Small Business Loans for Women: A BlueVine Guide for 2018May 8, 2018 By Zoe Weisner
More women are starting their own businesses. But when it comes to entrepreneurship, it’s still a man’s world. This is certainly the case when it comes to small business financing.
According to a recent American Express OPEN report, not only do women receive less than 50 percent of funding than men, but it also appears that the lending gap is getting worse.
Women entrepreneurs continue to encounter gender bias when it comes to raising capital, as Fundera also reported.
This is especially visible in certain industries like technology, fashion, and finance, where women were perceived to be less successful and weaker managers than their male counterparts. So, when it comes to financing, women business-owners still face many hurdles.
A Variety of Financing Options
Fortunately, women business owners now have more financing options with the rise of alternative business lenders. Online alternative lending makes it convenient for women business owners trying to juggle their many responsibilities.
“I have four kids,” Misty Cooley, owner of Penick Concrete Services, says. “I don’t have time to go to the bank. I can do everything online while taking care of my kids at the same time.”
Finding capital for women business owners shouldn’t be difficult. From traditional loans to new types of online financing, there is a growing number of programs specifically for women business owners.
Here’s a quick overview of financing choices for women business owners:
A term loan is a lump sum you borrow and repay based on set terms over a fixed period of time. Term loans normally last from 1-10 years, but some long-term loans can last up to 25 years or longer. Term loans may have fluctuating interest rates.
When it’s a smart option: Because it is based on fixed payments on terms that generally last more than a year, a term loan is typically the most cost-effective way of financing a major business expense. A term loan is a smart option if you need funds for a major business expense, such as buying a piece of equipment or remodeling a store. A term loan is also ideal if you’re looking to expand your small business by opening a new location or hiring more people.
The best type of business term loans are those guaranteed by the U.S. Small Business Administration. SBA loans can go up to $5.5 million based on low interest generally under 10% and are payable from 7 to as long as 25 years.
But before you look for a loan through the SBA, however, women business owners need to determine exactly how much funding they need.
“Too often I hear women business owners say they will take whatever they can get rather than defining their need. Businesses will be more successful if they seek the full amount of funding needed, rather than accepting whatever they can get,” San Francisco SBA District Director Julie Clowes says.
It also pays to understand the different types of SBA loans for “there are loan programs for every stage in the business cycle,” Clowes says.
Getting an SBA loan can entail a long and tedious process involving stringent requirements. You will be required to present a long list of documents and information.
“Often it is the back and forth with the lender for missing documents that takes longer than the processing of a complete application” Clowes states. Fortunately, she adds, the SBA has several resource partners “that offer free one-on-one counseling to help you prepare for meeting with a lender.”
These resources include organizations such as the Service Core of Retired Executives (SCORE), Small Business Development Centers (SBDC), and the SBA’s own national network of Women’s Business Centers.
Business Line of Credit
A business line of credit offers women business owners more flexibility. Unlike term loans, which offer borrowers a fixed lump sum upfront, a business lines of credit gives a business owner access to a set amount but with the option of drawing and paying fees only they funds they need. Traditional banks offer business lines of credit, but they typically have stringent requirements. Fortunately for women business owners, business credit lines are now also accessible through alternative lenders.
When it’s a smart option: A business line of credit is good to have for addressing short-term funding needs, including emergencies. It is also a less expensive and more flexible form of financing for women business owners who do not wish to be saddled with a huge debt. In many cases, a business line of credit is also ideal for growing a business.
Invoice financing is ideal for businesses that cater to other businesses, especially if their customers typically take weeks to pay for their products or services. This type of financing, which is also known as accounts receivable financing or invoice factoring, lets you get cash on unpaid invoices. Instead of waiting 30, 90, or even 120 days for a customer to pay, you’re able to get access to funds that you’ve already recorded as revenue.
With invoice factoring, for example, you can immediately get a huge chunk of the funds in an unpaid invoice—sometimes up to 95% of the total amount. Once the account receivable is paid off by your client, your business will receive the remaining rebate minus a fee from the factoring company.
When it’s a smart option: Invoice financing is best used for businesses that sell products or services to other businesses and that have reliable clients. Additionally, invoice financing benefits businesses with inconsistent cash flows because they can choose which invoices to submit for payment. Like a business line of credit, invoice financing is also a smart option both for plugging cash flow gaps and for growing a business.
Additional Resources for Women Business Owners
A strong support system of women entrepreneurs and business owners who can offer advice and networking opportunities is crucial to take your business to the next level. Here are some of the most well-established resources for women business owners:
One of the oldest and well-respected women’s business associations, NAWBO has a network of over 10.1 million women-owned businesses in the United States. Created with the intention to provide women-owned businesses the opportunity to connect with other women business owners, NAWBO equips its members with the tools to succeed in any industry.
The Office of Women’s Business Ownership raises women entrepreneurs through business training, counseling, and federal contracts programs coordinated by SBA district offices. Take their courses to update your skills or get into contact with your local business center.
Grants for Women Business Owners
Although women-only grant programs are far and few, we’ve compiled a list of recent women-focused grant and mentorship programs that are always on the lookout for fresh applicants.
Regional Grant Programs
Beacon DC is a community-based program geared to women entrepreneurs in the D.C. area. The organization runs the district’s largest online directory of women-owned businesses, and offers resources for women entrepreneurs. BEACON also promotes the involvement of women business owners in the district. The organization aims “to make D.C. the most influential and supportive city in the nation for women-owned businesses,” says Deloris Wilson, a BEACON fellow.
The New Economy Initiative’s annual NEIdeas Small Business Challenge annually awards $400,000 total cash prizes to existing businesses in Detroit, Hamtramck, and Highland Park of southeast Michigan. While the program is not specific to women business owners, over 65% of winners were women-owned businesses. To apply, simply submit your idea in 400 words through their online application, available on their website.
The Impact NH Fund seeks to encourage and educate women to become angel investors and increase funding for women-owned businesses. In order to qualify for eligibility applicants must have at least one woman in a C-level position and have significant operations in New Hampshire. For more information on eligibility requirements, check their website.
National Grant Programs
The Startup Ladies, an Indianapolis-based company known for providing entrepreneurial women with business resources and networking services, are now accepting applications for grant funding. It’s through the Startup Ladies Fund for women seeking funding to prove a scalable business concept. Grants are made twice a year and applications are accepted on a rolling basis.
Cosmetic powerhouse Sephora’s exclusive Accelerate program selects early-stage beauty businesses founded or co-founded by women. The program not only grants the selected candidates grants of $2,500 but also lets them participate in a seven-month mentorship program. At the end of the seven months, candidates get to present their company toindustry experts, venture partners, and senior leaders within Sephora for possible partnership opportunities.
Named after a young woman who died before she was able to fulfill her entrepreneurial dreams, each year the Amber Grant selects one woman per month to give $500 for her business. After the 12 winners are chosen, one is awarded an additional $2,500 at the end of the year. Applicants can also request for the possibility to receive personal mentoring and/or partnership with an Angel Investor.
For the past 13 years, Eileen Fisher has given thousands of dollars to women-owned businesses that create environmental or social change. Each year, 10 women are each awarded $10,000 to finance their businesses and given a trip to New York City to celebrate with the Eileen Fisher community. To qualify, your business should be in operation for at least three years and generate under $1 million in revenue.
Completely ran by volunteers, The Open Meadows Foundation offers grants of under $2000 to women-lead nonprofit organizations and startups businesses that are committed to improving the lives of women and girls. Grants are awarded twice a year and are given to organizations with budgets less than $75,000.
Founded by entrepreneur Tory Burch, the Tory Burch Foundation offers affordable business loans to women small business owners through community lenders, also known as Community Development Financial Institutions (CDFIs). The foundation also runs an education program geared to helping women “gain practical skills in such topics as negotiation, marketing and employee management.”
Brazen Global is a network of women entrepreneurs with chapters in major U.S. cities including St. Louis, Chicago, Dallas, Denver, Detroit, and Philadelphia. The membership organization is open to women-owned businesses in all industries and at different stages of development.
This Silicon Valley-based organization offers a 12-month program geared to helping women entrepreneurs who are in the process of launching their own businesses. The program includes sessions in startup development, business and funding strategy and negotiations.
International Grant Program
Since 2006, Cartier Women’s Initiative Awards has awarded outstanding women business owners all around the world. Over 80% of those awarded businesses are still active today. In order to apply, your business must be in its initial phase and an original concept. The chosen six laureates will each receive $100,000 for their business and one-on-one personalized business mentoring. Second prize is $30,000 for each of the 12 finalists.
This article was updated on May 8, 2018.
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The information and insights in this blog post are provided for educational purposes only, and do not constitute financial advice from BlueVine. Please consult your financial advisor before making any business financing decision. For information about BlueVine products and services, please visit the BlueVine FAQ page.
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