Although women-led businesses make up a substantial percentage of America’s businesses community, women are still finding it harder to get small business loans than men. According to the Small Business Association (SBA), the amount of startup capital is directly related to a small business’ ability to succeed.
There are many loans available for women business owners as well as several alternatives to traditional loans from a big bank. The National Women’s Business Council (NWBC) have released a document that serves as a guide for women who are looking for capital to grow their business and there are also many other sources to consider.
There are several organizations that administer grants for women business owners. They are mostly tied to specific circumstances and often include some sort of counsel, training or mentorship. These grants come from nonprofit organizations and are earmarked for women who are disadvantaged or in minority groups. The competition is fierce and it is wise not to underestimate the importance of the proposal itself. To increase your chances, hire a professional grant writer.
Angel, seed and venture capital investors
There are many organizations which provide loans specifically to women in business. These investment groups are made up of high net worth individuals who invest in startups in exchange for equity shares in the business. These groups want to have an impact on the companies and entrepreneurs they select as well as a substantial return on their investment. This means that these groups are providing capital to women whilst seeking to add value to their businesses. For the most part, these investors are looking for women involved in the tech industry where there is potential for major profits.
Traditional business Loans
Some banks have created programs for women seeking small business funding. Business loans from big banks and traditional lenders can be hard to obtain and can negatively affect your credit score. Banks usually require a strong personal and/or business credit score, a personal guarantee, collateral and a healthy cash flow. The application process is not for the feint-hearted, it takes serious effort and time. The whole process takes from one to three months. It is important to have an existing good standing with the bank or a relationship with the loan officer which can also be a helpful long term resource.
Small Business Association loans
The SBA is an umbrella for the Office of Women’s Business Ownership (OWBO). OWBO has developed loan criteria specifically for women. These loans are associated with similar rules that apply to traditional loans and grants. Women are eligible for the standard SBA loans such as the 7(a) Basic Loan, Certified Development Company Loan, Microloan and Export Working Capital Loan.
If your credit history is challenged, there are many alternative lending sources to consider. But alternative funding isn’t just for those with a less than perfect credit score, the multiple challenges that many women face obtaining loans is a great reason to turn to alternative lenders. Alternative lenders look at the whole picture of the business including cash flow, accounts receivable, minimum revenue and length of time in business. These alternatives can include microloans, lines of credit and cash advances. The NWBC suggests alternative loans when:
- You have poor or no credit
- Your business is still relatively young
- There is no little to no collateral
- You need money quickly
- You know your product will sell
- You have a seasonal business
- Your business is in a risky industry
As opposed to a family or personal account, running a business requires a larger budget. Acquiring a business loan is crucial for success in small business. Although it can seem harder for women to acquire working capital than men, there are many choices out there. It’s just a matter of knowing which one will work for you. Fundkite have all of your options at the ready for business loans when you need money fast. Apply now with us to see how we can help you take your business into the future.