Business loans provide the extra capital companies need to explore new market opportunities, maintain operations, and reach new customers. Getting extra funds for your business can change the trajectory of your company, but not everyone gets enough financing for their business.
It’s no secret. Female business owners face far more obstacles when applying for funding than their male counterparts. Fortunately, some federal programs, online lenders, and other financial institutions have gone the extra mile to ensure that women entrepreneurs have access to the resources needed to help their businesses thrive.
The Importance of Women-Owned Businesses
Did you know that women own approximately 40 percent of businesses in the U.S.? These companies employ over 10 million individuals, yet many face funding gaps that make it challenging to keep operations afloat. Why so? In short, they’re less likely to be approved by lenders for funding. So, it’s pertinent that these women-owned entities get the funding they need and deserve.
Become a Certified Woman-Owned Small Business (WOSB)
The WOSB contracting program aims to help women-owned small businesses secure more federal contracting opportunities.
Perks of Women-Owned Businesses
Although women entrepreneurs are more likely to be declined financing, some programs are designed to help bridge the gap. Furthermore, some lenders feature funding options exclusively for female-owned businesses, and there are several grant opportunities available to women on a local and national level.
Steps to Get Certified as a Women-Owned Small Business (WOSB)
To get certified as a WOSB, visit beta.certify.sba.gov to submit a formal application. You can also use a third-party certifier to assist you with the process.
Women Business Loan Options
It’s common for a business owner to use a term loan or line of credit to get funding. While you will find those options explained in detail, it’s good to know about additional resources as well.
SBA-backed Loans – 7(a) and 8(a)
The 7(a) loan program helps small business owners secure SBA-backed loans through traditional banks, online lenders and other select financial institutions. These loans have the most competitive rates, and you can borrow up to $5 million for one of these loans. While you will probably get the best rates and terms with this choice, borrowers need good credit scores and annual revenue. You will also have to wait at least a month to receive funds in most cases. However, if you can wait it out, this loan may save you more money than the other options.
While the 7(a) loan program is for every small business owner, women entrepreneurs have a special program just for them. The 8(a) Business Development program caters to disadvantaged small businesses and helps them capitalize on funding opportunities. This program can help women get financing if an SBA 7(a) loan does not work out. This arrangement gives women two opportunities to get SBA loans with competitive rates and terms.
Business Loans for Minority Women
Some online lenders and nonprofits feature business loans exclusively for minority women. However, the qualification criteria vary by lender, so it’s better to inquire before applying.
Bank Business Loans
Some traditional banks offer business loans with competitive terms. However, the qualification criteria are quite stringent, making these loan products challenging to qualify for. If your business is relatively new, this usually means that you have less than perfect credit or your business revenues aren’t at a certain level. Most banks will want you to have at least two years of business experience and steady revenue. It can also take over a week to receive funds from a successful bank loan application. If you need cash within 48 hours, a business bank loan may not be the best choice.
Microloans
Microloans are generally available through mission-based nonprofits. They seek to assist local small business owners who cannot secure funding through traditional banks, credit unions, or online lenders. These loans have small amounts (up to $50,000) but are more accessible and have shorter application processes. You can receive funds from some microloans within a few days. However, borrowers cannot use microloans to pay off other debt or buy real estate. The repayment on these loans cannot exceed six years, and you will receive a competitive rate. The rate is typically between 8% and 13%.
Personal Loans
Although personal loans include the word “personal,” you can use that capital for any purpose, including your business. A personal loan could be a viable option if you have good or excellent personal credit. Your business credit score will not help or hurt your ability to get a personal loan. However, the payments you make on a personal loan will only help your personal credit. If you want to get a business loan that improves your business credit with each monthly payment, a personal loan may not be the best choice for you.
Even if you don’t have the best credit, some lenders may happily provide you with a personal loan. However, be mindful that the loan terms usually span three to five years, so your monthly payments could be on the high end if you opt for a shorter term. If you are nervous about cash flow, you may want to consider borrowing less money or looking for a lender that can give you more than five years on the term.
Working Capital Loans
Working capital loans are installment loan products. Loan proceeds are disbursed at once and payable in equal monthly installments over a set period. You’re free to use the funds however you see fit as long as they’re for a business purpose. Most working capital loans are for short-term business expenses and addressing operations.
Business Credit Card
Business credit cards have a built-in line of credit that you can use to make purchases. Each card has a credit limit, and borrowing more money without paying it back gives you less money to spend in the future. In addition, if you repay the balance before the end of the month, you can avoid interest payments. This habit can help you save thousands of dollars since credit cards feature steep APRs.
While you can use a personal credit card, business cards usually have better perks. You can get rewards points or cashback on every business expense. In addition, this card can help with taxes. Many credit card issuers generate reports that track your spending and reveal each expense. Reviewing your statements at the end of the year can help you detect write-offs. It’s also possible that all of your business expenses count as tax write-offs, and the credit card can keep you organized. You should talk with a tax advisor before applying deductions to your tax bill.
Invoice Factoring
Invoice factoring is one of the few financing strategies that does not involve going into debt and making monthly loan payments until you pay off the balance. Instead, this funding source turns your outstanding invoices in accounts receivable into immediate cash. You don’t need the best credit score or a lot of business experience to get capital from invoice factoring. Your clients’ creditworthiness impacts this financing method more than your own credit. However, you will have to pay the factoring company a fee, known as a factor rate, for them to take the invoice off your hands.
You won’t have to worry about reaching out to customers and requesting invoice payments. The factoring company will do that for you, while you can use the newfound capital to grow your company in new ways.
Merchant Cash Advances
Merchant cash advances let you borrow against future earnings to get the funds you need today to keep your business up and running. Your company could qualify for funding even if you don’t have perfect credit, and some lenders offer funding in as little as 24 hours. While it’s possible to find many types of loans for borrowers who don’t have the best credit scores, merchant cash advances are exceptional in this area. While you can pay a lot of interest on these cash advances, some lenders give applicants a merchant cash advance even if they have credit scores in the 400s.
Business Lines of Credit
A business line of credit operates like a credit card. You’ll get access to a revolving line that you can withdraw from on an as-needed basis during what’s referred to as a draw period. Most lenders also assess interest-only payments during the draw period. You’ll make monthly payments (for principal and interest) over a set period when the draw period ends. This amount will likely fluctuate over time since the interest rate is variable.
Business owners can repay the line of credit during the draw period to save money on interest. You can continue drawing from your line of credit even after you pay it back. This arrangement gives business owners the opportunity to borrow capital, repay, and borrow again without having to apply for multiple loans.
Commercial Real Estate Loans
These loans make it easier for business owners to acquire commercial properties. Some businesses use these properties to serve customers, while others use commercial properties to store inventory. Many lenders have high loan maximums for these loans that comfortably exceed what you can get from a business line of credit or small business loan. You can get a loan term of up to 30 years with a commercial real estate loan.
Equipment Loans
Many businesses rely on equipment to maintain operations and serve customers. For example, a restaurant needs ovens and stoves, while a hospital needs the right equipment to serve patients. You can get started with equipment leases, but those monthly payments never go away until you part ways with the equipment. If you want to get rid of monthly equipment payments, you can use an equipment loan to finance your purchase.
Equipment loans give you the necessary business financing to buy equipment and eventually own it outright. Some lenders may require a 20% down payment, but others won’t request that you put any money down. Putting money down will decrease your monthly payments and allow you to pay less interest over the loan’s duration. Equipment loans are best for assets you plan to hold onto, while leasing may be more useful for short-term needs.
Where to Get Business Loans for Women
If you’re a woman-owned business looking for the right financing solution to start or grow your business, consider ROK Financial. They offer a variety of financing solutions for women entrepreneurs, with competitive rates and flexible terms. With over two decades of experience in business lending, their team of advisors can help you navigate the loan application process and secure funding quickly.
Plus, if you want to talk to one of ROK Financial’s business advisors about your specific loan needs, fill out this simple contact form, and someone will contact you to discuss your options.
Other Resources and Training Available for Women Business Owners
Small business loans can fuel your growth, but they aren’t the only option. Here are some other resources you can use to raise funds for your business.
National Women’s Business Council
The National Women’s Business Council serves as an independent voice for female entrepreneurs. It offers advice to the President, Congress and SBA on behalf of women-owned businesses.
Office of Women’s Business Ownership
The Office of Women’s Business Ownership assists female entrepreneurs through programs on capital, credit, business training, counseling and federal contracts offered by SBA district offices.
Women’s Business Centers
These centers offer tools and resources to help women entrepreneurs tackle and overcome common business-related challenges.
Ascent Online Learning Platform
Ascent is a free online learning platform for women entrepreneurs that features exercises, tools, fireside chats, infographics, videos, self-assessments, success stories and more.
Women Veteran Entrepreneurship Training Program
The Women Veteran Entrepreneurship Training Program awards small business development resources to both female veterans and military spouses.
National Association of Women Business Owners
The National Association of Women Business Owners is a cohort of more than 10 million women-owned businesses nationwide that work to promote economic development and foster innovation within the entrepreneurial community.
Small Business Grants
Many companies and nonprofits offer small business grants to women and other deserving entrepreneurs. Unlike a loan, you do not have to pay back a small business grant. You can use the money for your business without worrying about monthly payments, but it’s harder to get grants than loans. You have to fulfill specific criteria, and even hitting all of the benchmarks does not guarantee you will get a competition-based grant.
Some of these programs are specific for women, but you can also apply for small business grants that invite anyone to apply. You may have to make a pitch about your business, present your ideas to a live panel, or do something else. Some grants are as simple as submitting an application and waiting to see if you will receive funds. You can find applicable small business grants by visiting Grants.gov. Their search section lets you find grants based on location, industry, and other parameters. You can also find federal grants on the site.
