Starting a business requires capital, and this is a challenge all entrepreneurs face, but women face additional hurdles when it comes to getting funding.
Although there are more women-owned businesses in the US than ever before, women entrepreneurs still face barriers to traditional loans, such as higher interest rates, smaller loan amounts, and gender-based biases in the lending process. That’s where small business loans for women come in.
These loan programs are designed to empower women entrepreneurs with more favorable terms, easier acces,s and resources specific to their needs. In this article, we will go over the best small business loans for women and walk you through the process of applying for them.
Why Do Women Entrepreneurs Need Special Loan Considerations?
Women-owned businesses have a huge impact on the US economy; women own 40% of all US businesses. However, women entrepreneurs face unique challenges when it comes to capital. Studies show women receive a smaller percentage of venture capital funding than men, and many can’t get bank loans because of perceived risk and bias.
The financing gap is a concern; women are asked to provide more collateral and documentation. Knowing these challenges, several loan programs and financial institutions have emerged to address the needs of women entrepreneurs. These resources are designed to level the playing field so women can get the funding they need to succeed.
The rise of fintech (financial technology) companies has made more small business loans for women available by offering flexible and streamlined application processes for women entrepreneurs.
Best Small Business Loans for Women
There are many small business loans for women, each with its own benefits and requirements. Here are some of the top small business loans for women:
SBA 7(a) Loan
The Small Business Administration (SBA) offers the 7(a) loan, the SBA’s most widely used loan program. It provides women entrepreneurs funding for various business needs, such as working capital equipment and real estate. The benefits of SBA 7(a) loans are lower interest rates, longer repayment terms (up to 25 years) and smaller down payments than traditional loans.
To qualify for an SBA 7(a) loan, you must meet certain requirements, such as a good credit history, solid business plan and sufficient collateral. SBA loans require more documentation and a longer approval process than other types of loans, but they are a top choice for women entrepreneurs because of their favorable terms.
SBA Microloan Program
The SBA Microloan Program provides loans as high as $50,000 for women-owned small businesses. This program is perfect for women entrepreneurs who are just starting out or looking to expand on a smaller scale.
SBA microloans have lower qualifications and more lenient requirements than the 7(a) loan, so they are a great option for those with limited credit or startup capital.
Microloans can be used for work capital, inventory, equipment, and other business needs. They may have slightly higher interest rates than the 7(a) loan but are a great option for women entrepreneurs looking for small and flexible loans.
Women’s Business Centers (WBC) and Women-Owned Business Loans
Women’s Business Centers (WBCs) are non-profits that support women entrepreneurs with training, mentorship and financial resources. Many WBCs partner with lenders to offer loans for women-owned businesses. These loans typically offer more favourable terms, including lower interest rates and extended repayment periods.
In addition to traditional loans, WBCs can help women get grants, business advice and networking opportunities. So, WBCs are a great resource for women who need financial support and mentorship. Many WBCs also help with the loan application process, so women don’t have to navigate the loan process alone.
Online Lenders and Peer-to-Peer Lending Platforms
For women entrepreneurs who have trouble with traditional lenders, online lending platforms and peer-to-peer (P2P) lending can be an alternative source of funding. Companies like Kiva, Fundera and OnDeck offer small business loans for women through fintech platforms. Online lenders have more flexible requirements and faster application processes than banks, which can be a big plus for women who need quick capital.
Online lenders and P2P lending platforms have fewer credit score requirements, so it’s a good option for women with limited credit history or lower credit scores. However, interest rates might be greater than those of traditional loans, so be sure to compare them before committing.
Grants for Women Entrepreneurs
In addition to loans, women entrepreneurs can look into grants which don’t require repayment. Several organizations offer grants for women-owned businesses. Examples are the Amber Grant, which awards $10,000 monthly grants and a $25,000 year-end grant, and the Eileen Fisher Women-Owned Business Grant, which gives grants to women entrepreneurs focused on social impact.
Grants are highly competitive, but they are also a great opportunity for women business owners to get funding without the burden of repayment. Women entrepreneurs should research grant opportunities and make sure they meet the requirements before applying.
How do you apply for a small business loan as a woman entrepreneur?
The application process for small business loans for women can be overwhelming, but with the right preparation, women entrepreneurs can increase their chances of approval. The steps to apply for small business loans for women are:
Get Your Business Plan Ready
A business plan is required when applying for any small business loan. Your plan should include an overview of your business, market analysis, financial projections, and a thorough outline of how the loan will be applied. A good business plan shows lenders you have a solid plan for success.
Check Your Credit
Lenders will want to check your credit before approving a loan. Review your credit scores and fix them if necessary. A number of online lenders have more lenient credit score requirements, but it’s still important to have a good financial profile.
Get Your Documents Ready
Prepare to provide documents like tax returns, financial statements, business ownership and ID. Having your papers in order beforehand will streamline the process of application and improve your likelihood of approval.
Research Lenders and Loan Terms
Take the time to research different lenders and compare their loan offers. Look for the best interest rates, repayment terms and fees. Some lenders may have special programs or incentives for women entrepreneurs, so make sure to check for any available benefits.
Application Process and Timeline
Each lender has its own application process, so make sure to follow the instructions. The application process can take anywhere from a few days to several weeks, depending on the lender and type of loan. Be prepared for additional requests for documents or clarifications during the approval process.
How can you increase your chances of getting your loan approved as a woman entrepreneur?
To get small business loans for women here are some tips:
- Build a professional network and get mentorship from other women entrepreneurs who have gone through the loan process.
- Keep your financial records in order and up to date so you can present a clear picture of your business’s financial state.
- Be clear and confident about your business goals and show your long-term commitment to success.
- If you encounter bias during the loan process, don’t be afraid to negotiate or look for lenders who support women entrepreneurs.
Endnotes
Capital is key to any small business, and women entrepreneurs face more challenges in getting funding. However, there are many small business loans for women, including SBA loans, microloans, grants, and online lending options.
By knowing the types of loans, preparing your business plan and following the application process, you can increase your chances of getting the funding you need. Whether you go for traditional loan or fintech solutions, the resources are available to help you grow your business. Start now and check out the best small business loans for women for you.
