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Small Business Tips

Guide to Small Business Loans for Women

Manasa Reddigari

Too often, female entrepreneurs are forced to put their business dreams on the backburner due to a lack of funding. But a business loan can help you overcome the financial hurdles of doing business if you know where to look for one.  Read on to learn why you need and how to get small business loans for women.

Why does my firm need small business loans for women?

Debt-averse female entrepreneurs might naturally question the need for a business loan that collects interest over time. But occasions will arise in the course of starting or running your venture when a business loan can prove valuable:

  • You need start-up capital and do not have your own funds or a personal loan from family or friends to fall back on.
  • You need to replace equipment or replenish inventory and don't want to draw from profits.
  • You're in the growth phase of your business and need to maintain a continuous flow of cash to keep up with increased spending on new product development, marketing or other initiatives.
  • You're having a "bust" cycle of business and need a short- or medium-term investment to tide you over until you can turn over a profit again.

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What are the challenges of obtaining small business loans for women?

Women-owned businesses account for 36 percent of all businesses, 15 percent of employment and 12 percent of all sales, according to the Small Business Administration's Office of Advocacy. But despite these significant strides, women face the following challenges when securing the financing they need to launch and run their businesses:

  • They apply and ask for less funding. Only one-quarter of female entrepreneurs even apply for business financing, and those that do ask for around $35,000 less than their male counterparts, says Fundera.
  • They receive less funding. The average business loan was $57,097 for women-owned businesses and $103,604 for male-owned businesses in 2017, says a Biz2Credit study.
  • The lending gap is widening. The Biz2Credit study found that the value of loans declined by 42 percent from 2016 to 2017 for women-owned businesses. For male-owned businesses, it remained stable.

What are my options for small business loans for women?

Small business loans generally do not cater exclusively to women-led operations. That being the case, female entrepreneurs need to compete for business loans on a playing field dominated by male-led businesses.  But there are traditional loans provided by organizations that provide robust resources for female small business owners. The best small business loans for women include:

  • SBA loans: Female entrepreneurs with solid credit can get their businesses up and running with the help of these government-guaranteed loans from the Small Business Administration (SBA) with lower risk and fair interest rates. Your financiers will be banks or direct lenders for these loans, which tend to be long-term loans. The SBA also provides counseling and education so you can efficiently put the investment to use.
  • Online loans: You can apply for these loans online from firms such as Kabbage or CAN Capital and receive a decision on your approval on the same day in many cases. This makes them a great option for those who need funding faster than the traditional loan approval process would allow. The loans are typically short- or medium-term and may come with high interest rates if you have poor credit. But there are also low-interest, longer-term options available to female entrepreneurs with good credit.
  • Microloans: The average amount of small business loans was $600,000 from large banks, $150,000 from small banks and $60,000 to $80,000 from alternative lenders in 2016, says Fundera. On the flip side, microloans from nonprofit lenders usually don't exceed $50,000, hence the prefix micro. This amount of capital is ideal for small business loans for women and owners who run solo ventures or simply need a small infusion of capital for expenditures such as start-up equipment or inventory. Find nonprofit lenders through the SBA Microloan Program, Accion or Kiva.

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