Tips on how Asian American and Pacific Islander business owners can gain access to capital

Access to capital continues to be one of the biggest challenges stated by small business owners. That is why it’s important for business owners, particularly those from underrepresented communities, to learn how to proactively prepare for and evaluate funding options.

According to Bank of America’s 2023 Women & Minority Business Owner Spotlight, 78% of AAPI business owners plan to obtain financing for their business in the year ahead. However, many in the AAPI community feel they are lacking the knowledge and connections to obtain the financing they need: 31% say they’ve experienced challenges accessing capital and one-in-five believe they will never have equal access to capital for their business.

Aliyah H. Fan, a vice president and small business banker with Bank of America, is aware of the access to capital challenges AAPI business owners face. She also knows that 45% of AAPI business owners plan to expand their business this year and 26% plan to hire more employees. To that end, Fan is aware of the importance of providing business owners with the guidance and access to resources and solutions needed to prepare for funding.

Having immigrated to the U.S. from China in her youth, Fan taps her ancestry and what she learned growing up in a family that had to stretch every dollar while taking care of an extended family. When working with small business owners, she advises them to embrace the best practices she learned, like saving regularly, that will help them build a strong financial foundation. “When we first came to the U.S., my parents had limited financial resources,” she says. “We know how important it is to be hard working and have self-discipline.” She builds on both her background and professional experience to guide the small business owners she works with on finding the right financial solutions at every stage of their business’s life.

Here is some of the advice she shares with small business owners who are interested in finding capital with which to fund their business’s growth.

Prioritize personal finance

Fan learned the importance of saving from her parents, and she advocates being disciplined about building a nest egg, as well as college and retirement funds.

While this might seem not directly related to your business at first, savings can insulate you from the unexpected, whether at work or at home, she notes. “If we’re able to build a savings plan, it's going to be a lot easier when we need to use the money for an emergency,” says Fan. Adjust your spending and savings plans every month to accurately reflect what is going on in your life, whether you are planning to pay a parent’s medical expenses or are saving for a vacation, she suggests.

Given how important family is in the AAPI community—86% of AAPI business owners say they prioritize work-life balance—Fan advises the small business owners she works with to make sure their family is on board with their savings goals, so, for instance, teens understand why their parents may be prioritizing putting money in their college fund over shopping at the mall. “Saving helps AAPI individuals take care of themselves, their family members and their kids,” Fan says. “They’re also able to take care of their extended family.”

Know your options

The type of financing that best suits your company will depend on how much you need and whether that need is short- or long-term. Creditworthiness — your ability to qualify for financing — will also play a role. If your business is already established, most major banks have many solutions that may be right for you like a term loan. Your business may also qualify for what’s called a 7(a) loan, which is backed by the U.S. Small Business Administration.¹

For newer businesses or undercapitalized ones that have not yet built strong credit, working with a Community Development Financial Institution (CDFI) can be a good way to build up credit. Ultimately, many businesses that start out working with a CDFI transition into a traditional banking relationship.

A small business specialist like Fan can help you compare financing options, evaluate approval odds and find the right fit for your business.

Establish business credit

When you apply for most small business loans, banks look at your personal credit profile, your business’s credit score, and factors such as the assets you can use as collateral for a loan. “Most of our loans require personal guarantees, so your personal credit history and collateral all matter,” says Fan.

Opening a personal credit card and paying it on time can help you build your personal credit score, she says. Opening a business checking account and getting a business credit card, as well, can help you build your business credit, enabling lenders to evaluate your capacity to pay back a loan. “These are all ways to build credit that will prepare you in the future to get access to capital,” says Fan. (Learn more on borrowing to gain access to capital).

Get to know your small business banker

The first step to building a relationship with a lender and learning where to apply for capital is reaching out to your bank. The more you share about your goals for your personal finances and your business, the more your bank can help you. Make an appointment to come into your local financial center so you can build a working relationship. If there isn’t a financial center nearby, schedule a virtual meeting. “Our job is really to educate small business owners,” says Fan. “Bring your banker in early, so we’ll be able to help you access funds.”

If English isn’t your native language and you would feel most comfortable with a bilingual banker, let your bank know. Bank of America’s team reflects the diversity of the communities we serve, and many financial centers have bilingual staff.

Once your banker gets to know your situation, they can advise you on the financing routes available to your business. “We need to know what pain points there are in order to help you find the right solutions,” says Fan. “We see different businesses day-to-day, so we may be able to give you some suggestions.”

Additional resources

You can get informational tools and advice on starting, running or growing your business from your local Small Business Development Center or SCORE. SCORE offers a helpful list of resources for AAPI business owners you may also want to check out. And, if you want to improve your credit score, here is a crash course in credit score basics.

The bottom line

It may feel intimidating to reach out to a banker to look for small business financing. Once you take that first step, you may be surprised to find that many bankers, like Fan, will be members of your own AAPI community and understand your concerns. Ultimately, your banker can be a powerful supporter as you go after your goals, helping you every step of the way.