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. 

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Frequently asked questions.

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.

To help our PayPal merchants during these challenging times, PayPal has been accepting loan applications for the SBA Paycheck Protection Program. If you have received a PPP loan and are now looking for information on loan forgiveness, go to paypal.com/pppinfo. If you're experiencing trouble getting the site, try switching your browser (for example, if you're using Internet Explorer try Chrome).

Our customer service agents can’t accept loan applications or provide loan status through any of our contact channels, including phone and messaging. To check the status of your loan or for additional questions, please go to the Paycheck Protection Program loan site.

UPDATE AS OF 7/1/20: 

  • PayPal stopped accepting new PPP loan applications on June 26, 2020. The SBA has been able to approve PPP loan applications through June 30, 2020.
  • There were new PPP Loan Forgiveness application forms and instructions issued by the SBA on June 17, 2020, including an “EZ” form.
How long will PayPal accept new applications for the Paycheck Protection Program loan?
As of June 26, 2020, PayPal is no longer accepting new PPP loan applications.
June 30, 2020 was the last date that PPP loans will be approved by the SBA, as the PPP loan program is ending. PayPal stopped accepting new PPP loan applications as of 8PM ET on June 26, 2020, a few days prior to the SBA deadline, so that previously submitted and pending applications could be processed before the June 30, 2020 deadline. PayPal submits PPP loan applications to the SBA for approval only after the PPP loan application and all required supporting documentation have been received and reviewed, and the applicant has signed and returned all their PPP loan documents.  

I applied for a PPP loan through PayPal but have not received a decision yet.  What will happen to my application?
PayPal will continue to process PPP loan applications received before 8 PM ET on June 26, 2020 and will continue to submit eligible applications to the SBA for approval through June 30, 2020.
PayPal submits applications to the SBA for approval only after the loan application and all required supporting documentation have been received and reviewed and the applicant has signed and returned all their PPP loan documents. If you have not yet provided your documentation, please do so as soon as possible. Following receipt of your documents we will complete our review of your application and supporting documentation. Once our review is complete, we will either generate loan documents for your completion and electronic signature via DocuSign, or a notification (as required by law) providing the specific reason(s) why we were unable to approve your application. It is only after you have signed and returned all PPP loan documents that we can submit your application to the SBA for approval. Any application that has not been approved by the SBA (received an SBA loan number) by June 30, 2020, will be declined. 
If your business is still in need of a PPP loan and hasn’t been approved through another PPP loan provider, we encourage you to act quickly to complete and sign these documents, as time is running out. If you need assistance with a pending PPP loan application, please call 1-866-357-5082. The PayPal Business Financing Team is available to assist you Monday through Friday, 8AM to 6PM ET.
I’ve heard there is a new, simple, loan forgiveness application form. Who can use the new simple form, and where can I find more information?  
On June 17, 2020, the SBA published a new 3508EZ Paycheck Protection Program PPP Loan Forgiveness Application Form 3508EZ. The “EZ” Form requires less information and supporting documentation than the standard Loan Forgiveness application form.
To qualify for the new Form 3508EZ Forgiveness application, borrowers must be:
1) A self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in its PPP Borrower Application Form (SBA Form 2483).
2) A business with employees that meets certain established SBA requirements regarding maintaining or restoring employee headcount and salary and hourly wages for employees over certain specified timeframes.
3) A business with employees that meets certain established SBA requirements regarding maintaining  salary and hourly wages for employees over certain specified timeframes and that was unable to operate at pre-Covid -19 historical levels of activity because of Covid-19 related governmental restrictions related to health, safety or social distancing.
The details of these rules can be found at the top of the instructions document for the Loan Forgiveness Application Form 3508EZ.

Additional information about the new applications and eligibility criteria will soon be available on our PPP Loan Forgiveness website at paypal.com/pppinfo.
In the meantime, you can find the PPP Loan Forgiveness Applications and instructions through the following Treasury site: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses

Loan Forgiveness 

I’ve heard that recent legislation changed the terms of PPP loans. What is changing about the Paycheck Protection Program?

  • Extended Loan Term: The loan term (length of the loan) has increased to 5 years for loans approved by the SBA (assigned an SBA Loan Number) on or after June 5, 2020. Loans approved by the SBA before June 5, 2020 will continue to have a 2-year term.
  • Extended Payment Deferral Period: Payment deferral timeframes are being extended beyond six months. Deferment will generally be extended until after a decision is made on your application for loan forgiveness, or for at least 10 months after your loan was funded if you haven’t applied for loan forgiveness by that point in time. The new payment deferment rules will apply to all PPP loans.  More information will be provided once additional detailed implementation guidance is published by the SBA.
  • Greater Flexibility on use of Loan Funds to Help Achieve Maximum Forgiveness: The timeframe borrowers have to use loan funds for eligible costs and expenses have been extended from 8 weeks to 24 weeks. In addition, the minimum percentage that is required to be used for eligible payroll costs has been reduced from 75% to 60%. The remaining loan amount must be used for eligible nonpayroll expenses and other requirements must also be met. These changes should help more borrowers maximize their loan forgiveness

 For more information and loan forgiveness requirements, go to paypal.com/pppinfo.

When can I apply for PPP loan forgiveness?
Loan forgiveness may be requested as early as 8 weeks after your loan has been funded and not before. To maximize your loan forgiveness amount, you have up to 24 weeks to spend loan funds on eligible costs and expenses. You will need to collect all necessary documents to support your Loan Forgiveness Application and to demonstrate your use of the loan funds for eligible expenses during the applicable 8 to 24-week period. For more information about PPP loan forgiveness and the process to apply for forgiveness can be found at paypal.com/pppinfo.

I’m ready to apply now. How do I apply?
Loan forgiveness may be requested as early as 8 weeks after your loan has been funded, but not before. For information about the forgiveness application process, including related documentation requirements, go to paypal.com/pppinfo

How long will it take to process my loan forgiveness application? 
PPP loan providers have up to 60 days from receipt of a complete loan forgiveness application (including required supporting documentation) to issue a forgiveness recommendation to the SBA. Once a recommendation has been issued to the SBA, the SBA has up to 90 days to review it and inform the PPP loan provider if it is in agreement with the loan provider’s recommendation. We will keep you informed on the progress of your forgiveness application and will inform you of the outcome, once permitted to do so by the SBA.

I keep hearing about loan forgiveness. What does that mean?
Loan forgiveness means that you don’t have to pay back the portion of the loan that is forgiven. PPP loans may be forgiven in full or in part by the SBA. The amount of loan forgiveness will depend primarily on whether your use  of the PPP  loan funds meets the SBA’s forgiveness requirements. For more information and requirements regarding loan forgiveness, go to paypal.com/pppinfo.
I got my PPP loan. What do I have to do to achieve forgiveness?
There are a number of guidelines that borrowers must follow when using PPP loan funds to achieve maximum loan forgiveness. Details around these requirements can be found at paypal.com/pppinfo.

How do I change my PPP loan from a 2-year term to a 5-year term?
PPP Lenders may, but are not required to, offer PPP loan borrowers the opportunity to convert their PPP loans funded before June 5, 2020 from a 2-year to a 5-year term. We will have more details on how to address these requests once we have additional guidance from the SBA on how to implement this change. We recommend that you wait to make this request until a final decision on your loan forgiveness application has been made by the SBA.

What are the requirements around rehiring employees that could reduce my loan forgiveness? Are there any exemptions?
Information on these requirements can be found at paypal.com/pppinfo.

Application process

I completed my PPP application. How do I log in to check the status of my loan and upload documents?
To log in, go to https://my.loanbuilder.com/us/login. You'll see a choice to log in with LoanBuilder or to log in with PayPal.

  • If you’ve had a LoanBuilder loan, log in with your LoanBuilder credentials

  • If you’ve had a PayPal Business Loan, log in with whichever credentials you used to establish it (it could be PayPal or LoanBuilder credentials)

  • All others, choose to log in with the LoanBuilder credentials you set up when you applied for PPP (do not “Continue with PayPal”)

I just received a PPP loan contract through DocuSign—what happens next?
Once we have received your documents and they are appropriately signed and completed, we will, subject to final review and verification, add your application to the queue to be sent to the SBA as quickly as possible.
Program funding allocated by Congress is limited, and due to the unprecedented demand, the SBA’s processing is taking longer than anticipated. We expect it will take several days to process completed applications through the SBA and to receive an SBA loan number necessary for funding. For funding to occur, the SBA must accept your application and program funds must remain available.  We will continue to communicate updates through email.

How long will PayPal accept new applications for the Paycheck Protection Program loan?
June 30, 2020 is the last date on which a PPP loan application can be approved by the SBA. PayPal submits new applications to the SBA for approval after the loan application and supporting documentation have been reviewed to confirm eligibility requirements, and you have signed and returned all loan documents. If you are thinking of applying, we encourage you to do so as soon as possible and not wait until later in the month.

My loan amount is lower than I expected. Why?
We determined your loan amount based on the supporting payroll documentation you provided and in accordance with the SBA’s requirements for the PPP loan.

The SBA requirements include calculating the loan amount based on a specific formula that principally takes into account your average monthly payroll costs (excluding annual compensation in excess of $100,000 USD per employee annually) multiplied by 2.5.  

The documentation you submitted:

  • May not have supported the average monthly payroll costs you reflected on your application

  • Or the average monthly payroll costs you submitted may have not satisfied the Small Business Administration’s guidance for eligible payroll costs

For additional information, please visit sba.gov/ppp
Can I submit additional documentation?
No, once the loan documents are delivered via DocuSign, the loan amount cannot be changed.
Can I apply again for PPP through PayPal?
Once the loan documents are delivered via DocuSign, the offer and process are final for this application.  Given the high volume of applications and the limited funds allocated by the US Government for the program, applying again through Paypal is not recommended.
Can I apply for PPP at another lender?
We are not familiar with other lenders’ programs. However, your current PPP loan offer through PayPal will not prevent you from applying somewhere else. Please keep in mind that given the high demand, the limited funds made available by the US Government for the PPP program are expected to be depleted quickly.
How can I decline the offer?
If you do not wish to accept the loan amount offered, you may decline to electronically sign the documents we provided to you via DocuSign. To formally decline the agreements and stop future email reminders from being sent to you, choose “OTHER ACTIONS” from the upper right corner of the DocuSign envelope, and then “Decline to Sign” from the menu of options.

Full instructions are available at DocuSign: https://support.docusign.com/en/guides/Declining-to-sign-DocuSign-Signer-Guide.

How do I upload my documents? Can I email them?
All documentation will be uploaded to our online portal. If you don’t already have access, we’ll provide you with an opportunity to establish a login following the completion of our initial eligibility review of your application or send you a follow-up email. There’s currently no way for you to email your documents to us.

Please note that you’ll need to submit all your documents at once. Please don’t try to upload a few and come back to upload other documents later; this can delay the application process.
I submitted my application and got an on-screen confirmation that says my application has been received and you’re processing my request. What’s the next step?
For applications that have been initially reviewed and remain eligible, an email will be sent that will instruct you on how to establish your loan portal credentials. This email will come from noreply@paypal-businessfinancing.
If you’re not eligible, you will receive a notification providing the specific reason(s) why we were unable to approve your application.
When will I hear from PayPal about the status of my application?
We are working through applications as fast as we can. You can expect to get an email from us within the next couple of business days.
After I applied, it said that I have no active applications in the portal. What happened and why doesn’t it show?
Your application is likely in a pending status and will be reviewed as soon as possible. Once we’ve completed our review, we will notify you by email. 

Why was I declined?
The specific reasons for a decline will be provided to you through email. PayPal isn't given access to the specific reason(s) why your application was declined. 

Can I appeal a declined application?
The decision on your application is final. If you believe you may have been declined because you answered a question incorrectly or did not provide us with the requested supporting documentation, you may choose to reapply for a Paycheck Protection Program through PayPal at www.paypal.com/ppploan.
Otherwise, you might be eligible for a Paycheck Protection Program loan through another provider. If you choose to apply elsewhere you should do so as soon as possible. We expect that any additional funding that is authorized by the U.S. Government for the program will be depleted again quickly. A list of loan providers can be found on the SBA website (sba.gov).

* The lender for Paycheck Protection Program loan provided 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.
Because your automatic repayments get deducted as a percentage of each PayPal sale, the amount you repay each day changes with your sales volume. The more you sell, the more repayment progress you’ll make that day. On days without sales, you’ll make no payments, but there is a minimum repayment requirement every 90 days.

Depending on the loan terms you choose, you must pay at least 5% or 10% of your total loan amount (loan + the fixed fee) every 90 days.

The 5% minimum applies to loans estimated to take 12 months or more to be repaid, based on your business’ past PayPal sales and other factors. The 10% minimum applies to loans estimated to be repaid within 12 months.

For most of our customers, regular automatic repayments easily cover the minimum and this is never an issue. But if you do get behind, you can make additional payments on the PayPal Working Capital website.

If you do not meet the minimum payment requirement and your loan goes into default, your entire balance could become due and limits could be placed on your PayPal account.

Please see Section 12 (Account Terms) of our Terms and Conditions to learn more about default.

Tip: You can make additional payments or even pay the loan in full without any penalty.

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