Thanks to the help of small business loans for women, female entrepreneurs are growing in the United States at an alarming rate. According to research, approximately 40 percent of new business owners in the United States are women. Additionally, the number of new businesses that are owned by women is double that of the companies that are owned by men. But only one in four female business owners applies for a business loan. Those who do rarely ask for more than $35,000. Since female business owners are already faced with more adversity than their male counterparts, obtaining a loan needs to be an easy process for them.
The problem is that there are currently no business loans that are meant for women only. The good news is that several lenders and loan programs are trying to meet the demands of female entrepreneurship by adjusting their terms on business loans for women. Additionally, there are mentorship programs, business grants and other resources for women only that can help ensure that your women’s only business is a success.
Thanks to the recession of 2008, banks have become stingy about lending to small business owners. This is especially problematic for women. According to research conducted by Pepperdine University and Dun & Bradstreet, only 30 percent of women were approved for a loan that they applied for. This was compared to half of all business owners, so it appears that women took more of a hit than men. One theory behind these numbers is that businesses who have women leaders tend to have lower average profitability and revenue numbers, particularly when they start out.
Women also tend to be underfunded. Research shows that in 2015, approximately one-third of female-owned businesses suffered a loss when compared to male-owned businesses. Still, women lead companies have a lot of potential. For example, they have greater profit potential than male-owned businesses, which makes them worth pursuing and investing in. Here is a list of the best business loans for women, with online lending and SBA loans in the lead.
In addition to having one of the most abundant resource pools for women entrepreneurs, Small Business Administration (SBA) loans also have several loan programs that small businesses can choose from. This makes SBA loans a great choice for women who own a small business. It’s important to note that the SBA does not personally make these loans. Banks and other lenders do. But the SBA assists with subsidizing a certain amount of the loan if the borrower becomes negligent on his or her payments. Lenders tend to find SBA loans less risky, which means that they are more likely to work with you even if you’re just starting out. SBA loans offer good financing options if you qualify. They are best suited for women with good credit who are looking for a long-term business loan. If you meet their qualifications, you can get an interest rate of 4 percent to 9.5 percent with long-term financing of seven years or longer.
With an SBA microloan program, you can get a small amount of money (up to $5,000 in capital) for a startup or smaller company. The general purpose of an SBA 7(a) loan is to gain working capital for businesses that are already established. The program also offers money so you can buy commercial real estate or equipment. For these reasons, SBA loans are usually the best option for women, so it’s worth seeing if you qualify for one.
Online loans are ideally suited for women who do not have good credit or need money fast. They offer almost every type of business financing possible. Online lenders can provide either short-term loans for working capital (three to 18 months), medium-term loans (two to five years) for women who do not qualify for a loan from a bank, and other special terms such as invoice financing. Online loans are also easy to do online and can be ideal to use when you need money quickly. This is because lenders can process loans within a matter of a few days. In some cases, they can approve the loan the same day you apply. You can even check out alternative lenders such as Lending Club and Funding Circle who offer long-term financing with low rates to borrowers who have good credit. Other lenders, such as Kabbage and OnDeck will work with you if you have poor credit, but they may charge you higher interest rates.
A business line of credit is a good option for women who don’t have strong credit but require a loan term with some flexibility. Keep in mind that women tend to do better in industries who have periods of revenue cycles, such as the food service and retail industries. Because of this, it’s important for women who are invested in these industries to have flexible funding.
A business line of credit provides that flexibility by giving you access to certain amounts of money, but there is no requirement to use it all. Plus, you only pay interest on the money that you use, not necessarily the total amount of money that’s being offered to you. Once you pay back when you own, your credit goes back up to the amount it was before you borrowed.
Go with a lender such as Credit Junction or Lending Club because they offer low-interest rates for their lines of credit. These loans tend to be harder to qualify for. If you don’t meet the requirements for one of these lenders but still need money quickly, then try BlueVine or Kabbage.
When you need a small amount of money to help get your business started, then a microloan is a great option. A microloan can help get you a couple of thousands of dollars so that you can buy inventory and other essential supplies. Because many women run their businesses from home or work as freelancers or consultant, it can be hard to get approved for a loan by a bank or another traditional lender. But microloans are a great solution. Check to see if you’re qualified for a microloan to help start a new business as an affordable way to obtain money and establish credit. Here are some of the types of microloans that are worth looking into:
- SBA Microloan Program- for this type of loan, SBA teams up with nonprofit lenders to offer as much as $50,000. This type of loan can be beneficial for women who need money for startups or businesses who have smaller needs, such as home businesses or food trucks.
- Kiva- this platform uses microfinance crowdfunding to provide loans as much as $10,000 with a zero percent interest rate.
- Grameen America- this unconventional lender offers microloans for women but requires its borrowers to get into groups of four and undergo a week-long training program. At the end of the program, you’ll receive a loan of $1,500.
- Opportunity Fund- this lender offers a microloan up to $30,000 for businesses who have been operating for at least one year.
- Accion- this nonprofit lender makes microloans for up to $50,000. This includes women’s business loans. To be approved, you must show that your business has a sufficient cash flow, good character, and no new liens or bankruptcies.
- Tory Burch Foundation Capital Program- this program is funded by Bank of America allows female entrepreneurs to connect with local lenders who offer microloans.
- Local microloans- each city and state has their own network of lenders who offer microloans, so this is a good place to start. Local lenders are also more likely to support local businesses.
Another good option for female entrepreneurs is to look at business grants. A business grant is considered free money because you do not have to pay it back like you would a business loan. Keep in mind that most grants are harder to qualify for than a business loan. They are also stricter about how you can use the money. Because of this, business loans are still a better option for female business owners, but it doesn’t hurt to see if you qualify for a grant. There are three types of grants that you should check out if you’re in need of financing.
Federal grants are usually limited to specific areas of business, such as technology, agriculture, and medical research. Some of the most popular types that might apply to women small business owners:
- SBA InnovateHER Challenge- this grant offers up to $40,000 for businesses that provide services or products that help women.
- Rural Business Investment Programs- this program is from the United States Department of Agriculture and was designed to help businesses who intend to make a positive change in rural communities who need help.
- Small Business Technology Transfer (SBTT) and Small Business Innovation Research (SBIR)- these two programs offer grants for business owners who are in the science and technology fields. The overall plan is run by the SBA. Other areas of the government such as the United States Department of Energy and NASA, also offer their own SBTT and SBIR programs.
State level grants are provided by local and state governments. They tend to have more options than federal grants. Some of the more popular types include the following:
- North Carolina IDEA- they offer one of the largest state grant programs for business owners who specialize in technology.
- Tennessee Department of Economic & Community Development- these grants offer money to companies in Tennessee who specialize in public infrastructure and have a positive impact on the community.
- Kansas Job Creation Fund- if you’re moving to Kansas or already live there, then this grant can help you get started with your business.
- Nebraska Child Care Grants- these types of grants offer a small amount of money to home care centers and child daycare centers in Nebraska.
- Maryland Economic Development Grant- this type of grant provides money to businesses in Maryland who contribute to economic development.
Private grants are easier to get than government grants. But keep in mind that there is more competition for these. Private grants also tend to have a higher turnover rate, meaning that they don’t last long. Here are some that are worth looking into for women business owners:
- Chase Mission Main Street Grant- this grant offers $100,000 grants for small business owners who write an essay. Research shows that many of the past winners of this grant have been female.
- Halstead Grant- this grant offers $7,500 plus $1,000 in supplies for small business owners who specialize in silver jewelry.
- FedEx Small Business Grant- these grants are offered to small business owners for up to $25,000. Your business must be operating for at least six months.
- Zions Bank Smart Women’s Grants- these grants are offered in amounts of $3,000 to small business owners that empower women or communities in need around the Idaho or Utah areas.
- Eileen Fisher Women-Owned Business Grant- this grant offers $100,000 for ten different female-owned businesses who have been in business for at least three years.
- The Amber Grant- this grant is offered monthly. Participants can eat $1,000 for their woman-owned business. At the end of the year, one $10,000 winner is chosen.
- Open Meadows Foundation- these grants are offered for $2,000 for women lead businesses that promote an impact in economic, racial or gender areas.
- The Idea Cafe Grant- any business owner can apply for this $1,000 grant, but previous winners include a clothing shop, an art gallery owner, and a bakery. Most of the winners in the past also tend to be women. Additionally, this grant offers free publicity and advertising for your company.
Looking for grants in your local area is also a good idea as local businesses are usually happy to support local business owners.