Application Forms (3508S, 3508EZ or 3508) and can satisfy all the applicable documentation requirements, you may wish to proceed with one of the currently available loan forgiveness application forms, rather than waiting for the new loan forgiveness application form to be released. 

We'll provide updates on our PPP Loan Forgiveness Information page or through other PPP loan borrower communications as more information becomes available. We also recommend visiting the US Department of Treasury PPP website where you can access PPP program updates as soon as they're published by the SBA.
 

Q6.  I’ve already received loan forgiveness and my EIDL amount was subtracted from my PPP loan forgiveness amount. Under the new Covid Relief bill, the EIDL deduction was eliminated and the SBA is required to make borrowers whole if their EIDL balance was deducted from their requested forgiveness amount. When and how will I be made whole by the SBA?

PayPal is reviewing the new Covid Relief Bill, including how it impacts the loan forgiveness process for existing PPP loan borrowers. We're unable to provide any more detailed information or answers to your specific questions until the Bill is enacted, and the SBA issues detailed instructions and guidance regarding the handling of EIDL loan forgiveness amount reductions.  

We'ill provide updates as additional information becomes available. We also recommend visiting the US Department of Treasury PPP website where you can access PPP program updates as soon as they're published by the SBA.
 

Q7.  I’ve already applied for PPP loan forgiveness and my EIDL amount was subtracted from my PPP loan forgiveness amount. Under the new Covid Relief bill, the EIDL deduction was eliminated and the SBA is required to make borrowers whole if their EIDL balance was deducted from their requested forgiveness amount. My loan payments have now begun for the unforgiven loan amount tied the EIDL balance. Do I need to make payments on my remaining PPP loan balance?

PayPal is reviewing the new Covid Relief Bill, including how that bill impacts the loan forgiveness process for existing PPP loan borrowers. We'd recommend that you continue to make payments on your PPP loan balance until the SBA provides details regarding the handling of EIDL-based loan forgiveness amount reductions. If a credit balance results from your payments, we'll issue a refund to you.

We'll provide updates as additional information becomes available.
 

Q8.  I’ve already applied for PPP loan forgiveness, but my application was declined, or I did not qualify for loan forgiveness in the full amount of my PPP loan. Can I reapply for forgiveness using the new Covid Relief bill one-page PPP loan forgiveness application form? Can I reapply and include the new categories of forgiveness eligible expenses? 

PayPal is reviewing the new Covid Relief Bill, including how it impacts the loan forgiveness process for existing PPP loan borrowers. We're unable to provide any more detailed information or answers to your specific questions until the Bill is officially enacted, and the SBA issues detailed rules, guidance, forms and instructions on its implementation. The SBA has 24 days from the Bill‘s enactment to release the updated loan forgiveness form and related guidance.

We'll provide updates on our PPP Loan Forgiveness Information page or through other PPP loan borrower communications as more information becomes available. We also recommend visiting the US Department of Treasury PPP website where you can access PPP program updates as soon as they're published by the SBA.


IMPORTANT NOTE: The SBA continues to produce new and revised guidance on the Paycheck Protection Program. The information on this web page is provided to assist in generally understanding the PPP loan program, including the process by which PPP loans may be forgiven, in whole or in part. The information on this web page should not be relied upon as legal, tax, or financial advice. Please check the SBA website for published guidance and details. 

The lender for the Paycheck Protection Program Loan through PayPal is WebBank, Member FDIC.

PayPal Working Capital is a business loan of a fixed amount, with a single fixed fee. The loan and fee are repaid automatically with a percentage of your PayPal sales (a minimum payment is required every 90 days). There are no periodic interest charges, late fees, pre-payment fees, penalty fees, or any other fees.

If approved for a loan, the process is easy:
  • Select your loan amount. Maximum loan amounts vary based primarily on your PayPal account history.
  • Choose the percentage of your future PayPal sales that you want to go toward repayment of the loan amount and the loan fee.
  • Accept the terms and conditions, and the loan funds are deposited into your account with PayPal.Your repayments will be taken from your future PayPal sales until your balance is paid in full. You can also make additional payments or even pay the loan in full with no early repayment fee.

 

Q1. Will PayPal be facilitating new first time Paycheck Protection Program (PPP) loans and PPP Second Draw loans to PPP loan borrowers, under the new Covid Relief Bill?

PayPal is participating in the PPP to provide businesses access to additional PPP loan funding. This includes first time PPP loans for those who have not previously received a PPP loan, as well as Second Draw loans for those who have received a prior PPP loan. In either case, all SBA PPP requirements must be met.
 
The best place to get additional information and updates on the availability of PPP loans through PayPal is PayPal.com/PPPloan.
 

Q2. When will PayPal begin offering access to PPP loans?

PayPal will begin accepting PPP loan applications when the SBA begins accepting new PPP loan application authorization requests from all PPP loan providers. This is expected to occur on January 19, 2021.
 
The best place to get additional information and updates on the availability of PPP loans through PayPal is PayPal.com/PPPloan.
 

Q3. When can I start applying through PayPal for a loan under the PPP?

PayPal expects to begin accepting PPP loan applications on January 19, 2021.
 
The best place to get additional information and updates on the availability of these loan through PayPal is PayPal.com/PPPloan.
 

Q4. What can PPP loans be used for?

Loans can be used to help fund payroll costs, including benefits. Loan funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.
 
We recommend visiting the SBA PPP website for details.


Q5. Who will be eligible for the new PPP loans?

PPP loans for first time borrowers are generally available to businesses that have not previously received a PPP loan, have 500 or fewer employees, and meet all other eligibility requirements.

PPP Second Draw loans are generally available to businesses with no more than 300 employees, that have used the full amount of their first PPP loan for permitted purposes and can demonstrate at least a 25% reduction in gross receipts in the first, second, third, or fourth quarter of 2020 relative to the same 2019 quarter or for calendar year 2020 as compared to calendar year 2019. Special rules apply for businesses formed in 2020. All other eligibility requirements must also be satisfied.

We recommend reviewing the first time PPP loan Borrower Application FormSecond Draw Borrower Application Form and other program information that can be found on the SBA PPP website.
 
Businesses, including self-employed individual and independent contractors, will be able to apply through PayPal by going to PayPal.com/PPPloan.
 

Q6. If I received a first time PPP loan, but have not applied for forgiveness, am I still eligible to apply for a Second Draw PPP loan?

Yes. Borrowers who will have used the full amount of their first PPP loan for eligible purposes under the SBA rules before the disbursement of the Second Draw loan are eligible to apply for a Second Draw loan. However, the borrower is not required to have applied or received forgiveness on their initial PPP loan in order to apply for a Second Draw loan. Other eligibility rules apply.  
 
We recommend reviewing the Second Draw Borrower Application Form for all Second Draw loan eligibility requirements.
 
Businesses, including self-employed individual and independent contractors, will be able to apply through PayPal by going to PayPal.com/PPPloan.


Q7. If my first PPP loan is with another lender, can I apply through PayPal for a PPP Second Draw loan?

Yes. If you have an existing PPP loan with a different provider, you can apply for a PPP Second Draw loan through PayPal. You will need your 10-digit SBA/E-Tran number from your first loan to complete the PPP Second Draw loan application.
 
Businesses, including self-employed individual and independent contractors, will be able to apply through PayPal by going to PayPal.com/PPPloan.
 

Q8. Where can I get more information about the new PPP loans?

The best place to get additional information and updates on the availability of these loan through PayPal is PayPal.com/PPPloan.
 
Application forms, overviews and detailed rules can also be accessed directly from the SBA PPP website.
 

Q9. Who is the lender for the PPP loans provided through PayPal?

The lender for the PPP loans available through PayPal is WebBank, Member FDIC. 
 
IMPORTANT NOTE: The SBA continues to produce new and revised guidance on the Paycheck Protection Program. The information on this web page is provided to assist in generally understanding the PPP loan program. The information on this web page should not be relied upon as legal, tax, or financial advice. Please check the SBA website for published guidance and details. 
 
The lender for the Paycheck Protection Program Loan through PayPal is WebBank, Member FDIC. 

UPDATE AS OF 6/16/20:

Due to overwhelming response to the PayPal Empowerment Grants for Black Businesses Program, we paused the acceptance of new applications on Saturday, June 13 at 3 p.m. EDT. This will allow us to process submitted applications and assess availability of additional funds.

We recognize the critical challenge of access to capital that Black-owned businesses face. Please know that this grant program is part of a larger commitment from PayPal to invest in Black and minority-owned businesses and communities. Together, AEO and PayPal are determined to do more to execute on our shared vision of creating economic opportunity. We are exploring additional ways to address this urgent need.

We encourage those who were unable to complete an application by 3 p.m. EDT on Saturday to visit aeoworks.org/paypalgrant to join a mailing list for future updates.
 
I saw the announcement that the grant is closing, will there be another opportunity? 
Due to overwhelming response, we paused the acceptance of new applications on Saturday, June 13 at 3 p.m. EDT. This pause will allow us to process submitted applications and assess the availability of additional funds. 

We recognize the critical challenge of access to capital that Black-owned businesses face and are exploring additional ways to address this urgent need. 

Why isn’t PayPal doing anything for other minorities and economically challenged people of all races?
PayPal's mission and vision is that every person has the right to participate fully in the global economy, and we have an obligation to empower people to exercise this right and improve financial health. PayPal provides simple, affordable, secure and reliable financial services and digital payments that enable the hopes, dreams and ambitions of millions of people around the world. In addition to our global commitment to help everyone improve financial health, we also recognize the critical challenge of access to capital that Black-owned businesses face and we are committed to helping the Black community overcome these challenges.
 
My application was in progress when I received the notice. Am I still able to submit? 
Thank you for beginning your grant application. Incomplete applications expired on Tuesday, June 16 at 3 p.m. EDT and will no longer be considered.     

If you didn't complete your application by 3 p.m. EDT on June 16th, we will automatically place you on a mailing list to receive future updates on the program. 
 
I submitted my application prior to the notice, am I still eligible? 
Yes. If you received email confirmation that your application was submitted, you are still in the review cycle. We will start our evaluation and will follow up in the next two weeks.  
 
I've already submitted my application. Does this mean there will be a delay in when I receive funding? 
Thank you for your submission. We are using this time to focus on your application. We will start the review process in the next two weeks. This will not impact your reward timeline.  
 
When do you expect the program to reopen? How will we be notified? 
We are exploring additional resources that may be helpful to you. Please check back on the website https://aeoworks.org/paypalgrant/ for the most recent updates. In the meantime, these additional options may be helpful to you: 

The AEO Main Street Rise package offers AEO products to support your small business during this challenging moment. 

If your organization has been negatively impacted by COVID-19 and has not yet been approved for an SBA Paycheck Protection Program loan, PayPal is still accepting PPP loan applications. You can learn more about PPP loans at paypal.com/ppploan. Obtaining a PPP loan will not disqualify your organization from applying for the PayPal Empowerment Grant. The lender for the Paycheck Protection Program Loan through PayPal is WebBank, Member FDIC.
 

On June 11, 2020, we announced our commitment of $10 million to Black-owned businesses impacted by COVID-19 or civil unrest. These grants will provide direct support to business owners to cover expenses related to stabilizing and reopening their businesses. The fund will be managed in partnership with Association for Enterprise Opportunity, a leading national nonprofit expanding economic opportunity for Black entrepreneurs through its Tapestry Project.

What information is needed and how do I apply?
If you are interested in applying for an empowerment grant, please visit https://aeoworks.org/paypalgrant/ to learn more and access the grant application. We are working closely with our partner the Association for Enterprise Opportunity to conduct a detailed vetting process on each of the businesses that will be awarded a grant.

Who is eligible to receive these grants?
These grants will focus on providing support to Black small business owners to cover expenses related to stabilizing and reopening their businesses that have been impacted by COVID-19 or civil unrest. Applicant must be small business owners (under 50 employees, with revenue less than $1 million) operating as of May 2019. Sole proprietors, independent contractors, and self-employed persons are welcome to apply. Additional requirements may apply.
 
What can this grant be used for?
The grant funds must be used to help small businesses recover from instability caused by the COVID-19 shut down or the recent civil unrest. This can include expenses related to payroll, benefits, interest on mortgage obligations, rent, utilities, and repairs.
 
What do I need to apply?
You’ll need to provide basic details about your business, its operations and the funds you need. We’ll ask you a standard list of questions to ensure you meet the qualifications. You’ll be required to qualify for and have a PayPal Business Account in order to receive the grant.
 
Is there a deadline?
Grant applications will be accepted until the $10 million in empowerment funds have been distributed.
 
How long is the review process? When can I expect to hear back?
We will work through applications as fast as we can. You will receive an email confirmation as soon as your application is submitted. You can expect to hear from us within 1-2 weeks.
 
What are the terms of the grant? Do I have to pay it back?
No, the funds are yours to invest in your business.
 
What amount can I qualify for? 
You will be asked to carefully calculate and request only the amount you need in order for your business to recover (up to $10,000 USD). We are working to empower as many small businesses as possible though this community-focused effort.
 
Why is PayPal doing this?
Inclusion is part of how we do business at PayPal, and we want to be thoughtful with a significant commitment to help address systemic racial injustice. Our central mission is democratizing access to financial services and creating new economic opportunities for as many people and businesses as possible. We were spurred to even greater action by recent events. As we continue to live through an unprecedented global pandemic and economic crisis that has disproportionately affected more poor people and communities of color, we knew that we had to do more to live our values.

How do I get updates on the application process?
You can contact AEO at smb@aeoworks.org.

We’ll use cookies to improve and customize your experience if you continue to browse. Is it OK if we also use cookies to show you personalized ads? Learn more and manage your cookies