Women business owners face significant odds in starting and financing their businesses. Ironically, women are the majority of small business owners, with current statistics showing that women own 38% of SMBs. Data from the National Association of Women Business Owners indicate that women-owned businesses have a significant impact on the business landscape. Precisely, women-owned businesses generate annual revenues in excess of $1.6 trillion and employing over 9 million people. Despite the immense contribution of women business owners, access to finance remains a major sticking point. There are many business loans for women business owners available. See what financing options are available and how to best set your female-owned business up for success in this article.
What benefits does a business loan for women have for my business?
Here are four key benefits of business loans for women:
Combat Operational Costs
Women-owned businesses face steeper operational costs than men-owned businesses. Business loans for women can help cover some of these operational costs hence keeping these ventures open and running.
Increase Profit Margins
If your business is already making a profit and showing potential for even higher profits, then consider obtaining a small business loan. A business loan will allow you to invest in the most profitable niche and avoid leaving money on the table.
Build Your Credit Score
For women-owned businesses, having a good credit score is crucial for future funding. The most important factor is ensuring you avoid defaulting on credit that might jeopardize your chances of accessing larger-scale financing. However, you might still get financing even with a bad credit score.
When should I get a small business loan for women?
Launching a New Business
Starting a new business requires a substantial outlay of capital that might outstrip your capital hence the need to seek external financing to get your idea on the road.
Expanding your Business in a New Location
If your business outgrows the current location, you might need to look for a spacious location to accommodate your client base. Whereas expanding might be necessary, it is also an expensive undertaking. Financing from Rapid Finance could assist in business expansion. .
Purchasing Essential Business Equipment
As your business grows, you will certainly require purchasing new equipment and machines, which can set you back substantially. A small business loan for women can come in handy to help you acquire the right tools for your business. What’s more? You can actually use the machines as loan collateral.
Hiring New Talent
A small business rarely has all the personnel it needs because of cost factors. However, as the business picks up steam, additional staff will be necessary to run crucial activities such as bookkeeping and marketing. Business loans for women helps female business owners recruit the talent to perform some crucial business roles.
What type of business loans for women or other types of financing are available?
Besides commercial bank loans, women business owners have several private financing options for their business. Here are private types of business loans or other financing that women may seek for their businesses.
Term Loans
A term loan is lump-sum financing extended for business purposes and payable for a certain period. The period ranges from three months to sixty months. The loan attracts a fixed payment amount deducted from your business bank account on an interval agreeable with the lender.
Line of Credit
Line of credit financing is a business loan that offers your business funds on an as-needed basis. It is a flexible option to finance your business’s working capital. The good thing about the line of credit financing is that you only pay interest on the amount taken and only when you take it.
Invoice Factoring
Does your business have pending invoices yet to be paid by clients? Invoice factoring is an excellent financing option that allows you to cash your invoices as you wait for the clients to settle their accounts. Factoring helps get your money today rather than waiting for 30, 45, or 60 days hence improving your business cash flow.
Merchant Cash Advance
This financing option gives your business fast access to capital against future credit card receivables. Merchant cash advance helps your business get funds fast and flexible variable payments based on business receivables.
What are other financing options I can benefit from?
Women business owners can also benefit from a raft of other financing options for their businesses.
Business Credit Card
Any business can use a business credit card to maintain a positive cash flow by using a credit card to purchase essential items in place of cash. A business credit card backed by personal liability can also help women business owners get better credit terms for other forms of financing.
SBA Loans
The Small Business Administration loan works by connecting business owners with the most appropriate lenders for their business. SBA loans are most appropriate for business owners who do not qualify for other forms of funding. SBA places a limit on the interest rates making the option viable for fledgling small businesses.
Peer-to-Peer Loan
Peer-to-peer (P2P) loans exploit internet connectivity to bring together business owners seeking financing and investors willing to fund small businesses. To be eligible for P2P loans, your business must be in good standing and have a positive credit score. You also need to have all the required documentation, such as bank statements, cash flow records, and tax data.
Microloan
A micro loan is a type of financing option available to small businesses or start-ups ineligible for other forms of financing. Businesses that do not qualify for bank credit, do not have collateral, and have no credit history may turn to micro loans. Micro loans are given out by micro-lenders, mostly non-profits, who offer flexible terms suitable for new businesses.
How can I use a business loan for women?
Women-business owners can use a business loan to accomplish the following key activities;
- Stocking up your business in anticipation of a peak season such as Thanksgiving or Christmas
- Leasing additional space or expanding to a new location
- To get your business back on its feet after natural disasters
- Buying equipment that your business badly needs or upgrading existing machines
- Onboarding additional staff to help in key business activities you can no longer handle yourself.
What are the pros and cons of business loans for women?
At some point or another, women business owners will require business financing to take their ventures to the next level. These loans or other types of financing have many advantages and some disadvantages. Here are the pro and cons for business loans.
Pros
- Lower interest rates on certain types of financing
- Friendlier repayment terms
- Require no collateral or little, if any
- You do not lose stake in your business
- Critical in accelerating business growth
- Stems cash flow problems
Cons
- Prolonged loan appraisal process
- Regular loan repayments might hurt your cash flows
- If repayment falters, this might affect your credit score
Other business loans for women resources
As a woman entrepreneur, you could also benefit from other financing programs and resources. These include;
- National Association of Women Business Owners has a membership of 5000. Established in 1975, NAWBO enables women entrepreneurs’ access to government opportunities, financing, and networking.
- Women Business Centers– The Small Business Association runs these centers to help women business owners access training, financing, and other business resources.
- Womensphere Venture incubator helps women launch their start-ups in science, tech, engineering, and mathematics.
- The U. S Women Chamber of Commerce helps women business owners to have a voice in policymaking and legislation relevant to women-owned ventures.
- The National Women Business Council researches and lobbies elected representatives on economic issues touching on women-owned businesses.
- Women can also benefit from business grants offered by different organizations such as the Eileen Fisher Women-owned Business Grant, WomensNet Amber Grant and 37 Angels.
Summary
For a long time, women business owners have faced restricted financing options hampering their ability to do business. The financing landscape is shifting with more organizations coming up with loan products for women-owned small businesses.
At Rapid Finance, we understand that the pandemic has had a serious impact on your business, an impact that will probably endure for years to come. For this reason, we have several financing options to restore your business back on the path of success. Talk to us today.
