Small business loans for women are seeing a surge in demand. More females than ever are entering the entrepreneurial market and starting their own businesses. Yet research indicates that they find it more difficult to secure funding than their male counterparts. So, we put together this comprehensive guide to small business loans for women. It’ll walk you through all of the options available, no matter which stage of business you’re currently at.
Increasing Demand for Small Business Loans for Women
Women are increasingly opting to start a business and be their own boss. Recent statistics indicate that female entrepreneurship is on the rise, along with demand for funding to support start-up growth.
- Women own 40% of private businesses in America (Business Insider).
- Women entrepreneurs employ 9 million people and generate $1.8 trillion in sales (National Association of Women Business Owners).
- The number of female entrepreneurs has increased by 13% globally since 2011, while male rates increased 5% (CNBC).
- Women-owned businesses receive just 7% of venture capital investment money, which is highly disproportionate to their role in the economy (Entrepreneur).
- Loan approval rates for female entrepreneurs is 15-20% less than it is for men (Entrepreneur).
Unfortunately, the availability of small business loans for women doesn’t appear to be aligned with demand. Although more and more female-operated businesses are being founded, funding options seem to be lagging behind.
Why Aren’t Small Business Loans Given to More Women?
You might wonder why we even need small business loans for women. After all, gender shouldn’t be a factor in the lending process, right? These decisions are based on income, credit rating, and company revenue, so it should be an objective decision that isn’t influenced by sex. Unfortunately, it’s not that simple in practice.
Reports from the Small Business Administration (SBA) indicate that 18% of their loans were granted to female-owned businesses. Yet we know from the previous stats that this isn’t proportional to the 40% who run businesses. The U.S. Senate Committee on Small Business and Entrepreneurship have previously said that 16% of all conventional small business loans go to organizations run by women. Their report also noted that if women do apply for loans, they tend to go for smaller amounts as they worry that their application will be rejected.
There are several ways that gender can affect the availability of small business loans for women. The first is that women tend to earn less than men on average. The gender pay gap is still very real, with the average women in the USA earning 78% – 82% of the average man’s. People who earn less are seen as having less capability to repay loans, which means their choice of options (along with total loan amount) is greatly reduced.
In previous generations, family finances were often in the name of the husband (although 90% of women now control day-to-day spending). Although this may seem like an antiquated view now, it means that there are still generations of women who may not have any kind of credit history. Some women find that because bank accounts, mortgages, and credit cards were all in their husband’s name, there is no record of their financial reliability. Traditional banks, therefore, consider them to be a risk because they don’t’ know enough about their spending habits.
It’s also true that women are less likely to see out funding than men. This might be because they don’t think they’ll be eligible for one, based on the reasons we’ve covered above. If you don’t think that there’s any chance that you’ll be accepted, then why would you go down the avenue of trying to apply? Small business loans for women isn’t something that’s explored because it’s not thought to be viable.
Small Business Loans for Women – What Are the Options?
It’s not all bad news though. Although there aren’t any small business loans for women exclusively, there is an increasing number of alternative funding options. These avenues place less emphasis on ‘traditional’ markers of risk list credit score or trading history and consider the bigger picture such as revenue projections. Let’s run through some of the options available.
(1) Start-Ups with Less Than 1 Year of Trading History
New businesses can find it difficult to secure funding, especially during the first year of operation. Without a track record of successfully generating income, most traditional banks will be nervous of lending in case they don’t get the money back. They usually like to see proof that your business can create consistent sales before agreeing to any borrowing.
Although it may be difficult, it’s absolutely possible if you know where to look. If you have a good level of personal credit then you could consider taking out a personal loan. Business credit cards may also be a suitable alternative and provide the necessary financing over the short-term.
If you don’t have a strong personal credit history, then there are still lenders who will be willing to support you. The downside is that you’ll often pay much higher interest rates with can make these types of loan uncompetitive. Companies like Kabbage and OnDeck are usually willing to lend to people with a poorer credit history but will charge an interest rate of between 9% and 99%! Although this may not sound appealing, it might be a suitable short-term option to tide you over until you’ve proven your creditworthiness and can access lower-cost finance options.
However, our small business loans are different. We ask that you’ve been trading for a minimum of 6 months, have a personal credit score of 500, and are generating at least $10,000 a month on average. In return, we offer competitive interest rates that are far below comparable lenders, so that every female entrepreneur can grow their business and achieve their potential.
(2) Businesses With 1-2 Years of Trading History
Once your business has established a track record, you should be able to access more lending possibilities. With at least a year of revenue and strong future projections, you should be able to secure a small business loan, although your initial options may be limited. Depending on your recent business performance, you may be able to access larger loan amounts, agree more competitive interest rates, or favorable repayment terms.
Most lenders who are willing to offer loans in this category will charge interest rates that vary between 9%-50%. Although the baseline rates match those of loans available to 12-month operators, they don’t extend as high as the eye-watering 99%.
If your business still has a low credit score at this point, there are steps you can take to improve it. Take out a business credit card can help you build up your credit history as long as you make all of your payments on time. Use the card to pay regular bills and set up a recurring payment to cover it. This way you won’t accidentally forget to pay it off every month (which can actually be detrimental to your credit score).
Another option to build up your business credit is setting up supplier trade lines. It’s likely that some of your suppliers report back to business credit bureaus, so this can help you to establish a track record of reliably repaying money that you borrow.
(3) Businesses With 3+ Years of Trading History
With three years (or more) of trading history, you’ll be in a much stronger position to seek out a traditional small business loan. By now, you’ll have several years of accounts which demonstrate the reliability of your income and ability to repay debts on time. With a consistent annual revenue and strong profitability projections, you should be able to secure a competitive deal.
Small business owners who can show growth and the ability to make repayments, will be rewarded with the most competitive terms. You can expect longer repayment durations, lower interest rates, and higher loan amounts (dependent on their revenue).
Of course, if you explore alternative options then you won’t need to wait three years for competitive rates. Modern-minded lenders like Strategic Capital evaluate consistent growth as a primary metric. Sure, we consider your credit score, but it’s not the most important factor in our lending decision. The application process for our small business loans is also quite different to a traditional SBA loan or bank loan. It’s streamlined and simple – all we need is a signed credit application, the last 4 months of business bank statements, and proof of ownership (much less than the old-school alternatives). Best of all, the entire application can be completed in minutes and business owners often receive a decision within just a few hours.
Other Forms of Business Support for Women
In addition to business loans for women, there are other forms of support available. Associations, councils, and grant-facilities are all available to provide information, resources, and even funding.
The National Association of Women Business Owners (NAWBO) has over 5000 members across the United States. It represents the interests of female entrepreneurs across all industries and has significant clout with elected officials in Washington, D.C. Their website houses a comprehensive library of resources on a range of topics as well as an online learning platform.
WomanOwned serves over 3.5 million women business owners from around the world. They provide online business information and networking assistance as well as a number of resources for setting up, running, and growing businesses. This includes grant and funding information, along with connecting women-owned organizations with small businesses and potential partners.
The National Women’s Business Council (NWBC) is a non-partisan advisory council that provides a source of advice to the President, Congress, and the U.S. Small Business Administration. It’s an independent voice for women entrepreneurs that conducts research on issues of importance.
A free option is to join groups on LinkedIn (or other social platforms) that are aimed at women entrepreneurs and business owners. Here are a few of the most popular ones;
For even more tailored support you can also seek out niche groups that are specific to your business area. Examples include Women Business Leaders in Health Care and the Women in Fitness Association (WIFA).
Summary – Small Business Loans for Women
Although the range of small business loans for women has been limited in the past, this is starting to change. The increase in alternative funders competing with traditional banks means you have more options than ever to secure working capital and fuel the growth of your venture. Small business lending is no longer the domain of big banks, as smaller organizations have developed more competitive alternatives. Instead of considering the usual factors like credit score and trading time, they look at a wider range of influences. This means that small business loans are more accessible for female entrepreneurs, with fewer hurdles and less red tape.
Whether you’re just starting out on your entrepreneurial journey or have an established business, you’ll find an ever-increasing number of lenders who are willing to work with you. In the past you may have rejected the idea of a business loan, assuming that you wouldn’t be accepted. But the evolving financial landscape means that your options are growing and rates are competitive. By researching small business lending from a wide range of sources, you’re sure to find a suitable solution that meets your unique needs.
How We Can Help
Strategic Capital offers numerous small business loans for women (and men too) that support organizations across the USA. Transparency, innovation, and expertise are the driving factors behind everything we do.
With a talented team of advisors, a plethora of funding partners, and the best technology available -we go above and beyond to help our clients receive their capital rapidly with the industry’s most competitive repayment options and interest rates. We want to break speed records, not bank accounts.
Upon submitting your application, it’s reviewed by a dedicated Capital Advisor. We generate the best rates and terms at lightning speed through our funding matrix and robust lender network. Yep… it’s that simple. Learn more about our small business loans here.
Checking for pre-approval will not affect your credit score.