Everything You Need to Know About Business Financing for Women
Whether you are about to open a business, or are looking to expand your operations, here is everything you need to know about securing business financing as a woman business owner.
Business Loans from Alternative Lenders
With a business loan, your woman-owned business can flourish. You’ll have financing for equipment, payroll, inventory, and other imperative costs. Unfortunately, getting a loan through certain mediums can be challenging. Applying for a business loan through a bank can be time-consuming, and many small businesses don’t get approved. Thankfully, there are alternative lenders that specialize in small business loans. Through an alternative lender, your woman-owned business can receive a loan that is tailor-made for you. That way, you won’t have to worry about the future of your business when cash flow is limited.
Peer-to-peer lending pairs borrowers with lenders through online marketplaces. After applying for a loan, your information will be posted online, and investors can decide if they want to buy a portion of your debt. Once the lending company funds your loan with investor money, they provide you with a check, and you will make your payments directly to the peer-to-peer lender without directly dealing with the investors. When going through this process, marketing your business as woman-owned could benefit you; if female investors connect with your product or story, they may be more likely to invest!
Having anonymous investors make money off your loan isn’t ideal, and you would probably prefer to gain fast access to cash without sharing your private information online. Because other options offer women owned businesses funding at similar rates and terms, there are few advantages to peer-to-peer lending from a borrower’s perspective. Still, if you are in a crunch for cash, this is another option to consider.
Grants for Women Business Owners
You might not realize it, but there are grant programs that focus solely on helping women-owned businesses. By applying for these grants, you’ll be amongst fellow female business owners who are also seeking financing. Below, you’ll find our top suggestions for women business grants:
– The Amber Grant: Each month, one woman business owner receives a $500 grant. At the end of the year, one of the 12 female business owners will receive a $1,000 grant.
– Open Meadows Foundation: Does your business promote racial, gender, or economic equality for women? If so, you might qualify for this grant. The Open Meadows Foundation gives $2,000 to women business owners with limited resources ($75,000 or less).
– Zions Bank Smart Women Grants: With this grant, you can receive $3,000 if your business is in low-income areas of Utah or Idaho. They have six categories in which they provide this grant to: Arts and culture, business, child and elder care, community development, continuing education and human and health services.
These are just a few of the women business grants available. You can also research federal grants, and other opportunities within your geographic location or industry.
SBA loans are popular because they are issued by traditional banks and are insured by the Small Business Administration. SBA insurance makes these loans less risky for lenders to issue, and that translates to more competitive rates for borrowers.
SBA loans are a viable option if you have time and patience. Waiting several months for approval decisions to be made is typical, and because it is the bank’s standards that govern approval of your loan, borrowers can be approved for a loan by one lender and denied for the same loan by another lender.
The SBA Express Loan program offers a higher chance of approval and is faster, but you’ll need collateral, a 700 or higher credit score, and records showing that you’ve got a successful operating business to qualify.
In addition to loans, the SBA has a women-focused grant, called InnovateHER. To qualify for this grant, you’ll need to win a local competition.
Check out the Office of Women’s Business Ownership for free resources if you are considering a SBA loan and would like to learn more about options available to female business owners.
Credit Cards or Lines of Credit
Women-owned businesses need fast cash to meet payroll demands, buy inventory, and pay for other business expenses. Due to this, many women business owners turn to credit cards or lines of credit. While both are often unsecured lines of debt, lines of credit can be written as second mortgages on your home or as liens on your corporate inventory or other property. These funding sources provide relatively quick access to cash and fast approval timelines. Also, many credit card companies offer cash back or reward points to sweeten the deal.
The biggest risk with these funding sources is that they you are vulnerable to the lender’s decision to cut your credit line or call your note without notice. Because federal laws like the Credit Responsibility and Disclosure Act don’t protect borrowers using credit cards and lines of credit from limit cuts in all circumstances, a small business owner could wake the day before payday to find their cards closed to future charges and their lines of credit called due in full.
Once you’ve investigated the types of funding available for women business owners, we hope that you’ll be able to select the right financing option for your business. Running a woman-owned business can be rewarding, and we know that with some extra cash, you’ll be able to make your business even better than it already is!
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.