You're a business owner. You've poured your heart and soul into your venture, and now you're ready to take it to the next level. Financing options are available that were specifically designed for women-owned businesses. Let’s explore loan types, eligibility requirements, and the application process for female entrepreneurs.
Understanding the Landscape for Women-Owned Businesses
There are 13 million women-owned businesses in the U.S., which create $1.8 trillion in revenues. These companies employ 10 million people, which is more than the population of New York City.
Even so, in 2023, only 21% of approved SBA loans went to women-owned businesses.
Why are women having trouble finding funding?
Statistically, women are more likely to have lower credit scores than men, which can prevent them from qualifying for some small business loans. And even in this day and age, women are still often not taken as seriously as men in the world of business.
So while female entrepreneurs want to be on equal footing with men, when it comes to finding financing options, women may need to work a little harder to get similar results.
Types of Small Business Loans for Women
Here are some of the financing options available to female entrepreneurs.
Small Business Administration (SBA) Loans
These loans are backed by the government, which means they’re less risky to approved SBA lenders. SBA loans tend to come with low interest rates and long repayment periods, though they may be best for businesses that have been in operation for at least two years.
The SBA also offers the Women-Owned Small Businesses (WOSB) Federal Contract program. While this isn’t funding, it may help women who seek federal contracts to qualify for more opportunities.
Bank Loans
Banks and credit unions offer business loans and lines of credit. A line of credit, rather than providing a lump sum of money all at once, approves a borrower for a certain limit. She can take money out against that limit when she likes. Similar to a credit card, as she pays down the balance, the available credit grows.
Online Loans
There are also online lenders who offer business loans for women. Online lenders save on the cost of maintaining a physical branch network, and they often pass those savings along to their customers in the form of lower interest rates and fees.
Other Options for Financing
In addition to the options above, here are some alternatives to business loans for women.
Peer-to-Peer Lending
P2P platforms allow individuals to loan money to one another, without involving a bank. In exchange for the loan, the lender will receive interest.
Crowdfunding
Some small businesses have had success with crowdfunding, which allows a company or project to receive donations or investments from anyone who’s interested. Some platforms require the business to provide tokens of appreciation to donors, such as early access to the product or a t-shirt.
Grants
While they’re not business loans for women, small business grants can provide capital to women-owned businesses. Unlike with loans, the funds don't have to be repaid. Look for grants that specifically cater to women-owned businesses.
Advantages of Small Business Loans for Women
Small business financing provides access to capital for business growth and expansion. If you’ve dreamed of opening a second location, for example, but don’t have the capital to do so on your own, a business loan or line of credit can make that dream a reality.
Small Business Resources for Women
If you’re not sure where to begin in applying for financing, start with these resources. They can help you create a business plan, find and apply for financing, and provide opportunities for networking and mentorship.
- SCORE
- Women’s Business Centers
- International Association of Women (IAW)
- The Women’s Venture Fund
- Ladies Who Launch
- Women’s Business Enterprise National Council (WBENC)
- National Association of Women Business Owners
Eligibility Requirements for Small Business Loans for Women
If you plan to apply for business loans for women, first check with a few lenders for their requirements. You’ll want to make sure your business is eligible before you go through the application process because applying can temporarily ding your credit score.
Some loans, like SBA loans, may require your business to be in operation for a minimum period of time (two years). Others may have a minimum credit score requirement (and not all list that number on their website).
Some lenders will allow you to apply based on your business’s credit profile. But if your business doesn’t have a history of using credit, there may not be enough data for the lender to make a decision. In that case, they’ll look at the owner’s personal credit history and scores.
Some loans require collateral to secure the loan, so consider what assets you have available to borrow against.
Application Process for Small Business Loans
The application process for business loans for women may vary slightly from one lender to another. Expect to follow these general steps.
Step 1: Gather Documents
Required documents may include:
- Business plan
- Financial statements
- Tax returns
- Bank statements
- Profit and loss statement
- Photo ID
Step 2: Decide on an Amount
How much do you want to borrow? How will you use the funds? Depending on what type of loan it is, the lender may want to see your business plan, complete with a budget for how you’ll use and repay the loan.
Step 3: Apply
The logistics of this step will depend on the type of loan you’re applying for. An online loan from a private lender may take minutes to complete, while an SBA loan may require more effort. If the underwriter requires additional documents, you’ll be contacted. Answer promptly, to keep your application moving forward.
Step 4: Wait for Approval
It’s possible to get a decision within minutes when you apply for a loan online. SBA loans tend to take longer. Once your application is approved, you could get the funds in anywhere from one day to a few weeks.
Tips for Applying for Business Loans for Women
The more prepared you are when you apply, the better your chances of getting approved for a business loan. Know your business and personal credit scores. Also, use bookkeeping software and have a good handle on your business finances so you’re ready to answer any questions a lender has. Try to ask all of your questions before you begin the application process. Don’t be afraid to ask a loan officer to walk you through the process. If you research multiple lenders, that means that after you choose a loan, you’ll need to politely end the process with the lenders you didn’t choose.
With access to capital, you can grow your business, hire more employees, invest in marketing, or conduct research and development to expand your product line. Whatever you use the funds for, make sure it’s designed to help your business expand and grow more profitable.
