Small Business Loans for Women
- September 10, 2018
- Posted by: Jeff Gitlen
- Category: Small Business Loans
Women entrepreneurs own more than 11.6 million firms in the United States, generating $1.7 trillion in sales as of 2017 according to an American Express commissioned report on the state of women-owned businesses. Better yet, these businesses have seen an average of 103 percent in growth since 1997.
Unfortunately, a report covered by CNBC, shows that women business owners are getting nearly 50 percent less in funding than male business owners despite the improvements shown in the American Express report.
Finding funding for a business is vital in sustaining growth. While there aren't any business loans solely offered to women, there are some great small business loan opportunities worth considering. You can also review some additional financing opportunities below.
- Small Business Loans for Women
- Business Lines of Credit
- Invoice Factoring
- Grants for Women
- Investment Funds Specifically for Women
How Small Business Financing for Women Works
When it comes to business financing, there are several options. You can choose from traditional term loans or lines of credit from big banks, online lenders, and credit unions, as well as other types of financing like crowd-funding and invoice factoring.
When choosing an option, consider what you’ll need to qualify for each type of funding, how much you can borrow, and the differences between these forms of financing.
How to Qualify
The first thing that you need to know about business financing is how to qualify for it. It’s a little different than the process you would go through to qualify for a loan for yourself.
How Credit Score Factors In
When your company is just starting out, you’ll likely have to personally co-sign any loans that you take out for your business. In that case, the bank will look at your personal credit score and your income to determine how much you’re able to borrow and the interest rate they’ll charge you.
As your business grows and you establish a business credit score, you might be able to borrow more with better rates. If your business credit score is high enough and you have a steady stream of income, you likely won’t have to personally co-sign.
Best Small Business Loans for Women
Since the decision about whether or not to lend to a borrower is about credit, income, and company revenue, in theory it shouldn’t matter if you’re a man or a woman. But it doesn't necessarily work out that way in practice.
In fact, women often find it more difficult to find funding and are less likely to seek out small business loans because they don’t think they’ll get them, according to a survey by Pepperdine University's Graziadio School of Business and Management and Dun & Bradstreet Corp.
As discussed earlier, there are no women specific small business loans available. However, there are plenty of business loan opportunities for women entrepreneurs from banks, credit unions, and online lenders.
Here are four online lenders that offer business loans for women:
The U.S. Small Business Administration (SBA) offers a wide variety of loans for women-owned small businesses. The SBA does not directly lend to small business owners, but reduces the risk to all for easier access to capital.
Unlike some online loans, SBA loans offer competitive terms, counseling and education, as well as unique benefits. You can expect to receive anywhere between $500 to $5.5 million. These loans can be used for most business purposes, but be sure to check with the specific lender you work with.
The SBA provides a Lender Match tool that helps you find a lender that best fits your needs. The process works like this:
- Describe what you need
- Receive an email within 2 days of lenders who are interested
- Talk to these lenders to compare your options
- Apply for a loan
Additional Financing Options for Women-Owned Businesses
Business Lines of Credit
A business line of credit is kind of like a credit card, in that you can take money out of it and then pay it back and borrow against it again. It’s particularly useful if you don’t need to borrow a chunk of money all at once or if you have long-term cash flow issues for which you often need an injection of funds.
Because you only use what you need at any particular time, you won’t pay interest on money that you’re not using. While similar to a credit card, the interest rates on lines of credit tend to be much lower. Your monthly payments are also likely to be more affordable since you have more flexibility in how you repay them.
The interest rates on lines of credit are more likely to be variable. That could mean that your rates could go up.
A business line of credit is a good thing to have in place in case you have a financial emergency or if you need to deal with cash flow issues.
Do you wish your customers would pay you more quickly because you need the money now? Invoice factoring gives you an advance on the money that is owed to you.
You can often get money very quickly, and it’s easy to qualify for even if you have bad credit.
They often charge you 3 percent to 5 percent for borrowing money for 30 to 60 days, which ends up being a very high APR. Depending on your circumstances, it might be cheaper to use a credit card or a line of credit since the interest charge would be lower.
Invoice factoring could be a good idea if you desperately need money and all your other sources of credit are maxed out. But it can be a costly way to borrow money.
Grants for Women
Who doesn’t love free money? Here are some small business grants that you should check out.
Eileen Fisher Women-Owned Business Grant Program
Eileen Fisher doesn’t just design clothing for women – she supports other female entrepreneurs. She funds small businesses that are 51% owned by women. She focuses on companies that are socially conscious, are innovative, and are focused on finding sustainable solutions. The grants start at $10,000 and you have to be in operation for at least three years and have revenue under $1 million.
InnovateHer is a program that is sponsored by the Small Business Administration. It provides grants in an annual competition that searches for products or services that will help the lives of women and families. Entrants are selected based on their potential to commercialize their product or service, the impact the product will have on women and families, and whether it fills a need in the marketplace. They provide $40,000 to the first-place winner, $20,000 to the second-place winner, and $10,000 to the third-place winner.
Launched in 1998 by WomensNet.net, the Amber Grant was created in honor of a woman who wasn’t able to fulfill her entrepreneurial goals before she tragically died. The organization gives out $1,000 per month to a female entrepreneur. That qualifies the entrepreneurs for the $10,000 Amber Grant at the end of the year.
FedEx Small Business Grant
While this grant isn’t just for women entrepreneurs, it’s still one to keep in mind when you’re looking for funding. FedEx offers grants for $25,000 to help you build and grow your business. They provide up to 10 grants a year and require that you make a video in order to enter.
Zions Bank Smart Women Grants
Zions Bank provides a $3,000 grant to a woman in business. It aims to support women whose businesses promote empowerment or serves the low-income populations of Utah and Idaho.
Investment Funds Specifically for Women
Sometimes you just need that angel investor to believe in your business or an accelerator that will help your company go from zero to 60. Here are some places to get the help you need.
If you’re looking for an angel investment firm that focuses on women, consider Golden Seeds, one of the largest and most active early-stage investment firms for women. They focus on B2B and B2C firms in tech, health care, consumer products, and service industries. They look for companies that have a scalable business model and at least one woman in the C-suite.
This early-state angel investment fund focuses on companies in underserved markets. Belle Capital requires that you have at least one female founder in order to qualify and/or that you’re willing to recruit top female talent to your C-suite. They fund digital, mobile, internet, life sciences, medical devices, health IT, CleanTech, and other sectors.
Female Founders Fund
As an early-stage investment fund, Female Founders Fund aims to help companies founded by women. The companies must be based on innovative solutions that will better serve customers. The organization focuses on technology that connects buyers and sellers, e-commerce, web-enabled services, and disruptive communities.
Women's Venture Capital Fund II
The Women’s VC Fund II looks to help boost women in business, making investments in early-stage, revenue-generating companies that have the potential for significant growth. It requires that companies are inclusive of women. It focuses on funding companies based on the West Coast that are working on enterprise SaaS, educational technology, and consumer internet solutions.
Women's Startup Lab
If you’re looking for an accelerator to help you succeed, the Women’s Startup Lab can connect you to a group of mentors who are looking to help female-led businesses. The lab boasts a stellar track record with 90 alumnae and $50 million raised for their companies. In return for their assistance, they ask for 3 percent in equity to pay it forward.