Whether you are looking to start your own business or grow an existing one, there are many ways to fund it. These options include loans, grants and equity financing.
The SBA offers a variety of loan programs and resources for women entrepreneurs, including Women Business Centers and Community Navigator programs. You can also find funding through online lenders, credit unions and banks.
1. SBA Loans
Women entrepreneurs in underserved communities have access to a wide range of loan options, including community development financial institutions (CDFIs), microloans and specialty programs. These lenders offer short-term three- to 18-month loans for working capital, which can fill a gap in cash flow.
These small business loans are backed by the U.S. Small Business Administration and typically come with lower interest rates than standard business loans. Some lenders require collateral and a personal guarantee, while others don’t.
These business loans are a good choice for entrepreneurs looking to make large investments, like purchasing a point-of-sale system or a piece of commercial equipment. However, these loans are often more difficult to qualify for than other types of small business loans. Some lenders also charge application fees and other ancillary charges. Be sure to research lenders before applying. It can take up to one day for some lenders to approve and disburse funds. This can be a frustrating delay for business owners who need the money quickly.
2. Online Lenders
Women-led businesses aren’t always able to get the financing they need. According to a report from Lendio, women-led companies receive just 4% of all commercial loan dollars. This is largely due to industry-driven factors such as profitability, which can impact the likelihood of getting loans from lenders.
Another way women-led business owners can get access to funding is through online lenders. These lenders typically don’t offer the same banking services as traditional banks and can be more open to female entrepreneurs who may not have a long business credit history.
Many of these lenders also offer prequalification, which allows potential borrowers to share basic information about their company and financial statements to see if they qualify for certain loan amounts, rates and repayment terms without having to have their full credit profile pulled. This can speed up the loan approval process and help to reduce costs, since many online lenders charge less for origination fees and other similar charges than traditional lenders.
3. Traditional Lenders
If you’re a well-established woman business owner with solid credit and financial records, traditional lenders like banks may be able to help you finance your small business. However, they often have higher requirements for loan applications and funding than alternative lenders.
Depending on your company’s needs, you can choose from various types of traditional financing, including working capital loans. These are typically used to cover short term expenses, such as paying employees or managing the lease on your business space. You can also choose accounts receivable financing, which allows you to borrow against outstanding invoices to finance your business. This type of financing can be more costly than a working capital loan, but consistent payments on your business credit line will build your business’s credit and could help you qualify for more favorable financing terms in the future. In addition, some community development financial institutions and nonprofit lenders distribute business loans for women with more flexible qualifications than traditional lending institutions.
4. Crowdfunding
Women-owned businesses are growing and thriving, but they still face challenges when it comes to funding. Fortunately, crowdfunding is an option that levels the playing field. This type of financing allows entrepreneurs to raise money through an online platform in exchange for a stake or percentage of the business.
Women can use crowdfunding to fund almost anything, from a new product or technology to marketing and renovations. Many crowdfunding platforms offer support services to help entrepreneurs navigate the process, including a mentorship component. A few of them include Digital Undivided (which focuses on Latino and black women) and the Fearless Fund.
A lack of experience in the business world can also hold women back when it comes to securing funding. This is especially true in the lending and finance industries. Many algorithms look at a woman’s credit utilization rate and may deny her approval without considering the larger societal factors at play. This is why it’s important to have a strong team to guide you through the business funding process.business loans women
