- Small business loans for women: what are my options?
- 1. SBA loans for women
- How SBA 7(a) loans for women work
- SBA Express Loans
- What else you need to know about SBA loans for women
- 2. Bank and credit union small business loans for women
- 3. Online business loans
- Working capital loans
- Working capital loans
- Equipment loans
- Inventory loans
- Term loans
- Merchant cash advances
- Invoice financing
- Business line of credit
- Business credit card
- 4. Microloans
- Small business grants for women
- Additional resources for women entrepreneurs
- Are there any other small business financing options women could consider?
- How to become a certified woman-owned small business (WOSB)
- Women-owned business loans from Funding Circle
Female entrepreneurs are leading an exciting shift in the US economy-with two out of every ten businesses owned by women. However, despite employing over 10.1 million people and generating $1.8 trillion in revenue annually, women are hitting a wall when it comes to financing. According to a Federal Reserve report, funding requests from women are less likely to be approved in full-compared to those submitted by their male counterparts.
Understanding your loan options- and how to qualify- can help increase your odds of getting approved. Beyond just loans, be sure to explore other grants and resources designed to level the playing field for female business owners.
Small business loans for women: what are my options?
Small business loans typically fall into one of four categories:
- Small Business Administration (SBA) loans
- Bank and credit union small business loans
- Business loans from online lenders
Determining which option is best for your business depends on several factors including but not limited to credit rating, financial profile, financing needs and overall business goals.
1. SBA loans for women
The Small Business Administration doesn’t make loans directly—rather, it guarantees loans through its nationwide network of lending partners. The SBA offers several small business loan programs that female entrepreneurs can use to grow their businesses.
How SBA 7(a) loans for women work
Through the SBA 7(a) loan, women can borrow up to $5 million with a typical repayment term ranging anywhere from five to ten years. Borrowers financing a real estate purchase can take up to 25 years to repay their loan.
A major benefit of SBA 7(a) loans for women is that they tend to offer lower interest rates for qualified borrowers.
While there is no “official” minimum credit score for eligibility, most SBA 7(a) lenders are looking for a minimum credit score of at least 620—and that’s assuming the rest of your application is exceptional, with no history of bankruptcies or foreclosures.
Women entrepreneurs can put a 7(a) loan to work in several ways:
- Covering day to day working capital needs such as payroll, hiring and training new employees, or managing tax obligations
- Refinancing existing business debt such as loans, credit cards, and lines of credit
- Purchasing business equipment and vehicles
- Buying land or real estate for the business
- Purchasing inventory or necessary supplies
- Renovating your business
- Opening a new location
The SBA requires that all business owners who apply for 7(a) loans meet its definition of a small business. That means:
- Being based in the U.S.
- Operating for-profit
- Having less than $7.5 million in average annual revenues
- Being within specific size guidelines for your industry
Unsure if your business meets size guidelines? Check out the SBA Size Standards Tool to see if your women-owned business is eligible for a small business loan.
SBA Express Loans
Through the SBA Express Loan program, female entrepreneurs can borrow up to $350,000 for either short or long-term capital. From covering equipment to consolidating debt, the express loan can be used for any purpose intended to help grow your business.
Similar to the 7(a) loan, this option is geared towards established businesses operating for at least two years and reporting significant revenue.
A key difference separating the Express loan from alternative options is its accelerated review process. Keep in mind that while approval can be quick, it can still take anywhere from 60-90 days for funds to actually hit your account.
In terms of cost, the interest rates for Express Loans tend to be slightly higher compared to 7(a) loans due to the faster approval process.
What else you need to know about SBA loans for women
The 7(a) and Express Loan are just two of many different SBA programs—click here to learn more about alternative options.
If you think one of these programs could be right for your business, keep in mind the following:
- Collateral requirement: Lenders don’t require collateral for women-owned business loans under $25,000, either 7(a) or Express. For business loans over $25,000, you’ll need to provide collateral in the form of personal or business assets (or both).
- Personal guarantee: The SBA requires a personal guarantee when you own 20 percent or more of the business you’re applying for a loan for.
Personal guarantees are standard with other types of business loans for women as well—it means you’re personally responsible for repaying the debt if the business isn’t able to keep up with the payments.
2. Bank and credit union small business loans for women
When applying for a small business loan through a bank or credit union, the amount you can borrow depends mainly on the institution’s lending guidelines.
One benefit of financing through a bank is securing a lower, fixed interest rate. The catch, of course, is that you’ll likely need good to excellent credit to be approved for the lowest rates. If you’ve already established a personal or business banking relationship, the financial institution may be willing to take that into account for loan approval.
In terms of other benefits, a small business loan for women from a bank could help you build your business credit rating if you repay the loan on time. And loans from banks and credit unions can be tailored to fit just about any financing need.
There are some drawbacks to consider, though. For example, qualifying for a bank or credit union loan might be difficult for women who don’t have a strong credit report or an established business-operating history.
Filling out the paperwork can be time-consuming, and the approval process is notoriously long. It could be several weeks or months before you’re able to get funding once you’re approved, which makes these kinds of small business loans for women less convenient if you need immediate capital.
An online small business lender, however, can put money in your business’s hands much faster.
3. Online business loans
Alternative lenders take the small business loan process online. There are several reasons why women might want to consider forgoing traditional lenders and getting a small business loan through an online lender.
- Speed advantage: Some online lenders offer approval for women-owned business loan applications in as little as 24 to 48 hours, with funding completed within a few days.
- Lenient qualifications: Qualifying may be less strenuous for newer women-owned businesses or women business owners with less than perfect credit.
Interest rates with online lenders can be on par with options from traditional lenders. However, they tend to be slightly higher—this is usually to account for the slight increase in risk due to lower qualification standards. Some online lenders also reduce the fees associated with procuring a small business loan. For example, you might not pay an origination fee or a prepayment penalty for an online business loan, which can save your business money.
The borrowing limits can be generous, and repayment terms can last a few months or up to several years, depending on the type of loan. Online lenders are a bit more lenient on collateral requirements, too.
Most importantly, female business owners can take advantage of variety when it comes to their loan options. The kinds of loans women business owners can find online include:
Working capital loans
Working capital loans can be used to cover short term expenses. With a working capital loan, small business owners can pay employees on time, cover the lease for the business, or manage overhead costs.
Working capital loans
Working capital loans for women are designed to be used for short-term expenses. With a working capital loan, you could pay your employees on time, cover the lease for your business, or manage overhead costs.
As the name would have it, equipment loans can be used to purchase various equipment such as software, hardware, vehicles, and other business necessities. With online equipment financing, the equipment you’re buying often serves as collateral; so, while it’s possible to borrow up to 100% of the cost, most lenders require some down payment from small business owners.
Inventory loans are a way for retailers to ensure they have enough supply on hand to meet consumer demand.
A term loan is a loan that borrowers repay over a set period of time—also known as a ‘term.’ Online lenders may offer short-term loans that can be repaid within a few months or long-term loans that can stretch out over a few years. Both usually carry a fixed interest rate, so you have some predictability with the payments.
Merchant cash advances
A merchant cash advance (MCA) isn’t technically a loan. Rather, it’s a financing option that lets you borrow against the value of your future credit card receipts. Since MCAs don’t require years of business history or a minimum credit score, they can be relatively easy to qualify for. The biggest downside is that a merchant cash advance can end up being much more expensive than other types of small business loans for women.
Invoice financing, or accounts receivable financing, is similar to a merchant cash advance as you’re borrowing against your outstanding invoices. Again, it can be easier to qualify for compared to a traditional loan, but the overall cost of borrowing could be higher.
Business line of credit
Business loans are usually installment debts—you pay them off over time, and the balance goes down until it zeroes out. A business line of credit is a revolving line that you can draw against as needed. You only pay interest on the amount of credit you use (not the entire loan), making it more like a credit card than a loan.
Business credit card
While not technically a loan, business credit cards can still be a great way for small business owners to finance day-to-day business related expenses. A business credit card operates much the same as a personal credit card—you swipe now, pay later. These cards can earn you cashback bonuses and cool perks while also extending your working capital.
Microloans are smaller loans under $50,000 that can help fund female entrepreneurs who are either just getting started, have a minor capital need or are running a business as a sole proprietorship. While they can’t be used to buy real estate or refinance other business loans, they’re good for virtually any other small business financing need.
Through the SBA’s microloan program, eligible borrowers can qualify for up to $50,000 with repayment terms up to six years. You can also apply through Accion, a nonprofit that lends up to $50,000 to eligible women and other minority business owners. Opportunity Fund is another program that offers up to $30,000 for eligible businesses operating for at least one year.
Small business grants for women
Small business loans aren’t the only financing options for female business owners. Grants can be an excellent alternative-especially as many are designed specifically for women and don’t require repayment.
There are numerous programs that offer grants for female entrepreneurs —from state and federal grants to nonprofits, private businesses, and industry-specific women’s communities.
Completing grant applications can be a tedious process; so, when narrowing down your options, be sure to read the guidelines carefully to ensure your business qualifies. When submitting your application, include any supporting documents to avoid being rejected for being incomplete.
Here’s a quick list of popular grants that are great for women-owned businesses:
- Amber Grant: Awards $10,000 to a female entrepreneur each month
- Eileen Fisher Woman-Owned Business Grant:Awards $100,000 to 5 to 10 women business owners each year
- The Girlboss Foundation Grant:Awards $15,000 grants twice a year to female entrepreneurs
- FedEx Small Business Grant:Awards up to $25,000 apiece to 10 small businesses annually
National Association for the Self-Employed:Awards $4,000 per month in growth grants to small businesses
Additional resources for women entrepreneurs
Keep reading to explore other financial resources that can be helpful for female entrepreneurs.
- The Office of Women’s Business Ownership operates roughly 130 business centers throughout the United States. Designed to connect female business owners with federal contracting opportunities, they also offer business training and counseling as well as help getting access to credit and working capital.
- The National Association of Women Business Owners is an advocacy group for women in business. This organization offers training and resources related to becoming a certified women-owned business, getting government contracts, and securing access to capital.
- The National Women’s Business Council is an advisory group to government agencies that also provides resources for female entrepreneurs. It provides information on finding capital, growing supply chains, and increasing your brand’s visibility.
For a complete list of resources for female entrepreneurs, check out our National Resources for Female Entrepreneurs. It includes links to grants, networking, inspirational, and educational resources that can be just as valuable (if not more so) than a loan.
Are there any other small business financing options women could consider?
Yes, quite a few, actually…
- Angel investments
- Venture capital funding
- Friends and family
- Personal loan for your business
Each option has its own set of pros and cons.
The biggest drawback of angel investments or venture capital is having to trade business equity to get funded.
Crowdfunding is a way for businesses to access quick funding, but also comes with its fair share of challenges. If your campaign isn’t fully funded, you won’t get anything at all. On the other hand, if your campaign is funded, then the crowdfunding platform will likely take a cut.
While friends and family tend to offer loans with no strings attached, it can be risky to mix small businesses and personal relationships. Imagine what would happen if you could never repay what you borrowed.
Taking out a personal loan for your business couldbe a good option if you’re struggling to obtain other forms of financing. While you may be able to find some flexible programs with lower APR’s – you could be limited to smaller loan sizes and will likely need to secure your loan with personal assets.
How to become a certified woman-owned small business (WOSB)
Getting certified as a woman-owned business can be beneficial if you work on government contracts. As a certified WOSB, you can pursue public sector work and government “set asides.” Set asides are contracts the federal government earmarks for small businesses, including women-owned businesses.
There are two ways to get certified: self-certify or get certified through an SBA-approved third party. Organizations approved to certify women-owned businesses include the Women’s Business Enterprise National Council, the National Women Business Owners Corporation, and the U.S. Women’s Chamber of Commerce.
One isn’t necessarily better than the other—and every process involves lengthy paperwork. Step one is to make sure your business meets the basic requirements. This includes:
- Meeting the SBA’s size standards for a small business
- Being a business that’s 51% owned by women
- Having women in charge of managing daily operations and making long-term decisions for the business
- Having a woman in the highest officer position in the company
There’s no minimum time in business required-which means you can apply whether you’ve been operating for six years or six months.
Get started by registering on Sam.gov. Once your initial registration is approved, you can apply for self-certification at certify.SBA.gov. You’ll need the personal MPIN code you created at the Sam.gov site, your employer identification number, and a DUNS number. The good news is that it’s free to self-certify.
If you want to get certified by one of the organizations mentioned above, they each have their own certification process available through their websites. Just keep in mind that you’ll pay a fee to use them, which can be as high as $400.
Women-owned business loans from Funding Circle
With so many loan options to choose from, it’s important to find the one that best fits your unique financing needs.
We’re invested in helping women-owned small businesses just like yours access low-cost business loans of up to $500,000, with terms lasting from six months to five years. Best of all, you can get a decision in as little as 24 hours after document submission (with competitive rates).
Whether you need to hire new staff, expand your business operations, or grow your product line, a loan from Funding Circle can help.
It’s simple and easy to get a rate quote. Check your eligibility for a small business loan from Funding Circle today!