How Black-Owned Businesses are Leveraging SBA 7(a) Loans for Growth

As we honor Black History Month, it’s important to celebrate the entrepreneurial spirit and resilience that contribute to the vibrant landscape of American businesses. This month also offers an opportunity to highlight how essential resources like SBA 7(a) loans are supporting Black-owned businesses by providing the capital needed to start, grow, and succeed. Through data from LenderAI Insights and other sources, we’ll take a closer look in this article at the significant impact the SBA 7(a) program has had on entrepreneurs, particularly within the Black-owned business community.

The Role of SBA 7(a) Loans for Black-Owned Businesses

Black-owned businesses play a vital role in the U.S. economy, with approximately 3.7 million firms representing 11.3% of all businesses. SBA 7(a) loans provide crucial access to capital, enabling Black entrepreneurs to meet diverse needs such as working capital, equipment purchases, business acquisitions, and real estate investments. These loans are key to overcoming financial challenges that may be difficult to address through traditional lending options. By supporting these essential investments, SBA 7(a) loans help foster sustainable growth, so Black-owned businesses can further expand, create jobs, and strengthen local economies.

In FY 2024 alone, Black-owned businesses received $1.4 billion in SBA 7(a) funding—an impressive sum that underscores the increasing access to capital. However, when compared to the $31 billion in SBA loan funding approved across all businesses, the share remains relatively small. This trend emphasizes the need for continued support, targeted outreach, and policies that ensure Black entrepreneurs have equal access to the resources that will allow them to thrive on the same scale as their counterparts.

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SBA Loan Approvals for Black-Owned Businesses: A Growing, But Limited, Share

Although their share of the total SBA loan pool remains relatively small, the number of SBA 7(a) loans approved for Black-owned businesses has been consistently growing. Of the 70,242 loans approved in FY2024, 5,056 were for Black-owned businesses, representing 7.2% of the total. In FY2025, 2,004 of the 29,992 loans approved so far have gone to Black-owned businesses, making up 6.7% of the total. The volume for 2025 to date signals a positive trend, suggesting that Black-owned businesses may see a higher share of approvals as the year progresses.

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Job Creation

Black-owned businesses play a crucial role in creating jobs, employing more than 1.2 million people. As these businesses grow with the help of SBA loans, they contribute to both job creation and community economic development.

SBA 7(a) loans are more than just a financial tool—they’re a catalyst for job creation and local economic development. By providing small businesses with the capital they need, SBA 7(a) loans help entrepreneurs expand, hire, and fuel job growth.

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States with the Highest Percentages of Black-Owned Businesses

The District of Columbia, Maryland, and Georgia are among the states with the highest percentages of Black-owned businesses, with other Southern states like Mississippi and Louisiana also showing strong representation. For example, Black majority-owned businesses make up 35% of businesses in D.C., 31% in Maryland, and 31% in Georgia. These trends highlight the concentration of Black-owned businesses in urban centers and specific states, underlining the importance of targeted initiatives that promote SBA loan access and drive greater adoption among Black entrepreneurs.

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Challenges Black-Owned Businesses Face in Accessing Loans

While SBA 7(a) loans have proven to be a valuable tool for many small business owners, Black entrepreneurs have historically faced significant challenges in securing these funds. Despite having strong business credentials, Black business owners are less likely to be approved for loans than their white counterparts, even after controlling factors such as credit score, business revenue, and industry.

A study by the U.S. Federal Reserve highlights this disparity: In recent years, Black-owned businesses have faced a loan denial rate of 20.8%, compared to just 8.1% for white-owned businesses. This stark difference illustrates the systemic barriers that Black entrepreneurs encounter when seeking capital, which has long hindered their ability to start and scale businesses.

Moreover, even when Black business owners are approved for loans, they often receive smaller loan amounts and face higher interest rates than white entrepreneurs. This financial disadvantage exacerbates their challenges, making it harder to compete, grow, and build sustainable businesses.

• Black entrepreneurs were nearly half as likely to receive full approval for financing compared to their white counterparts—32% versus 56% for white-owned businesses.
• Black sole proprietors are half as likely as white sole proprietors to secure financing, though the script flipped when Black-owned businesses were an LLC or corporation.
• In FY2024, the SBA approved 5,054 loans for Black-owned businesses, totaling $1.4 billion, which represented 7.2% of all loans approved. White business owners were approved for $12 billion in SBA funding, totaling 45.5% of all approvals.

These disparities underscore the need for targeted initiatives, educational programs, and policy reforms aimed at addressing these racial inequities in access to financing. Programs like SBA 7(a) loans play a crucial role in leveling the playing field, but additional efforts are necessary to ensure Black entrepreneurs have the equal opportunity to succeed.

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Resources to Support Black Business Owners

In addition to SBA 7(a) loans, there are a variety of valuable resources available to help Black entrepreneurs access funding, mentorship, and educational tools to grow and scale their businesses. Here are some key resources tailored to support Black business owners.

• National Black Chamber of Commerce (NBCC): The NBCC is a prominent organization that advocates for the economic empowerment of Black businesses. They offer networking opportunities, advocacy, and resources for entrepreneurs seeking to expand their businesses and engage in economic development.
• NAACP Grants and Resources: The NAACP provides funding opportunities through grants that promote economic empowerment and social equity for Black entrepreneurs. These grants support initiatives focused on sustainability, community impact, and business growth.
• Minority Business Development Agency (MBDA): The MBDA, part of the U.S. Department of Commerce, provides a wide range of services to minority-owned businesses, including access to capital, business consulting, and networking opportunities. Their Business Centers across the U.S. help Black entrepreneurs with strategic planning and connecting with investors.
• The Black Business Entrepreneurs Network (BBEN): The BBEN provides a platform to connect Black business owners with other entrepreneurs, funding opportunities, and key business services.Through networking and educational events, the BBEN helps foster a supportive community of Black business owners.

Key Takeaways for Lenders

• Increasing Demand for SBA 7(a) Loans: The steady growth in SBA 7(a) loan approvals for Black-owned businesses indicates a strong and expanding market. Lenders should consider this growing demographic as an opportunity for business development.
• Targeted Outreach Is Key: With Black-owned businesses making up a smaller share of the total SBA loan pool, targeted outreach and tailored lending programs can help ensure equal access to capital for Black entrepreneurs.
• Addressing Disparities: While the SBA 7(a) loan program is crucial, lenders should be aware of existing systemic barriers, such as higher denial rates and smaller loan amounts for Black entrepreneurs, and explore solutions to make the lending process more equitable.
• Investing in Diverse Communities: By prioritizing loans to Black-owned businesses, lenders can contribute to job creation, community development, and the overall economic strength of diverse local economies.

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