Approximately 1.1 million women own businesses, or 19.9% of them, according to Census data. And as the influence of women entrepreneurs is growing, raising capital can still be tough. Just 25% of women entrepreneurs need financing, compared with 34% of men, according to the WBENC reports. Women are more prefer to finance businesses with credit cards, while men are more prefer to use equity investors.
Types of Small Business Loans for Women
Women business owners needed to be concentrated in service industries with lower sales, which own younger businesses and work fewer than 20 hours per week, according to the Small Business Administration (SBA) reports. These factors can make it hard for women to avail business loans, there are various options.
SBA loans:
The SBA assured business loans given by partner banks. The person can receive an amount and repay it in regular monthly installments. If the person defaults, the SBA assured it will pay back 75% to 85% of the loan. SBA loan interest rates and terms can be compared to those of non-guaranteed loans.
Bank loans:
Banks and credit unions provide both long-term and short-term business loans. The person will need a certain amount of revenue, years in business, or collateral to verify. Many banks also need financial statements and projections, tax returns, a business plan, and other documentation when a person wants to apply for a loan.
Online business loans:
This loan can be compared with traditional banks in online mode only, lenders need to have less stringent criteria for borrowers and can usually approve and issue loans within days or hours instead of the weeks or months like traditional loans may require. However, online-only lenders can charge higher interest rates and fees. BlueVine, Funding Circle, Lendio, and OnDeck are some of the known online small business lenders.
Personal loans:
Personal loans from banks or online lenders may be used for any purpose, it includes your business. As the loan is based on a person’s creditworthiness, repaying it won’t build business credit as a business loan would. Some of the Online personal loan lenders are Avant, LendingPoint, and Upstart.
Peer-to-peer loans:
Peer-to-peer lending websites match borrowers with individual or institutional investors who provide personal or small business loans. A person needs to prove their creditworthiness to avail loan. Prosper and Peerform are the two most known peer-to-peer sites.
Equipment loans:
Just as auto loans, equipment loans use the equipment itself as collateral. A person can avail them from equipment financing companies, equipment manufacturers, and resellers.
Accounts receivable financing:
With this option which is also called factoring, the person will sell their outstanding invoices to a factor, who pays you a percentage of the amount due. The factor is then collected on the invoice; if they succeed, the person receives the rest of the money minus a factoring fee.
Microloans:
Microlenders include nonprofit, community and government organizations offering small loans is to underserved business owners.
Business lines of credit:
Such as credit card, a business line of credit allows people to draw as much money as they need, up to their credit limit. The person can repay only what they borrow as they pay the money back, it becomes available to borrow again.
What Defines a Woman-Owned Business?
The SBA doesn’t provide women-specific business loans, but to encourage the women business owners, the federal government focuses to award at least 5% of all federal contracting dollars to women-owned small businesses each year.
Women-owned small businesses (WOSBs) must:
- Qualify as a small business based on SBA size standards.
- Be at least 51% owned and controlled by women.
- Must be managed day-to-day by women.
Disadvantaged women-owned small businesses (EDWOSBs) must:
Meet all the requirements of a WOSB
Be owned and controlled by one or more women, each with:
- net worth under $750,000.
- $350,000 or less in gross income averaged in the past 3 years.
- $6 million or less in personal assets.
Getting certified from WOSB or EDWOSB can provide new opportunities. Persin can get certified at beta.certify.sba.gov or with a verified third-party certifier.
Some Ways Women Can Get Money to Start a Business
There are some other ways to get a loan to start a business.
Grants or awards:
Grants and awards for business owners of every kind, including the Visa She’s Next Black Women-Owned Business Grant Program, Women’s-Net grants, and the Cartier Women’s Initiative. GrantsforWomen.org contains all types of grants for women; Grants.gov is a database of federal grants.
Family and friends:
If the person has family and friends who can be ready to invest in your business or lend you money, this can be a great option. Make sure to maintain the relationship professionally and document.
Angel investors:
These are individuals who are ready to invest in small businesses, either individually or as part of angel groups. Most angels have business experience and can provide advice along with financing.
Crowdfunding:
Various websites such as WeFunder, FundRazr, and IndieGoGo allow business owners to “crowdfund” individuals to finance their businesses. The person will need an exciting product, marketing skill, and perseverance to accomplish your crowdfunding goal.
The Bottom Line on Business Loans for Women
It can be of any type of financing person seeking, there must be plenty of resources to help. Avail information about business loans for women from state and local economic development agencies, Small Business Administration district office, SCORE chapter, Women’s Business Center, or Small Business Development Center.
Availing the small business loan may require solid business and personal credit. Recheck your business credit report, personal credit report, and personal credit score before filling out loan applications. You can begin to build business credit by getting a federal Employer Identification Number (EIN), forming a corporation or LLC, and opening bank accounts under your business’s name.
Repaying a business loan on time can help build your business credit score, which helps to make it easier to get financing in the future.
