Against all odds, women have made a footprint in the small business ecosystem. Over 13 billion, roughly 40% of all small businesses in the US, are owned by women entrepreneurs.
In total, these businesses employ 9M+ workers and inject over $1.7 trillion into the economy every year. That’s huge!
However, things haven’t been easy for women in business. For centuries, it has been hard for women entrepreneurs to obtain small business loans. Most traditional lenders look down upon them and reject outright to finance their business ideas.
Luckily many alternative lenders have stepped in, to bridge the lending gap, making it easier to access a small business loan for a woman.
There are even government programs, foundations, companies, and microlenders, geared towards helping women access grants and small business loans.
What is a business loan for a woman?
Small business loans for women are financing options geared towards helping women entrepreneurs access funds to start and grow their businesses.
Lenders in this category aim to close the historical lending gap for years and make it easier for women to access small business financing.
Different funding options for women
There are different funding options that women can look into to start and expand their businesses. They include:
Banks and credit unions
Banks and credit unions are the best sources for small business loans for women with good to excellent credit scores, substantial revenues, and extended trading history.
Loan terms and rates may vary from lender to lender, but you can be sure to access funding at the lowest interest rates and longer repayment terms than you can find elsewhere.
However, banks have stringent requirements and may require personal guarantees or collateral, which is a hurdle for women seeking funding through these traditional lenders.
On average, banks approve only 13% of loan applications, and the underwriting process can take weeks to months. Gender bias is also a bane in banks: men are more likely to get approved than women.
SBA loans
These are government-backed loans offered by the Small Business Administrations (SBA) to small business owners, including women. The SBA guarantees up to 80% of the loan amount from certified lenders, and you could get funded up to $5 million.
Like bank loans, SBA loans have low-interest rates of less than 9% and have long repayment periods. You can also take advantage of SBA programs like Women’s Business Center (WBC), geared towards helping women entrepreneurs to start and grow their businesses.
The downside is, SBA loans come with very stringent requirements, including a high minimum credit score, and you may not qualify unless your business is already established and profitable.
You’ll also brace for a prolonged application and funding process up to 60 days.
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Personal loans
If you have a good personal credit rating, you can use personal loans to raise startup capital or inject cash flow into your business. The good thing is, personal loans don’t require collateral, and they have less stringent requirements compared to business loans from traditional lenders.
However, personal loans have lower limits than business loans, and you may not raise enough money with this funding method. Again, you end up mixing your personal finances and business revenue, which complicates your tax filing and accounting producers.
Grants for women
Various companies and foundations offer grants to help creative women entrepreneurs raise capital for their businesses. Though grants are tough to qualify for, you should never shy away from trying.
If you qualify and win the challenge, you walk away with free money that you can use to grow your business without having to worry about monthly repayments.
Top grants that you can look into include the InnovateHER Challenge, Girlboss Foundation Grant, Tory Burch Foundation grant, The Amber Grant, and Eileen Fisher Women-Owned Business Grant, among others.
Online lenders
Arguably, online lenders are the best alternative sources of small business loans for women. Unlike traditional lenders, they employ advanced financial technology to process business loans without systemic racism and gender bias issues.
Again, online lenders beat other lenders with an easy application process, as you can apply from anywhere at any time. They also have transparent loan terms and include business loan calculators on their websites so that you can determine your loan costs before making the final application.
Once you get pre-approved and accept the loan terms, you could get funded within one or two days. Plus, fintech lenders have lenient loan requirements and are more likely to welcome small business owners with poor to fair credit scores.
The downside is, their loans carry higher interest rates than banks and have shorter repayment times of 24-60 months.
Microloans
Micro finances offer small business loans for women and are ideal for women entrepreneurs seeking smaller loan amounts.
Microloans are mainly targeted to informally run SMEs generating less than $500,000 in annual sales and are easier to qualify for than traditional business loans.
Even online lenders offer these types of loans up to $75,000.
Why a woman should consider accessing alternative funding options
There are several reasons why a woman should consider alternative lenders over traditional ones. They include:
No gender bias
Gender bias is a significant hurdle for women seeking funding from traditional lenders. In comparison, women receive less than 16% of business loans. Plus, a woman entrepreneur is 15%-20% less likely to get approved for a bank loan vs. a male counterpart.
Alternative lenders, like online lenders, use technology to process business loans without these issues. They won’t ask for your gender when you make the applications.
Fewer restrictions
To consider your loan application, traditional lenders require good to excellent credit, long trading history, and stellar business finances.
However, alternative lenders are the exact opposite. They are willing to use alternative data to assess borrowers’ creditworthiness. Thus, they are willing to work with borrowers with poor, fair, or no credit history.
Faster funding
Online lenders offer an easy application, quick pre-approval, and faster funding. Once you’ve accepted loan terms and made the final application, you could get funded within a day or two.
With traditional lenders, you have to brace a bureaucratic paper-laden application process and wait weeks to months to receive funds.
How to apply for a business loan for a woman
Here is a step by step guide on how to quickly apply for a small business loan women:
- Decide how much money you need to borrow and check your credit score
- Comparison-shop lenders based on their credit score and other requirements
- Pick the best lender and fill out an application form online to get pre-approved
- Accept the loan terms and share the required personal and business documents to make the final application
- Get approved and sign the contract
- Wait to receive your money within 1-2 business days
Visit the link in the intro to learn more about different loans for women and apply in a few steps to get funded.
