Micro-Lending and the Opportunity for African American Entrepreneurs

For many budding African American entrepreneurs there is a major detour on the road to building a successful business: access to capital. Though the percentage of African Americans aspiring to start their own business continues to rise, traditional lenders are reluctant to offer capital to new entrepreneurs with little financial resources.

Due to the racial wealth divide African Americans can only provide one-twelfth of the collateral required where white entrepreneurs can offer significantly more. This leads too many African American entrepreneurs to use high-interest financing tools, such as credit cards, to bridge the gap in capital development.

Although most traditional financial institutions are geared towards individuals with significant assets and wealth, working with a micro-finance institution is an alternative that more African American entrepreneurs should consider. Micro-finance institutions provide very small amounts of capital, also known as micro-finance loans, for individuals who typically do not have access to traditional financing options. They also provide other business development services including but not limited to: credit counseling, business incubation, tax prep and one-on-one business training.

Read more: Huffington Post