Business Loans for Women
More women than ever before are deciding to start their own businesses. The number of businesses owned by women in the United States has increased by 68% since 2007, bringing the total number of woman-owned businesses up to over 10 million. Businesses owned by minority women are growing at a particularly remarkable rate, rising 265% since 1997.
Businesses owned by women are responsible for employing millions of people across the country and generate over a trillion dollars of revenue every year. But despite the growing number of women-owned businesses, women are still facing many obstacles when it comes to accessing capital. Female-owned businesses make up more than one-third of the nation’s SMBs, but receive only about 4% of all business loans.
It’s estimated that female business owners are 15%-20% less likely to be approved for a business loan, and women who are looking for money to start a new business receive about 80% less capital than men do. To make it possible for women to keep their businesses growing without fair access to traditional debt financing, there has been a rise of several different business loans for women.
Types of Business Loans for Women
If you are a small business owner, you may be able to qualify for an SBA loan, regardless of your gender. Although the SBA doesn’t have any programs to help guarantee business loans solely for women, their programs often improve the odds of a woman being approved for a loan. According to the SBA, SBA loans are three to five times more likely to go to women than business loans not backed by the SBA.
Remarkably, businesses who only need a fairly small amount of money often have a hard time getting approved for a traditional business loan because they aren’t looking for enough money for the lender to see the deal as being profitable for them. But since businesses often only need small amounts of money, many institutions and organizations have started offering microloans to help fill the gap. Many organizations that offer microloans have programs geared toward female entrepreneurs. Unlike many other types of business loans, microloans can often be used for funding startups.
The SBA also has a microloan program that is also very accessible to women, with some of their approved intermediaries being organizations that are aimed at helping women business owners. During the 2011 fiscal year, 54% of all microloans made through the SBA’s program went to businesses that were either fully or mostly owned by women.
Traditional business loans from banks aren’t the only way for businesses to get the money they need. Many other lenders offer different types of loans that don’t involve the extensive paperwork, long approval times, and strict requirements that come along with traditional loans. Alternative lenders use their own credit models and KPI’s to determine a business’s health to provide financing options that don’t discriminate. Merchant cash advances and invoice financing are two popular types of alternative loans that make it possible for businesses get the help they need, even when banks say no. These types of loans are generally given in smaller amounts and are best for handling short-term working capital needs, but they also offer loan products for growth initiatives.
One way to raise money for a business without going through a bank is by seeking equity financing. Rather than taking out a loan and taking on debt to help their businesses get started, many business owners choose to find people to invest in their company. Women investors are very often more inclined to get involved with a business that is run by another woman. If the investor has experience working in your industry, their experience and advice could be extremely valuable to have on your side.
Grants For Female-Owned Businesses
Grants are highly sought after by many business owners since they are a way to get money without having to pay anything back. The reality is that grants can be hard to find, are very competitive, have very strict requirements, and applicants may be required to match funds for the grant. First of all, be aware that the federal government does not give away money to start a new commercial business or expand an existing one, but they do offer grants for nonprofit or non-commercial organizations. However, they do give funds to state and local governments, which may potentially use that money for grants to help small business owners. Some private organizations also offer business grants specifically for women.
Applying for Business Loans for Women
The process of applying for a loan will vary depending on which type of loan you’re interested in. Alternative lending can be fast and easy to apply for while an SBA loan or a grant can be very time-consuming. At a minimum, you will probably be expected to supply the following things regardless of which type of loan you’re considering:
- Past bank statements and business tax returns
- A copy of your business license/certification
- Your resume and resumes for any partners/essential employees
- A copy of your driver’s license/other official government-issued identification
- P&L statements