There are many options for finding outside funding as a woman entrepreneur or woman business owner of a startup company.
In light of the global pandemic, female small business owners are being exponentially impacted compared to their male counterparts. This has resulted in the prevalence of additional financing options that provide working capital to support women business owners. In hopes of leveling the playing field in a gendered job market, organizations like the National Women's Business Council and the U.S. Small Business Administration have implemented many programs to support women-led entrepreneurship for the upcoming year.
In knowing what small business loans are available for women this year and how to apply for them, your odds of getting approved will be increased.
Keep reading to discover the best small business loan options available for women right now and how to apply for them.
Types of Small Business Loans
There are four types of business loans that are available for business owners. Together with grants and nonprofit resources designed to help women business owners succeed, there are four types of small business loans:
- Small Business Administration (SBA) loans
- Bank and Credit Union small business loans
- Small business loans from online lenders
- Microloan programs
To decide on which type of business loan is best for you, it will depend on a few factors. Your financial profile, credit history and rating, financing needs, and business goals will all impact which type of loan will be the best for your business needs. In this article, we will focus on the top small business loan options available this year.
Small Business Administration (SBA) Loans
Here's the rundown on the Small Business Administration (SBA). SBA loans are not provided directly to a business owner. Instead, SBA loans are guaranteed through a network of lending partners. The allocated funding is then provided to a business owner, who is then able to use the capital to help grow their business. This is a great option for small business owners who may have trouble securing a more traditional loan by other means.
There are many SBA loan programs available, and some even specifically cater to small businesses operated by women. Notably, the SBA 7(a) loan program enables women business owners to borrow up to $5 million with a standard repayment term ranging from five to 10 years. What's great about the SBA 7(a) loan is that the program generally offers lower interest rates for qualified borrowers that are women. Although there is no official minimum credit score requirement, most SBA 7(a) loan lenders will require a credit score of somewhere around 600 for eligible borrowers.
This loan program helps women business owners with covering everyday capital expenses, refinancing existing business debt, buying new business equipment or vehicles, purchasing property for their business, buying necessary supplies, equipment financing, making renovations, or opening a new business location.
The application process for most SBA loans is pretty straightforward. Applicants must be owners of business operations that are based in the United States, that operate for profit, that have less than $7.5 million in average annual revenues, and that operate within the size guidelines designated for the particular industry. For more information on eligibility requirements, check the SBA standards tool.
Be that as it may, SBA loans have some caveats to keep in mind. For one thing, SBA loans over $25,000 require collateral in the form of personal or business assets. In addition, SBA loan applications require a personal guarantee when you own 20% or more of the business that you are applying for. Not to mention, most SBA loan programs (not including SBA express loans) take a few months to be processed and approved.
Bank and Credit Union Small Business Loans
Banks and credit unions are other options that women business owners can explore for additional capital. Lending guidelines will vary depending on the financial institution that you decide to apply with. As with other financing options, there are both benefits and disadvantages to this source of capital.
An advantage of working with a bank to acquire a small business loan is that they can offer fixed interest rates that are lower than other competitors. As long as you have a good credit score and credit history, you will be able to get low interest rates. Moreover, these types of loans can be customized to suit your specific business needs from loan amounts to the conditions of the term loan. Banks and credit unions can also provide female business owners with a business line of credit. This financing option functions similarly to a credit card that is designated for specific use for your business financing.
At the same time, it can take an exceptional amount of time for a bank or credit union to process a small business loan. Applications can be lengthy and often require an exceptional amount of background information and history reports for a lender to evaluate and determine your creditworthiness. If your small business needs immediate financial assistance, these loans will not be the best option for you. Further, these traditional bank loans will not be a feasible option for established business owners who have less than ideal or bad credit scores or credit history.
Online business loans, on the other hand, can be processed at a much faster rate. As long as you meet eligibility requirements, the speedy advantage of short-term loans from alternative lenders can make a world of difference for some small business owners.
Small Business Grants for Women
On top of business loans, it is beneficial to explore grant and nonprofit funding opportunities that are available for women business owners this year. These types of funding opportunities typically do not have to be repaid, saving you and your wallet extra stress. Best of all, there are millions of grants and nonprofit funding opportunities available this year that are specifically designed to help women succeed. The amount of funding and eligibility requirements will vary depending on the opportunity, but most will not have an application fee. Of course, given the nature of these financing options, the application process is much more competitive than other options.
With this in mind, you might consider applying for grants and nonprofit funding opportunities in addition to your loan applications. Start with federal grants, state grants, and local nonprofit organizations for capital opportunities. There are even websites specifically for small business owners, like challenge.gov and SBIR.gov, and women business owners, like grantsforwomen.org and The Open Society Foundations.
Here are some specific grants that women business owners can apply for this year:
- The Eileen Fisher Women in Environmental Justice Grants
- The Cartier Women's Initiative Awards
- The Tony Burch Foundation's Fellows Program
- The Amber Grant for Women
- The Women's Fund of Central Ohio Grants
- The Boston Women's Fund Grants
- The Chicago Foundation for Women Grants
- Ms. Foundation Grants
- Women Founders Network
Depending on the type of capital you are looking for and the industry of your business, it might also be beneficial to consider venture capital funding or other investment opportunities offered through private businesses. There are also many industry-specific communities that cater to women business owners. Women's business centers can similarly offer you additional resources for outside help and can even contribute to your business development plans.
How to Apply for Opportunities
When it comes to submitting your applications, make sure to review any guidelines to check that your business qualifies for the opportunity so as to not waste your time or anyone else's. Also, don't forget to submit supporting documents along with your application where applicable. This might include a copy of your business plan, credit history, and other personal information relative to your business.
If you don't have the time to apply for grants, consider hiring a grant writer to help you with the application process. Grant writers are often paid only as long as their submitted application to a grant program provides qualifying cash flow to your business. The grant writer will usually agree to collect a percentage of the business funding that is awarded prior to getting started.
Other Funding Options to Consider
- Angel investors
- Friends and family
- Personal loans
Financial Resources for Women Business Owners
- Office of Women's Business Ownership
- National Association of Women Business Owners
- National Women's Business Council
- National Resources for Female Entrepreneurs
- Women's Business Enterprise National Council
- National Women Business Owners Corporation
- U.S. Women's Chamber of Commerce
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Notice to the Reader
The content within this article is meant to be used as general guidelines or a business resource and may not apply to your specific small business operation. Always consult with professional counsel for legal, business, and tax advice to ensure that you're meeting competent standards of legal business operations.