These days, gender equality in the workplace remains a key issue, and while debates rage on about diversity and the wage gap, the number of women-owned businesses appears to be steadily on the rise. According to a report commissioned last year by American Express, women own roughly 11.6 million U.S.-based businesses, amounting to nearly 9 million employees and more than $1.7 trillion in revenue. No doubt many of these are small businesses looking to establish a greater foothold in their respective markets, and the availability of small business loans for women is accordingly becoming a hot topic.
Introduction to Business Financing for Women
As a woman entrepreneur, accessing business financing can be a crucial step in growing and scaling your business. However, women-owned businesses often face unique challenges when it comes to securing funding. According to the National Women’s Business Council, women-owned businesses are less likely to receive venture capital funding and are more likely to rely on personal savings to finance their businesses. Fortunately, there are a variety of business financing options available to women entrepreneurs, including small business administration (SBA) loans, online lenders, and credit unions. In this section, we will explore the different types of business financing options available to women entrepreneurs and provide tips on how to access them.
Small Business Loans for Women We Recommend
Traditionally, small businesses tend to rely on lenders to kick off their launches or take their objectives to the next level. However, women-owned small businesses face greater difficulty securing funds from various business lenders, making it challenging to compete with their larger, more recognizable counterparts.
To achieve the equal standing that women deserve in the modern professional landscape, it’s essential that small business loans for women become more readily accessible. If you’re looking to acquire a loan for your small business, here are four of the best options we recommend you consider.
1. Personal Loans
Although conventional wisdom might dictate that entrepreneurs should opt out of infusing their business ventures with personal funds, acquiring a personal loan to get your small business off the ground doesn’t have to be a terrifying prospect. After all, you might have a hard time leveraging your new (and perhaps not yet profitable) business for a large enough loan. If you already have good credit and a sound financial history, a personal loan is probably the smoothest option for funding your small business.
Offering a personal guarantee can improve the terms of a personal loan, such as interest rates and borrowing terms.
Even so, proceed with caution before you agree to any loan, especially a personal one. Sure, personal loans offer a quick influx of cash for your business, but the interest rate is typically much higher.
Conversely, the borrowable amount for such loans runs on the low side, meaning that a personal loan will likely only provide a limited impact on your business performance. In addition, these loans are often expected to be repaid in a shorter amount of time. So explore all your options before you decide that a personal loan is right for you. That being said, as far as accessibility for new businesses, you probably find won’t find a better choice.
2. Microloans
If all you need is a quick financial booster shot to get your small business up and running, you might want to look into the possibility of a microloan. This type of loan caters specifically to new businesses and involves a smaller amount of money (hence the name). In recent years, a wide range of lenders have begun to offer microloans.
The assistance they provide is sufficient to make sizable a difference in a new venture, but it’s not so large that it poses a treacherous financial risk to the lender. Most of the time, microloans are well under $50,000; think inventory, equipment and other capital rather than real estate or more costly purchases. For the woman whose business requires minimal capital, a microloan might be just the right option. This type of small business loan could be used in tandem with other financing.
For example, a microloan would be perfect for existing businesses in need of an upgrade, or a more established business that’s only a small loan away from reaching its funding goals. Another point to keep in mind: Microloans are usually granted at an average of 10 percent interest rates. That figure may or may not be suitable for small businesses, considering the alternatives that can exist — so consider your options first.
3. Small Business Administration (SBA) Loans
Speaking of low-interest loan options, those given by the Small Business Administration (SBA) certainly fit the bill. However, SBA loans are most appropriate for small businesses with a lower credit risk, not startups. Part of why SBA loans can be a great option for women-owned small businesses is because the organization itself boasts a policy intent on offering capital to companies just like yours. Through the SBA, your business can receive government funding up to $5 million at interest rates as low as 6 percent.
If you need to make a quick investment in your business (especially one too large to be covered by a microloan), an SBA loan is among the fastest lending options on the market. Moreover, the long-term repayment periods and low interest rate mean you’ll get maximum impact for the funds you borrow and have a suitable amount of time to recoup your investment without fear of penalty. While SBA loans aren’t as ideal a choice for businesses with no real history, the fact that they require little to no collateral makes them an attractive choice for a variety of small businesses.
4. Online Lenders
In this technology-driven age, is it any real surprise that the internet brings its own unique solution to small business loans? Online lenders have increasingly become an essential element for today’s small business owners. Traditional banks might be routinely accused of balking at small business loans, especially those fronted by female entrepreneurs. But online lenders — along with riskier prospects like crowdfunding — offer a welcome alternative.
In fact, some of them are committed specifically to extending small business loans to women. In addition to the rising number of online lenders, these companies also commonly make the application process as easy as possible for women business owners, removing the guesswork and minimizing the steep rejection rate they’d face at traditional banks.
Imagine securing up to $500,000 for your small business through alternative means, such as a merchant cash advance. This arrangement would provide you with a lump sum of funds that you then pay back gradually through a percentage of your sales. The bottom line is that you have way more funding options for your business than you probably realize. As always, do your research into the terms of online lenders, and compare against competitors to ensure you’re getting the best deal.
How to Get a Business Loan
Getting a business loan can be a daunting task, especially for women entrepreneurs who may face additional barriers to accessing credit. However, with the right preparation and knowledge, it is possible to secure a business loan that meets your needs. Here are some steps to follow when applying for a business loan:
Check your business credit score: Your business credit score plays a significant role in determining your eligibility for a business loan. Make sure to check your credit score and work on improving it if necessary.
Determine how much you need: Calculate how much money you need to borrow and create a plan for how you will use the funds.
Research lenders: Research different lenders and compare their rates, terms, and requirements. Consider working with online lenders, credit unions, or the Small Business Administration (SBA).
Gather required documents: Make sure to gather all required documents, including financial statements, tax returns, and identification documents.
Apply and review: Apply for the loan and review the terms and conditions carefully before signing.
Business Loans for Women with Bad Credit
Having bad credit can make it more challenging to secure a business loan, but it is not impossible. There are several options available to women entrepreneurs with bad credit, including:
Online lenders: Online lenders often have more lenient credit requirements and may offer more flexible terms.
Alternative lenders: Alternative lenders, such as those that offer invoice financing or merchant cash advances, may not require a good credit score.
Credit unions: Credit unions are member-owned and may offer more favorable terms to women entrepreneurs with bad credit.
SBA loans: The SBA offers several loan programs that may be more accessible to women entrepreneurs with bad credit, including the SBA Microloan program.
Business credit cards: Business credit cards can provide access to credit, but be aware that interest rates may be higher.
It is essential to note that having bad credit may result in higher interest rates or less favorable terms. However, with the right lender and a solid business plan, it is possible to secure a business loan that meets your needs.
Time to Rise Up
While women-owned small businesses unfortunately face more than their fair share of challenges, the tides are finally starting to shift in their favor. With so many females stepping into leadership roles in the professional world, the number of small business loans for women is certain to rise, and the ease with which aspiring entrepreneurs can achieve their dreams is expected to follow suit.
In the meantime, women-owned businesses should explore the full range of funding possibilities at their disposal. Often, venturing outside of traditional banking will yield the best results — especially for small business owners — and can maximize your ability to live up to your mission statement. Don’t allow seemingly insurmountable obstacles to stand between your business and success. Simply identify the resources available to you, and you’ll be that much closer to your desired outcome. Are you on the hunt for extra capital for your small business? Let us know in the comments.
