Funding sources for women and minorities

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(FORTUNE Small Business) -- Dear FSB: Way back when, there were low-interest rate loans from the government for women and minorities in small business. They no longer exist, business advisors say. Why is this? I am an older woman in business and find it all but impossible to get a loan.

- Whetonia, Tonie's RVs Inc., Salem, Va.

Dear Whetonia: While there are no actual loans from the government for small business owners, there are government agencies that help small business owners secure financing. These agencies don't actually make loans - they guarantee loans made by traditional lenders. Banks and other financial institutions provide loans to small business owners because the agencies guarantee repayment of the loan.

The Small Business Administration and the Minority Business Development Agency provide small business owners with all kinds of assistance - financial as well as non-financial - such as help writing business plans and with financial planning to secure funding. While the MBDA was established to specifically assist minority-owned businesses, the SBA is theoretically color-blind.

"In recent memory, the government has not offered or guaranteed loans that are specifically geared to women and minorities," said Deborah Kluger, an independent consultant for Proposal Writing and Government Contracting.

However, in practice, minorities and women are not out of luck. Many SBA-certified lenders, such as Bank of America (BAC, Fortune 500), Wachovia (WB, Fortune 500) and Wells Fargo (WFC, Fortune 500), give special consideration to these small business owners.

Wells Fargo, for one, which publicly pledged to lend $3 billion to Asian-American-led businesses by 2012, has four small business programs in place for minorities and women: Wells Fargo Asian American Business Services, Wells Fargo Women's Business Services, Wells Fargo Latino Business Services, and Wells Fargo African-American Business Services.

Like the SBA, the MBDA doesn't offer any direct funding, but has relationships with local lenders through its national network of Minority Business Development Centers, Native-American Business Development Centers, and Business Resource Centers.

While the SBA doesn't offer grants to start or expand small businesses, it does guarantee loans of up to $250,000. Once the small business owner has been approved for an SBA-guaranteed loan, the owner can apply for a loan from any SBA-certified lender. In addition to banks, there are privately owned and managed investment firms - Small Business Investment Companies - that offer venture capital and startup financing. The SBA has information about SBICs and certified banks on its web site.

If you are having trouble getting loans for your business, one place to go for advice is the Small Business Development Centers (SBDCs), recommends Kluger. Associated with the SBA, there are SBDCs located in every state. The MBDA also has local development centers that can help.

Many state and local governments also provide funding, incentives, and other assistance for small businesses, said Kluger. Information is usually available under the "Businesses" heading on the state's website. In Virginia, the Virginia Small Business Financing Authority provides assistance with direct, indirect, and conduit lending.

While not specifically focused on minorities and women, peer-to-peer lending services such as Prosper.com and the new Virgin Money are a potential source of loans, said Kluger. In addition, there various firms and organizations provide micro-loans for small businesses, some of which specialize in loans to women or minorities. One of the largest, Accion USA, has branch offices nationwide and makes loans ranging from $500 to $25,000.

There are also a number of non-profit organizations assisting minority owners, such as the National Minority Business Council's Micro-Loan Fund, the National Minority Supplier Development Council's Business Consortium Fund, and the National Urban League's Urban Entrepreneur Partnership.