Small BusinessOperationsFunding

Small business loan resources for women

Women-owned businesses are a vital part of the economy, with enterprises owned by women employing more than 10.1 million workers and contributing about $1.8 trillion to the economy.1 It’s, therefore, important for women entrepreneurs to be aware of the different ways to source funding.

With small business loans, women entrepreneurs can tap into the capital they need to:

  • Launch their startup
  • Develop new product lines
  • Open a new location or renovate an existing one
  • Buy essential business equipment or inventory
  • Hire and train new staff
  • Level up their advertising and marketing strategies
  • Cover payroll, insurance premiums, and other day-to-day expenses

When it comes to small business financing, there are a variety of loan types to choose from. Here's what entrepreneurs need to know about funding, plus tips for getting approved for a business loan.

Types of small business loans for women

One thing to remember is that not all loan types or lenders are right for all types of businesses. Some may focus only on certain types of operations, startups, or established businesses. That said, here are the most common small business loan types for female entrepreneurs:

  • Small Business Administration loans and programs: The SBA partners with lenders to guarantee loans for small businesses, including women-owned businesses. The SBA also operates an Office of Women's Business Ownership, which has local offices that can help with grants and loans. SBA-guaranteed business loan options include the 7(a) loan program, which offers small businesses up to $5 million in funding, and a microloan program that offers up to $50,000 in loan funding to small businesses seeking capital to get started or expand.
  • Other bank business loans: Traditional banks offer their own small business loans outside the SBA. While these loans can come with lower costs compared to other options, they often have the highest eligibility requirements, which tends to make them available primarily for established businesses.
  • Other microloan options: In addition to SBA microloans, private organizations, alternative lenders, smaller state banks, and credit unions offer microloans for women-owned businesses. Microloans tend to offer more leniency with a required credit score because they're willing to consider alternative forms of collateral. This makes them an ideal option when searching for business loans with a lower credit score. That said, microloans also typically come with higher interest rates. You can find a microlender in your area using the Opportunity Finance Network Community Financial Development Institution (CDFI) locator.
  • Asset-based financing: These types of loans let a business take out financing using collateral like their accounts receivable, machinery and equipment, inventory, and real estate. Some loans can be secured with one asset, while others allow several different asset types to be combined.
  • Online small business lenders: These lenders typically offer the same borrowing options as traditional banks, along with asset-based financing. In addition to offering a variety of loan types and terms, these online lenders often offer fast access to business loans, with some providing loan funding in as little as 24-48 hours of approval.
  • Merchant cash advances: These types of loans allow business owners to receive a lump sum cash infusion in exchange for payments based on a portion of future sales. These types of loans can make sense for a business that doesn't have the credit history to apply for a traditional loan but has the sales receipts available to prove a history of cash flow.
  • Small business loans for bad credit: Some online lenders specialize in working with businesses with poor credit, especially if they can prove that they have strong finances. Women entrepreneurs can work with online lenders like Fundbox or their local community financial development institution to access specific funding targeted toward businesses that lack access to traditional forms of financing.

Tips for comparing business loans for women

What does it take for women business owners to improve their chances of qualifying for a small business loan? Knowing what lenders are looking for is a good start. Details that can influence business loan decisions include:

  • Personal and business credit scores
  • Length of time in business
  • Annual revenues
  • Financial statements
  • Cash assets and collateral
  • Business debts
  • Business and personal tax returns
  • Capital needs
  • Business plans

Take time to review your financials, check your credit scores, and get your paperwork organized. Most lenders will want to review this information, so having your documents prepared in advance can help save time during the loan application process. The more you understand what lenders expect from borrowers, the easier it becomes to find a financing option that's tailored to your situation.

Weigh your loan options carefully

When comparing business lenders, a few notes to pay attention to include:

  • Minimum and maximum loan amounts offered
  • Loan repayment terms
  • APR range and whether the lender charges a fixed or variable rate
  • Additional fees such as late payment fees, prepayment penalties, and other common loan costs
  • Minimum qualification requirements for credit score, revenues, and time in business
  • Loan fees, including origination fees or prepayment penalties
  • Approval and funding speed
  • The lender's customer support options
  • Repayment terms and the flexibility to pay monthly, weekly, or daily
  • Whether funds are accessed as a lump-sum payment or as a small business line of credit

Use a loan estimator to compare loan terms before you apply for financing. This allows you to understand the full benefit and cost you'll get from the loan before you take on a significant financial obligation.

Before you commit to a decision, you may want to seek out the advice of a lending expert to see if they can recommend financing options that work for your business.

Also, find out which loans require collateral and/or a personal guarantee. A guarantee means you're personally committing to repaying the loan, even if it's in your business's name. Signing a personal guarantee could help your loan application, but remember that doing so can put your personal assets on the line if you default on the loan.

Is a business loan right for you?

Measuring the return on investment can help you decide if getting a business loan is the right move. For example, borrowing $100,000 to develop a new product could yield a stellar ROI if that product increases your revenue by 25% annually. But borrowing money to buy equipment may not be worth it if you’ll have to replace or upgrade it before the loan is repaid.

Also, take a good look at your budget to make sure you can handle loan repayments without it being a burden on your cash flow. The goal is to get ahead with a loan, not fall behind.

Finally, consider whether something other than a loan makes sense for funding your business. For example, consider:

Each alternative has its pros and cons. Asking your friends and family for money means you may not pay interest on what you borrow, but you may risk souring the relationship if you don't pay them back. And with venture capital funding or angel investing, you're typically giving up an ownership share in your business in exchange for funding.

More resources to explore

If you're interested in learning more about some of these options, the National Women's Business Council offers resources on financing for women business owners. Additionally, the Association of Women's Business Centers provides access to a national network of women's business centers, many of which lend to women-owned small businesses.

One of the great parts about small business loans for women is you don't have to adhere to a one-size-fits-all mold. You can pick and choose what works best for your business. And if it's a loan — either from the SBA, an online lender, a microlender, a traditional lender at a bank, or another resource — doing your homework beforehand means you can approach borrowing and funding with confidence.

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