Female owners of small businesses have a wide variety of choices when it comes to securing small business loans. Though it may sound feministic, it’s true – women are typically perceived as less of a risk because of their general successes in their professional roles.
According to Forbes magazine there are several key traits that every female leader possesses including strength, perseverance, adaptability, and grit. In general, female business owners are more conscientious about their businesses than their male counterparts, and as a result, customers often feel that the business focuses more on them as the customers and less on the business. Women small business owners also tend to their business more carefully, eschewing wasteful business practices that cut into profits, such as extravagant spending. These are just some of the reasons why the opportunities for small business loans for women are so readily available.
In 2019, $26.6 billion was invested in companies with at least one female co-founder. There was just under $6 billion in female-founded only, and $20.9 billion in female/male co-founded companies.
If you’re a woman looking to get funding for your small business, one of the options below should be just what you need.
Business Grants for Women
Grants are often the entrepreneur’s first choice, even more than venture capital. Business grants for women are essentially free financing that does not need to be repaid, the competition for grant financing is very fierce, especially among women entrepreneurs. Grants often have restrictions set out by the grantor which may make accessing them difficult or even impossible for some entrepreneurs. A business grant for women entrepreneurs may have additional requirements or restrictions than other traditional business grants
This type of loan isn’t offered by banks. Friendly loans are financial loans where friends and relatives provide the initial startup capital to help get your business going or to keep your company in business. Having a friendly loan may be interest-free (but not always), which can be a huge advantage. On the flip side, personal loans from friends come with a high degree of emotional risk.
Crowdsourcing is an online method for securing a friendly loan. You invite people connected to your social media to invest in your idea, usually with a tiered reward system based on the amount invested. Instead of paying interest on the amount of the loan, you typically have to give the site hosting the crowdfunding a percentage of campaign the money collected.
Recommended Reading for You:Crowdfunding Your Business – All You Need to Know
Personal Business Loans
Businesses that are just starting out have the hardest time getting small business loans. This is due to simply having nothing to go on. There may not yet be ‘business’ to show the banks operating expenses, profits, or other business costs, so lenders can’t determine how profitable the business might be. The good news is that if you have good credit at the bank, you can apply for a personal loan for business. This type of loan is usually “unsecured loan.” This means that you don’t have to provide any sort of collateral; the loan available and the repayment terms will be based on your credit score or other financial benchmarks. It helps if you have a high credit score, so the bank can see you are a responsible person. The downside is that these types of loans usually have a high interest rate.
Personal business loans aren’t usually big enough to cover large-scale expenses such as commercial rent, vehicles, or salaries. These loans are good for getting specialized start-up equipment such as computers, coffee machines, and other items that have a decent resale value. Negotiate to push off the first payment until you believe your company will start to have enough of a positive cash flow to be able to pay off the loan. Be sure when searching online to look for banks that give personal business loan preference to female business owners – trust me, they’re out there.
Business Credit Cards
If you know that your cash flow is going to be relatively steady, it might be a good idea to apply for a business credit card. Credit cards are another type of unsecured loan, but with responsible money management, you can help your business build good credit. By paying off your credit card bills regularly, you will improve your credit score, which increases your chances for getting business loans. While interest rates for business credit cards can be pretty high, you only have to pay interest if you don’t pay the balance of your card every month.
As an added plus, credit cards come with a wide variety of rewards. Look for a reward that can help your business save money. While travel rewards might be a nice perk, unless you need to travel for business, it won’t help you while you’re starting your business. Look for cash back rewards, if possible, and try to tailor your rewards to fit your specific needs. If you need to travel locally, get a card that gives cash back for gas purchases. If you’re always on your phone, look for a card that gives rewards for phone service.
Working Capital Loans
Once your business gets off the ground, you may find that you need cash for operational expenses. This may be due to seasonal fluctuations or slow accounts receivable. Once you can show the bank your profitability and sustainability, they will consider lending you money for your day-to-day cash needs. These loans may be unsecured, based on your own personal credit score, or they can be secured with some sort of collateral from your business.
Recommended Reading for You:Financing Your Business: What You Need To Know
This type of loan is typically provided when your business can show the potential for future profits but you need a cash infusion now. In a common scenario, a business will get a larger order than usual for its product, but it doesn’t have the cash on hand to buy the raw materials in order to produce it. A bank will provide a bridge loan so that the business can buy the raw materials while still providing payroll to its employees. Once the sale is complete, the business can repay the loan and interest without having to disrupt its normal business operations. Another scenario could be when a bridge loan is useful to pay down an older loan with a higher interest rate.
There are many lenders who have experience working with women-owned business, and who are happy to provide specialized service to women, offering incentives, better interest rates, and other benefits. In addition to searching online, it would be a good idea to talk to other female entrepreneurs in your area to ask about resources, associations for women-owned businesses, and about their experiences with banks and other lending institutions that are friendly.
A good rule to remember is that any lending institution wants to make money from giving you a loan. That means you can shop around both locally and on the internet for the loans that suit your needs at an interest rate your business can afford to pay. No one will care as much about your business as you do. Don’t rush to sign the first loan you’re offered. Build a spreadsheet, do your research. Take your time to find the right loan, and remember, you’re not doing them a favor by borrowing money, you’re doing business.
Recommended Lenders for Small Business Loans for Women Business Owners
Kabbage is a reliable online lending platform that prides itself on giving financial assistance for women-owned businesses. With Kabbage, women can apply online or through their mobile app by connecting information generated through accounting data, online sales, shipping and dozens of other sources. Kabbage provide an automated decision right away and give qualified small businesses women owners access to fast cash
Small business funding options that fit your business. Qualify in 10 minutes for up to $250,000 line of credit
Women business owners have a variety of financing options with BlueVine. Alternative lender Bluevine makes it convenient for women business owners who don’t have time to go to the bank to get a loan online. Bluevine’s business loans may be right for your business if you need cash fast. Funding times for BlueVine’s loans range from 12 to 24 hours.
$5,000 - $5M fast funding for your business. Apply online and get approved in as fast as 20 minutes
Ondeck is one of the few lending platforms that offer loans for women business owners. If you’ve been in business for at least a year, have annual revenues of at least $100,000, and have a healthy business, a small business loan or line of credit from OnDeck could be a good fit for your situation.
A+ rating with BBB, 9.8/10 customer ratings at TrustPilot. Relaxed eligibility requirements and transparent Information for fast financing solutions
Loanbuilder provides access to a business loan of up to $500,000 and female business owners can get a small business loan approved within minutes. Loanbuilder allows you to choose the loan amount and repayment term, with your choice the determinant for the interest rate. Fees on Loanbuilder are fixed, so there’s no fear of interest accumulating over time.
LoanBuilder Loan offers one type of funding and that is a short-term loan with amounts that range from $5,000 to $500,000