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Finance & Accounting, Small Business Loans, Women in Business

How to Get Small Business Loans for Women

small business loans for women

Are you a female entrepreneur who is looking specifically for business loans for women? If so, you’re in good company. There has never been more women starting businesses, and loans are often fueling their success. Here are just a few of the current statistics that highlight the current demand for business loans for women:

  • Women-owned businesses account for more than 40% of all privately held firms in the United States.
  • One in five businesses with revenue of $1 million or more is woman-owned
  • 10.1 million businesses are owned by women, employing more than 13 million people and generating more than $2 trillion in sales to the economy each year.

Despite the clear success of women-owned businesses, business loans for women are still harder to come by than those for male business owners even when taking into account factors such as industry and credit score.

Not surprisingly, many female business owners are well aware of the challenges of obtaining financing and are choosing to rely less on outside capital than men. Because of the difficulties of obtaining business loans for women, female-operated businesses often have less working capital and tighter budgets to purchase the things they need to fuel their success. Women are also more likely to seek out non-traditional forms of lending such as peer-to-peer financing, government or non-profit assistance, or alternative small business loan for women providers such as Kabbage.

Business Loans for Women: Where to Start

If you’re considering applying for business loans for women, a good place to start is the Office of Women’s Business Ownership with the United States Small Business Administration (SBA). They oversee a network of Women’s Business Centers (WBCs) across the United States and provide training and counseling for women, particularly those who are economically or socially disadvantage. They also provide assistance in applying for SBA backed loans.

While the SBA doesn’t offer any specific loan programs for women, it is one of the largest loan guarantors in the United States. This gives women-owned businesses the opportunity to apply with certified commercial lenders for loans backed by the government. And, many of these certified lenders do have special programs designed to help women-owned businesses.

SBA Loans for Women Business Owners

Microloans – The SBA’s Microloan Program provides loans up to $50,000 to help small businesses and some non-profit childcare centers. The average SBA microloan is $13,000, and intermediary lenders have their own lending and credit requirements.

General Small Business Loans – The SBA offers the 7(a) Loan Program to help businesses in the acquisition, operations, or expansion of an existing business. These are typically larger loans than those issued through the Microloan Program. The average 7(a) loan in 2012 was $337,730, and the maximum loan amount is $5 million.

8(a) Business Development Program – The SBA’s 8(a) Business Development Program is not a loan program, but rather a resource for minority and women-owned businesses to grow through one-to-one counseling, training workshops, and management & technical guidance. This program is also beneficial to women and minorities because it provides access to a variety of government contracting opportunities to enable them to compete in the federal marketplace.

Women business owners who are interested in any loan program or the 8(a) program should contact their local SBA district office. As well, the SBA’s website offers a wealth of resources for women business owners through their online learning center. There are online training courses, informational videos, chat sessions and many tools that can help assist you in growing your business.

Additional Funding Resources for Women Business Owners

The National Association of Women Business Owners (NAWBO) is another very good resource for female business owners. They are the leading organization representing the more than 10 million women-owned businesses in the United States. With 70 chapters across the United States, the organization is a one-stop resource for helping female business owners including offering information about business loans for women. They keep an updated list of lenders along with offering events, programs, and even a resource center with a wealth of information for growing a business.

Private bank business loans for women are another option. Many community and national banks offer specific loans and other financial solutions for female entrepreneurs. For example, Wells Fargo, a leading provider of small business loans for women in the United States, launched a national outreach and education program in 1995 to help women small business owners reach their financial goals. They continue to work directly with the National Association of Women Business Owners and offer programs that include workshops, seminars, tradeshows, research, and financial guides. In their commitment to recognize the success of women business owners, Wells Fargo also offers cash grants and national recognition awards on an annual basis.

Union Bank is another loan provider that offers competitive interest rates and flexible underwriting for both lines of credit and business loans for women and minority owned businesses. It’s also well worth asking your local bank or credit union if they have specific loan programs for women.

Small Business Loans for Women: A Few Tips

Find Out Your Options
Take the time to research all of your loan options. Compare interest rates, application requirements, processing time, and loan terms. Not all loans are created equal, so it can really pay to find the right one!

Start Building Business Credit
Even if your personal credit scores are good, it can be very challenging to obtain business loans for women. Establishing good credit for your business before you apply for a loan is a smart idea. This can be done through paying vendors on time and applying for a business credit card and making payments on time.

Look Better on Paper
Many small business owners, both male and female, make the error of not depositing cash into their business bank accounts before paying themselves or their vendors. This can be a big mistake! Making those deposits is your proof of cash flow if you want to obtain a business loan. Also paying vendors on time and filing taxes before the deadline can help too!

Focus on Your Business Plan
A business plan isn’t just busy work required by the bank or the Small Business Administration. And, it shouldn’t be tucked into a drawer once you’re done writing it. It should stick with you as a dynamic blueprint for the future growth of your business. By keeping current with your financial projections, marketing strategies, and development efforts, you will always have the back up to show potential lenders and investors what you’re doing now and where you’re headed in the future. Tip: The Small Business Administration offers both classes and online articles to help you write a business plan.

Consider Alternative to Traditional Business Bank Loans for Women
Thanks primarily to the meltdown of the financial markets and extended recession that started in 2008, banks have significantly slashed the number of small business loans they are issuing. Despite the fact that the economy has begun to pick up, the credit crunch continues. Simply put, business loans are not all that easy to come by – even those backed by the SBA. Fortunately, there are alternatives to bank loans that are definitely worth exploring.

  • Peer-to-Peer Loans – This relatively new option for acquiring funds for a business is gaining ground thanks to its popularity on the Internet. Individual investors join forces to lend money to small business owners through online platforms such as those offered by sites like Prosper.com and Lending Club.
  • Microloans – Some cities and states are creating their own microloan programs to help entrepreneurs launch and grow businesses to support local communities and their economies. It’s definitely worth the time to check with your local or state government office to find out if there are any such programs in your area.
  • Asset-based Lending – This form of financing is also referred to as factoring is based on a business selling invoices, receivables, purchase orders, or contracts. Asset-based lending is most commonly used by business-to-business companies that have cash flow issues. The cost can be high for asset-based lending with annual interest rates typically topping off at 18 to 30 percent annually.
  • Alternative Business Loans – Small businesses that don’t meet traditional bank requirements can still obtain funds through non-bank entities such as Kabbage, which specialize in offering ready cash for working capital. Kabbage does not use a business or a business owner’s credit score as the primary criteria for determining approval for funds. Instead, they look at data from a wide range of sources including eBay, Amazon, UPS, PayPal, shipping analytics, and more. For women-owned businesses with no credit or poor credit, Kabbage can be a great way to get cash for purchasing inventory, hiring more staff, or buying equipment. The application process is much less complicated than that of traditional banks, and funds are typically available in less than 10 minutes, as opposed to the weeks or even months it takes to get approval from a bank.
  • Loans from Friends and Family – Of course, many female entrepreneurs simply turn to their loved ones for acquiring the cash they need to start a business or to enable it to grow. This is, in fact, one of the most common sources of financing for small business owners. And, there are definite perks to going this route including typically lower interest rates, more flexible payment terms, and no approval process. However, there are often strings attached to loans given by those you care about. To minimize any chance of problems down the road, it’s always a good idea to write and sign a detailed loan agreement with the terms clearly spelled out.
  • Lease-Backs – If you have real estate or equipment that has substantial value, a lease back could be another possibility for funds. This is when you, as the borrower, sells your asset at market value and leases it back at the market rate for a set amount of time. This option is typically more favorable when you have real estate to lease back.
  • Personal Credit Cards – Countless business owners have launched successful businesses by charging the items they need on their personal credit cards. Is it the perfect solution? Probably not. But, it’s often the easiest way to get cash quickly when you need it. If you are going to use credit cards, make sure to only charge what you can definitely pay back so you are not putting your own personal credit at risk.

Keep a Close Eye Out for Scams
Unfortunately, not everyone in the loan business is honest, and there are certainly predatory lenders out there that would love to make a quick buck off an unsuspecting business owner looking for business loans for women. If something looks too good to be true, it probably is. Do ask questions, and make sure you get answers. A few resources for helping you determine if a loan provider is legitimate or if it’s one you should stay clear of:

  • The Federal Trade Commission is the complaint department for the federal government. You can file a complaint if you’ve been taken by a loan scam or if you suspect a scam. And, you can get some very helpful tips on their website for how to spot a scam.
  • The National Fraud Information Center is a division of the National Consumers League. They provide a daily Internet Fraud Report that gives up-to-the-minute information about online scams including those that involve financing for businesses.
  • ScamBusters is a fantastic site that closely monitors scams worldwide.

Without a doubt, it can be tremendously exciting and even a little scary to launch a new business. Full of hope and promise for the future, it makes good common sense to carefully weigh your options before deciding upon a business loan for women or any other type of financing. With the right type of funding and a good game plan for how the cash will be utilized, you can position yourself for entrepreneurial success.

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Kabbage Team

The Kabbage Team is here to not only fund the small business loans you need, but to help you grow your business through free marketing tips, webinars, tools and more. Is there something you'd like us to cover or want to get your small business featured on our blog? Send us a note at content@kabbage.com.

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