The number of women-owned businesses in the U.S. is growing. The latest Census data counted over 1.1 million companies owned by women entrepreneurs in 2018, and these companies do over $1.8 trillion in sales each year. Together, they employ 10.1 million workers.
While these stats are impressive, most businesses will need outside funding at some point. If you’re a woman looking to start or expand your company, you may find this list of resources a great place to start.
Qualifications for Women-Owned Business Loans/Grants
Numerous loan programs and grant opportunities are accessible to women entrepreneurs, each characterized by its own set of requirements and criteria. In general, companies must be at least 51% owned and controlled by women. Programs like the Women-Owned Small Business (WOSB) Federal Contract program also require that women make long-term decisions about the company and manage the day-to-day operations. This particular program is dedicated to giving at least 5% of federal contracting dollars to companies owned by women.
Loans also adhere to specific guidelines that may not be influenced by whether you are a woman. These include the requirement to:
- Give a detailed business plan for new businesses
- Show your sales and income history
- Be able to provide collateral (for larger loans)
- Demonstrate a good credit score and history
Lenders like to see that a woman-owned business is a good credit risk, is likely to be paid back, and that it meets the overall goals of the program.
Different Types of Loans Available For Women Entrepreneurs
Loans are one way for a business owner to get working capital to pay bills, hire employees, or buy products for resale. A loan needs to be repaid, so it’s generally an option for companies that demonstrate sound financial practices and the ability to meet the payment obligations. Securing loans can pose a challenge for newly established businesses, particularly when seeking substantial amounts. Fortunately, there are many loans to choose from, each with different rules for who qualifies.
SBA Loans
The Small Business Administration (SBA) may be one of the best-known solutions for those looking for business loans. They are open to all qualified business owners, regardless of gender or sex. However, some additional benefits can be provided to women with an interest in growing their businesses.
SBA loans include:
- SBA 7(a) loan: This is the most common of the loans and can get business owners up to $5.5 million in loan funds to use for day-to-day expenses, expansion, real estate, machinery, or working capital. In some cases, the loan proceeds can also be used to refinance expensive debt at lower rates.
- SBA 504 loan: If you’re a woman-owned business with a plan for boosting your local economy, this loan may be for you. It’s designed to finance major fixed assets and can’t be used for refinancing or supplies. With a loan cap of $5 million, however, it offers liquidity for companies looking to upgrade their warehouse or offices.
- SBA microloan: You don’t have to borrow millions to find the SBA offerings useful. The microloan, available in amounts of just $500 to $55,000, is a good option for working capital or supplies.
SBA loans have special requirements, including that the business must be owned and operated in the United States.
The SBA also offers the 8(a) program. While not a loan, this program gives socially and economically disadvantaged small business owners certification to help them receive a set-aside portion of federal contracts, in addition to business development help, mentoring, and training. Certified 8(a) companies also get priority access to federal surplus property.
Online Business Loans
The Small Business Administration (SBA) isn’t the only source for obtaining a business loan. Numerous companies provide the convenience of applying for loans right from your home or office. These online loans offer a streamlined application process, often allowing you to preview the loan rates before making a decision.
An additional advantage is that these term loans can accommodate individuals with a limited business history or less-than-perfect credit. While they are accessible to many, it’s important to be aware that this convenience may come with a cost. Some online lenders impose higher interest rates and fees. It’s worth noting that while online lenders may market their services to women, they are available to anyone meeting the loan’s qualifications.
Bank Business Loans
You may already rely on a traditional bank for your business checking account or investments. Why not consider what they have for business loans? One advantage of working with your existing bank is that they know you and have much of your information on file already. They may offer discounts for connecting your business checking account to your loan account, with a lower interest rate for setting up automatic payments on your loan every month.
You don’t have to be an existing customer to apply for most business loans, however. While convenient and possibly more affordable, many traditional banks are looking to expand their loan business to companies and may be happy to hear from a woman-owned business.
Microloans
We’ve already mentioned the SBA’s microloan program, with “micro” being the important part of the word here. These loans are smaller than traditional business loans, ranging from just a few hundred dollars to thousands. The advantage of these microloans is that they can often be paid back quickly, making them an appealing option for those who may not qualify for a larger, long-term loan.
If you need a way to pay your distributor or payroll until your busy season, micro-loans offer some flexibility with their smaller fund amounts and range of uses.
Wondering where to locate microloans? You may find them through your bank, SBA lender partners, and even with certain private online lenders, although they might not explicitly label them as “micro” loans.
How To Apply for Business Loans
Applying for a business loan is the same general process, regardless of whether your business is women-owned or not. It may be the first time you’ve reached out to a lender for money, but it doesn’t have to be a scary process. Lenders are businesses, just like you, and they want to make a profit from the interest on loans while ensuring that they get paid back on time. Providing comprehensive information to potential lenders significantly improves your chances of securing a loan. Be well-prepared to showcase your business achievements, whether you’re a new entrepreneur or an established one. The more you can demonstrate your business success, the more likely you’ll receive a positive response when you apply for a loan.
What To Expect
Every loan is different, from how the applicant is handled to the loan interest rates and total funding amounts. How you can use the money may differ between lenders, as well. Since there’s so much variety, it’s best to come into the loan process with a list of questions to help you learn about the loan and what you can spend the money on.
Things to go over with the lender include the following:
- What do I need to use the money for?
- How much do I need? How much would be nice to have?
- Do I want a long time to pay back the loan? Or is this a short-term opportunity?
- What interest rate am I willing to pay?
- Will there be penalties for paying off the loan early?
- Is this a true loan to be paid back and then closed? Or is this a line of credit that can be borrowed against again and again?
- How will I pay for the loan each month? Where in the budget will I find the money?
- How long will it take from the time I apply to when the money is deposited into my bank account? Is that quick enough to help me?
- How will a loan affect my tax situation? Should I consult with a tax professional before I apply?
- What is my credit score? Is that sufficient for the loan amount and rates I’m looking to pay?
Pre-Application Checklist
Once you’ve decided to apply for a loan, you should assemble your paperwork and important information to make filling out the application an easier task. Many loan applications, especially those online, can be completed in a few minutes, especially if you have your business information handy.
Pre-approvals, which can show you a glimpse of your rate and loan amounts, can often be provided almost instantly and don’t cause a hard pull on your credit report. Consider a pre-qualification or pre-approval application if you’re unsure of what’s out there. It can give you more information about what loans you may get access to and if they are worth pursuing with a full application.
Things to bring to your application session include the following:
- Business name, principal place of business, owner name and information, and the date your company was started
- Your business plan, along with industry information
- Expenses and account receivables
- Financial projections or reports showing your estimated profit for the next three to five years
- Tax documents
- List of ways you’ll use the money and how it will help your business overall
- Your plans for paying the money back with your existing budget
These documents make applying for a loan much easier, whether you’re funding a woman-owned business or a veteran-owned business.
More Business Credit and Loan Resources for Women Entrepreneurs
Small Business Development Centers (SBDCs)
This nationwide network of offices assists small business owners in marketing, finances, production, technical engineering, and economic development. They offer special programs for minorities, veterans, and women, including help with applying for Small Business Innovation and Research (SBIR) grants.
National Women’s Business Council (NWBC)
This non-partisan federal advisory council offers advice to federal lawmakers, the President, and SBA, giving a voice to woman entrepreneurs across the country on important economic matters.
Women’s Business Centers (WBCs)
These offices help create a level playing field for women through free or low-cost training programs and access to small business financing and mentoring.
SCORE – Service Corps of Retired Executives
Made up of experienced, retired business owners, this group of men and women teach workshops, lead training sessions, and offer mentoring to new and established businesses to help them thrive in the changing economic landscape.
Venture Capital Firms and Angel Investor Networks
While not directed at women alone, these funding groups are made up of high-net-worth investors who want to help early start-ups grow. They give cash in exchange for company equity.
Ascent online learning platform
This web-based training center provides training, tutorials, quizzes, exercises, and tools to help women start and grow their companies.
This program takes women through every stage of running a business through a free curriculum. It’s offered in English and Spanish, and those who complete it will have a business plan for helping to start or grow their company.
National Association of Women Business Owners
This dues-collecting organization represents women in all industries through chapter groups across the U.S. The National Association of Women Business Owners (NAWBO) works to educate and empower female entrepreneurs, as well as affect positive change for women business owners.
Women-Owned Business Loans FAQ
Does SBA lend money directly to entrepreneurs?
The U.S. Small Business Administration is not a bank or lender, but it works with lenders to match small business owners to the loan products best for them. The SBA may guarantee the loan, which means they take on most of the risk. They don’t directly loan out funds, however; this is done by the financial institution.
Can I get a loan with bad credit?
The definition of bad credit can vary from one lender to another. While credit unions and most traditional banks typically shy away from granting business loans to individuals with very poor credit, some small banks may still extend loan opportunities to those who have faced previous credit challenges. Offering collateral and paying higher rates are ways that may help you get funding with even a less-than-stellar credit history.
How hard is it for a woman to get a business loan?
There are plenty of loan choices out there to help female business owners secure funding nowadays, and the good news is that most of them are open to everyone who qualifies, not just women. Your odds of getting a loan approved depend on several factors, but what lenders really want to see is that you can handle paying it back on time.
