Women only own 36% of the small businesses in America, reports the National Women’s Business Council. And according to the Harvard Business Review, a big reason for this gender gap is due to lack of funding. In fact, a national study found that female-led small businesses receive less than half of the financial investments and financing as businesses owned by men. This funding disparity is especially startling because women-owned businesses statistically generate 10% more revenue over five years.
If you are a female entrepreneur looking to launch a small business or expand your existing business, a growing number of lenders and financial institutions are offering unique small business loans for women to help close the financial gap and even the playing field.
Small Business Administration (SBA) Loans for Women-Owned Businesses
The U.S. Small Business Administration (SBA) is a federal agency established in the 1950s specifically to provide financial and legal support and advice to American small businesses and entrepreneurs.
In the ’80s, the U.S. government passed the Women’s Business Ownership Act. With these new laws, the SBA began to launch various new programs, business centers, and financial services to aid female business leaders. These include:
- The Office of Women’s Business Ownership (OWBO)
- Expanded funding, including women-owned small business loans like the 8(a) Business Development program (business loans for minority women), the 7(a) loan program, and SBA Express loans
- The Women-Owned Small Businesses (WOSB) Federal Contracting program
Because the government guarantees the loans (including financial subsidization if you default on your payments), lenders and banks are more likely to extend financing to your small business.
The increased approval rate, paired with the very competitive interest rates and payment plans, makes this a top choice for general business loans and start-up business loans for women.
There’s just one caveat: Meeting the SBA’s qualifications and getting approved for these government-backed loans can be tricky.
SBA 7(a) Loans For Women
The 7(a) loan program is the most popular lending service from the SBA. It provides general-purpose working capital for your start-up or business, allowing you to use the loan for a multitude of purposes, including:
- Real estate investments
- Buying furniture, packaging, and other supplies
- Refinancing existing debt
- And much more
- Maximum loan amount: $5 million for a standard 7(a) loan, or $350,000 for a (7a) Small Loan
- Maximum SBA guarantee: 75% to 85% of the loan amount, depending on the total loan amount
- Interest rate: Negotiated with the lender, with a cap set by the SBA’s current maximum
- Financing turnaround time: Five to 10 business days
- Your operations must be defined as a for-profit small business.
- You need to show investment into your own operations and that you attempted to use other financial resources first.
- You must be able to demonstrate financial need and be in good standing with the U.S. government (e.g., no delinquent taxes, no defaulted payments on other financial programs, etc.)
Specific eligibility terms are set by the individual lender or financial institution that provides the actual funding.
SBA Express Loans
The standard 7(a) loan can take several weeks to process. This timeline may be too long if you’re facing a cash flow problem, a critical debt payment, or a time-sensitive business opportunity.
For these situations, the SBA offers the SBA Express program. It’s one of the fastest small business loans for women on the market.
- Maximum loan amount: $350,000
- Maximum SBA guarantee: 50% of the loan amount
- Interest rate: Negotiated with the lender, with a cap set by the SBA’s current maximum
- Financing turnaround time: 36 hours
- Same as the SBA 7(a) loan program, with specific eligibility terms set by the individual lender or financial institution that provides the actual funding.
The SBA’s Office of Women’s Business Ownership (OWBO)
The SBA operates dozens of district offices across America, with at least one local office in every state. These offices provide localized support for women and their entrepreneurial activities, tailored to the specific region’s needs.
The OWBO, in coordination with these local district offices, helps women business owners with:
- Business training
- Local access to credit and capital
- Business counseling
- Help to apply to federal contracts
- And much more
The OWB also operates a nationwide network of Women’s Business Centers.
These centers provide practical assistance to help women overcome the financial and social barriers to entrepreneurial success. The centers also provide resources and support for your day-to-day business operations.
What You’ll Need to Apply
To qualify and get approval for SBA loans for women, you’ll need to find an SBA lender and meet the lender’s requirements. Common lenders who provide financing under the SBA 7(a) loan program include:
- Wells Fargo
- JP Morgan Chase
- S. Bank
- And many other financial institutions and banks
All SBA lenders will ask for the following forms of documentation:
- A borrower information form (SBA Form 1919)
- Personal background and financial statements
- Business financial statements, including year-end P&L statements for the last three years
- Business certificate/license
- Loan application history
- Three years’ worth of income tax returns
- Resumes for each business principal
- Business overview and history
- Business lease
- Additional documentation if you’re using the loan to purchase an existing business
Lendio: Online Lending Marketplace
As you can see, applying for an SBA loan for women requires a lot of paperwork and a significant amount of research and documentation.
Many female entrepreneurs also struggle to meet all of the qualifications required by the SBA and the lender.
If you don’t qualify for an SBA loan for women or don’t want to deal with the complex documentation requirements and extended approval turnaround timelines, consider using an online lending marketplace.
Lendio’s online lending marketplace was created to solve the problem that 80 percent of small business loan applicants get rejected by their bank. Lendio provides a range of business financing options for women, including:
- Business line of credit
- SBA loans
- Short-term and long-term loans
- Merchant cash advances
- Start-up loans
- Business acquisition loans
- Equipment financing
- Commercial mortgages
- And much more
- Target audience: Female business owners looking for more flexibility, different payment terms, or other loan amounts than offered by traditional bank loans or SBA loans.
- Interest rate and loan amounts: Negotiated with the lender and varies by the specific lending product you need (e.g., commercial mortgage versus equipment financing)
- Financing turnaround time: 24 hours
How Lendio online marketplace works:
- Take 15 minutes to complete a straightforward online application.
- Receive instant lending quotes and options from more than 75 different lenders.
- Choose the loan amount, terms, and interest rates that work best for you.
- Receive funding in as little as 24 hours.
Bank and Credit Union Small Business Loans for Women
Before we discuss traditional lending, it’s important to note that conventional financial institutions also provide SBA loans. The critical factor is that the SBA guarantees the loan, which increases the bank’s willingness to accept risk, extend approvals to female small business owners, and keep interest rates competitive.
With traditional lending, the bank provides small business loans for women directly to you with no middle man (i.e., an online lending marketplace) and no supporting third-party (i.e., the SBA).
Traditional bank small business loans for women offer some significant benefits:
- Low fees
- Favorable interest rates and payment terms
- Customized financial products to your specific business needs
- Secondary benefits, such as a chance to build your business credit score, or the ability to leverage your relationship with the bank into other financial products (e.g., a business mortgage or a corporate checking account)
However, small business loans from a bank or credit union also present some potential disadvantages:
- Very low approval rates with a high risk of rejection
- High eligibility requirements (for example, many credit unions or banks will require you to have an exceptionally high credit score)
- Complicated, time-consuming application processes with a lot of documentation required
- Lengthy, extended approval and funding timelines
Going with a bank or credit union may be worth considering if you’re confident that you have excellent credit and a polished financial history or if you have a well-established relationship with the lender.
However, many female entrepreneurs find the process and risk to onerous of a burden to take on.
As their name implies, microloans are very small loan amounts (typically under $50,000).
These smaller loans make financial sense if you need a small investment to get started or to overcome a momentary financial hurdle, or if you’re a sole proprietorship without a lot of expenses.
Keep in mind that microloans often have more strict requirements about what you can use them for. For example, most microloans stipulate that you can’t use them to refinance other debt or buy commercial real estate.
The SBA offers the SBA microloan program in partnership with local nonprofit organizations in your community.
You can also access microloans through Lendio’s online lending marketplace.
Alternative Financing Options for Women
Think outside the bank. As you launch and grow your small business, you may be eligible for the following alternative financing options for women.
Small Business Grants for Women
Grants designed to support female entrepreneurs typically have an array of eligibility requirements, such as your business industry, your ethnicity (e.g., some institutions offer grants specifically to help minority women), etc.
If you meet these qualifications, grants are ideal because they provide essential financing with no repayment obligations.
The SBA grant program offers grants for women who work in:
- Scientific research and development
- Technology and innovation
You can also find grants through the broader federal government.
Finally, many grants for women are made available at a local level through:
- Nonprofit organizations
- Community groups
- Small credit unions and local banks
- Private businesses
- Women-centric advocacy organizations
Grant amounts vary widely, and approvals typically require extensive documentation, personal references, and proof that your business operations are related to the grant’s overall vision and mission.
VC Firms and Angel Investors for Female Entrepreneurs
For a minimal subset of women who run businesses representing a significant growth opportunity (e.g., an innovative tech solution, a digital app, a crowdsourced idea, etc.), you may want to consider venture capital funding or angel investments.
Both options involve giving up some of your company’s equity in exchange for financial backing from private investors. With this equity change, you are also handing some of the control and decision-making to these investors.
This type of financial backing isn’t for everyone. Talk to a financial advisor before embarking on this route, as the financial and legal obligations are significantly different from all other forms of lending.
How to Become a Certified Woman-Owned Small Business?
Certifying your business isn’t necessary to access most forms of financing. However, if you get your WOSB certification, you’re eligible to access government contracts and public sector work that the government reserves for women-owned small businesses.
You can become a certified WOSB through the following groups:
- Women’s Business Enterprise National Council
- National Women Business Owners Corporations
- Women’s Chamber of Commerce
Each of the above organizations has its specific requirements. In general, you must meet the SBA’s guidelines for the definitions of a small business and also have a woman placed in the following areas:
- The owner (if there are multiple owners, women must make up at least 51 percent of the ownership)
- Leadership and management of daily operations
- The highest officer position in the business (e.g., CEO or president)
Once approved, WOSB certification lets you access the WOSB federal contracting program, where the government has set aside various contracts and service needs and reserved these jobs specifically for WOSBs.
FAQs About Small Business Loans for Women
Unless you’re using a service like Lendio’s online lending marketplace, the application process for SBA loans and traditional lending takes a significant investment of time, energy, and focus.
Once you’ve applied, approval is also tricky. Eight out of 10 loan requests get rejected by most banks.
For the best small business loans for women, work with a marketplace like Lendio, which offers quick access (and even faster approvals) to traditional lending and SBA-approved lenders.
Outside of specialized programs like the SBA 8(a) loan program (small business loans for female minorities), most loan programs are not designed with gender identity in mind.
However, some critical financial products are specifically better suited for female entrepreneurs, including the SBA 7(a) loan program, the SBA Express loan program, and Lendio’s online lending marketplace.
There are hundreds of grants for women entrepreneurs, including the Amber Grant for Women, the Boston Women’s Fund Grants, the Ms. Foundation Grants, and the Women Founders Network Grants.
Your best option to find grants for female business owners is by contacting your local SBA Women’s Business Center.
If you have bad credit, you may not be eligible for most women-owned small business loans from traditional banks and credit unions. Lendio can help. Once you submit your application, you’ll be matched with different lenders regardless of your credit score and credit history.
Every lender is different. In general, to qualify for small business loans explicitly directed at women, you must meet the SBA’s definition of a small business and have a woman in a place of majority ownership and control.