Obtaining a business loan can be challenging for any small business, especially if you’re from a traditionally underserved group.
Approximately 270,000 small businesses in the United States are owned by Indigenous Americans. That’s a relatively small proportion of the nearly 10 million people who identified as Native American and Alaska Native (AI/AN) in the 2020 U.S. Census. (That figure, by the way, is a 160 percent increase from the 2010 Census figures. This leap may be partly due to changes in reporting options, such as the ability to identify with more than one group.)
By supporting and financially fostering the establishment of more Native American-owned businesses, these businesses can provide more economic opportunities to the AI/AN community. Currently, the AIAN median household income is $35,310, which is significantly below the $51,371 median for the U.S. as a whole.
Fortunately, multiple business loan opportunities, business grants, and support are available for Indigenous American small business owners. The U.S. government offers many of them at advantageous terms, such as lower-than-market interest rates.
A business loan is one of the primary means to finance any small business. It can allow expansion, new product lines, purchase of expensive equipment, and more. Of course, small business owners will have to pay the loan back over time. That’s why it’s crucial to determine whether a loan is the best financing option for your business.
Let’s review some of the best business-financing loans and programs available for AI/AN-owned businesses.
1. Indian Loan Guarantee and Insurance Program
The U.S. Department of the Interior’s Bureau of Indian Affairs (BIA) helps AIAN business owners attain loans with favorable interest rates and terms.
To help AIAN business owners overcome challenges they might face with conventional lenders, the BIA also offers the Indian Loan Guarantee and Insurance Program (ILGP) and has a Division of Capital Investment (DCI).
The DCI manages the ILGP and provides guidance for program assistance. Through ILGP, the DCI helps AI/AN tribes and individuals secure reasonable interest rates while also reducing the risk to lenders by providing financial backing from the federal government.
In 2020, the DCI provided 18 loan guarantees equaling more than $125 million. Lenders also approved 21 insured loans equaling more than $1.2 million to AI/AN American entrepreneurs.
To be eligible for a loan through the ILGP program, you must either be:
- An enrolled member of a federally recognized Native tribe or group
- A company with at least 51 percent ownership
You must also meet the following eligibility requirements:
- Own a minimum of 20 percent equity in the funded project
- Ensure the project contributes to the economy of a Native American tribal service area or reservation
You can use ILGP loans for various purposes, including operating capital, acquisition and refinancing, building construction, equipment purchases, and lines of credit.
2. U.S. Small Business Administration
The U.S. Small Business Administration (SBA) serves all Americans, but its mandate includes helping underserved communities such as AI/ANs. They back business loans offered by financial institutions such as savings, loans, and banks. That means these loans have advantageous interest rates and terms.
There are several types of loans offered through the SBA. The most common loan is the 7(a). You can use a 7(a) loan for working capital, refinancing existing business debt, purchasing or renovating real estate, expanding an existing business, buying supplies, and more. SBA 7(a) loans can offer up to $5 million.
The SBA also backs a type of loan called a 504, offered through Certified Development Companies (CDCs). These loans provide long-term, fixed-rate financing for fixed assets that can boost business growth and employment opportunities.
If your business is smaller — and you need a smaller loan — the SBA offers microloans of up to $50,000 for start-ups and small business expansion. These loans are administered by community-based nonprofit organizations with lending experience. They also offer management and technical assistance to guide start-ups.
You can use microloans for a wide range of purposes, including purchasing inventory, working capital, supplies, equipment, furniture, machinery, and more. However, you can’t use them to repay existing debt or buy real estate.
Interested in learning more about SBA loans? See our Complete Guide to SBA Loans to learn everything you need to know!
3. U.S. Department of Agriculture
The U.S. Department of Agriculture (USDA) offers a Business & Industry Loan Guarantee program to back business loans in rural areas. Those eligible to apply include Federally recognized Tribes, for-profit businesses, and people either currently in business or aspiring small business owners.
To qualify for these business loans, your location must meet the following eligibility criteria:
- Be located anywhere in the United States
- Be in a rural area with a population of fewer than 50,000 inhabitants
Note: The borrower’s headquarters can be based within a larger city if the project is located in an eligible rural area. To check if your project is eligible for financing, see eligible addresses for Business Programs.
You can use these loans for various purposes, such as acquisitions, purchasing and renovating buildings, buying supplies or inventory, and more. You can also use these loans for refinancing — if it strengthens cash flow and creates more jobs.
If your business is agriculture-related, you may be eligible for the USDA and the Farm Services Administration’s Indian Tribal Land Acquisition Loan Program. These loans are designed to strengthen and increase operations, grow agricultural productivity, and save farmland for the future.
Additionally, the USDA’s Highly Fractionated Indian Land Loan Program helps Tribes, Tribal entities, and Tribal members alleviate the problems caused by fractionated interests on tribal lands.
4. U.S. Department of the Treasury
The U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund offers Native Initiatives programs designed to strengthen businesses and economic motivation in Native areas. The Native American CDFI Assistance Program (NACA Program) awards financial assistance, including loans, to Native CDFIs.
To be eligible, you must certify as a Native CDFI and serve predominantly a Native community (at least 50 percent), including Native Americans, Alaska Natives, and Native Hawaiians.
5. Minority Business Development Agency Grants
The U.S. Department of Commerce’s Minority Business Development Agency (MBDA) is the only federal agency solely dedicated to the growth and global competitiveness of minority businesses.
In 2021, the MBDA awarded $3.9 million in federal funding to 13 grant recipients to establish various MBDA (AI/AN) projects.
The MBDA offers multiple programs, services, and initiatives to support the economic growth of minority-owned businesses, including a grant program.
Although MBDA grants are competitive, you can receive funding up to $300,000, depending on your business’s project. And if your business receives an MBDA grant for a project, you can apply for more MBDA grants for future ventures.
The MBDA can also help you better position your business for financing. Visit one of MBDA’s Minority Business Centers for more in-depth, one-on-one financial counseling.
Let Guidant Financial Help
Considering loan financing, researching the options, and applying for loans can be complex – and even overwhelming. Which loan should you apply for? What financing options are you eligible for? What are the requirements? How can you increase your chances of approval? What should you know before applying?
Fortunately, Guidant Financial offers a free consultation on business funding to Indigenous American business owners and aspiring business owners. We provide in-depth information on the types of loans available and other potential funding sources, such as grants or Rollovers for Business Startups (ROBS).
Guidant works with multiple loan providers and financial institutions to find the best funding solution to meet your business needs. Let our decades of experience benefit you! Contact us at 888-472-4455 to speak with one of our financial experts or get pre-qualified for business funding now.