Small business loans for women from $25K to $500K
Women own four out of 10 businesses in the U.S., employing 9.2 million people and generating $1.8 trillion in revenue annually. While their businesses may be thriving in one area, when it comes to financing, many women entrepreneurs are hitting a wall.
A Federal Reserve report found that when applying for loans, women were less likely to be approved or receive the full amount of funding they asked for compared to men.
That makes doing your research on small business loans especially important. Knowing which small business loans are available for women and how to qualify can help increase the odds of being approved. Beyond loans for women, there are also grants and other resources designed to level the playing field and help women business owners succeed. Here’s the full rundown on small business loans for women.
Small business loans for women: what are my options?
Generally, small business loans for women can fall into one of four categories:
- Small Business Administration (SBA) loans
- Bank and credit union small business loans
- Business loans from online lenders
Deciding which one to pursue depends on several things, including your business’s financial profile, your credit rating, your financing needs and your overall business goals.
1. SBA loans for women
The Small Business Administration doesn’t make loans directly; it guarantees loans offered through its nationwide network of lending partners.The SBA offers several small business loan programs that women entrepreneurs can take advantage of to grow their business.
How SBA 7(a) loans for women work
Women can borrow up to $5 million through the 7(a) program with the typical repayment term ranging from five to 10 years. You can take up to 25 years to repay a 7(a) loan if you’re financing a real estate purchase.
A major benefit of SBA 7(a) loans for women is that they tend to offer lower interest rates for qualified borrowers. That being said, while there is no “official” minimum credit scores for eligibility, most SBA 7(a) lenders are looking for a credit score of at least 620; and that’s assuming the rest of your application is exceptional, with no history of bankruptcies or foreclosures.
As far as how women entrepreneurs can put a 7(a) loan to work, the use of capital is quite flexible and can be used several ways including:
- Covering day to day working capital needs, such as managing payroll, hiring and training new employees or managing tax obligations
- Refinancing existing business debt, including loans, credit cards and lines of credit
- Purchasing business equipment and/or vehicles
- Buying land or real estate for the business
- Purchasing inventory or necessary supplies
- Renovating your business
- Opening a new location
The SBA does require that all business owners who apply for 7(a) loans meet its definition of a small business. That means being based in the U.S., operating for-profit, having less than $7.5 million in average annual revenues, and being within specific size guidelines for your industry. The SBA has a Size Standards Tool that can tell you if your women-owned business is eligible for a loan.
SBA Express Loans
A 7(a) loan could be right for women who needs a sizeable amount of capital to grow their business. However, if you have a smaller financing need, either for the short- or long-term, you might consider an SBA Express Loan instead.
The Express Loan program allows women entrepreneurs to borrow up to $350,000. Like 7(a) loans, these women-owned business loans are geared towards those with established businesses that have been operating for at least two years and have strong revenues.
A key difference is that Express Loans have an accelerated review process, which is designed to make getting approved faster. Loan funding, however, still can take anywhere from 60 to 90 days.
In terms of cost, the interest rates for Express Loans for women tend to be slightly higher compared to 7(a) loans, due to the faster approval process.
Women can use an Express Loan for working capital, equipment or inventory purchases, debt consolidation or anything else that a 7(a) loan could be used for— which makes them a flexible way to fund your business.
What else you need to know about SBA loans for women
These are just two of many SBA Loan programs, which you can learn more about all of the other SBA programs here. When it comes to SBA Loans, there are a few other things to keep in mind.
First is the collateral requirement. For women-owned business loans under $25,000, either 7(a) or Express, no collateral is required. But for loans over that amount, you’ll need to have some skin in the game in the form of personal or business assets, or both.
Second is the personal guarantee. The SBA requires a personal guarantee when you own 20 percent or more of the business you’re applying for a loan for.
Personal guarantees are common with other types of business loans for women as well; it means you’re personally responsible for repaying the debt if the business isn’t able to keep up with the payments.
2. Bank and credit union small business loans for women
Banks and credit unions can be another source of small business loans for women. The amount you can borrow depends largely on the bank or credit union’s lending guidelines. And like other financing options, there are are positives and negatives to consider when applying for a small business loan through a bank.
One benefit of working with banks for small business financing is that they can offer lower, fixed interest rates for women business owners. The catch, of course, is that you’ll most likely need good to excellent credit to be approved and get the lowest rates. But if you have an established personal or business banking relationship, the financial institution may be willing to take that into account for loan approval.
In terms of other benefits, a small business loan for women from a bank could help you build your business credit rating if you repay the loan on time. And loans from banks and credit unions can be tailored to fit just about any financing need.
There are some drawbacks to consider, however. For example, qualifying for a bank or credit union loan might be difficult for women who don’t have a strong credit report or an established business-operating history.
Filling out the paperwork can be time-consuming and the approval process can take time. It could be several weeks or months before you’re able to get funding once you’re approved, which makes these kinds of small business loans for women less convenient if you need capital right away.
An online small business lender, however, can put money in your business’s hands much faster.
3. Online business loans
Alternative lenders take the small business loan process online. There are several reasons why women might want to consider getting a small business loan through an online lender.
First, there’s the speed advantage. Some online lenders can approve women-owned business loan applications in as little as 24-48 hours, with funding completed within a few days.
Qualifying may be less strenuous for newer businesses, or women business owners that have less than perfect credit.
Interest rates with online lenders can be on par with business loan options from a bank, however they tend to be slightly higher. Some online lenders also reduce the fees associated with procuring a small business loan. For example, you might not pay an origination fee or a prepayment penalty for an online business loan, which can save your business money.
The borrowing limits can be generous and repayment terms can last a few months up to several years, depending on the type of loan. And an online lender might not expect you to offer up collateral for a loan.
Most importantly, women can take advantage of variety when it comes to their loan options. The kinds of loans women business owners can find online include:
Working capital loans
Working capital loans for women are designed to be used for short-term expenses. With a working capital loan, you could make sure your employees get paid on time, cover the lease for your business, or manage overhead costs.
As the name suggests, equipment loans are designed for purchasing equipment. So whether you need new computers, other office supplies, or a piece of equipment to manufacture your products, this type of small business loan for women could cover it. With online equipment financing, the equipment you’re buying often serves as collateral and while it’s possible to borrow up to 100 percent of the cost, most lenders require some down payment.
If you run a retail store or another business that sells a physical product, you need to make sure you have enough supply on hand when customers are ready to buy. An inventory loan uses the inventory as collateral so you get what you need quickly and keep the shelves stocked.
A term loan is a loan that is repaid over a set term. Online lenders can offer short-term loans that you have to repay within a few months, or long-term loans that can stretch out over a few years. Either one usually carries a fixed interest rate so you have some predictability with the payments.
Merchant cash advances
A merchant cash advance isn’t technically a loan. This financing option lets you borrow against the value of your future credit card receipts. One reason business owners might consider an MCA is that they’re fairly easy to qualify for. You can get an MCA without needing several years of business history or a perfect credit score. The biggest downside, however, is that a merchant cash advance can end up being much more expensive than other types of small business loans for women.
Invoice financing, or accounts receivable financing, is similar to a merchant cash advance, only you’re borrowing against your outstanding invoices. Again, it can be easier to qualify for when you put it next to a traditional loan but the overall cost of borrowing could be higher.
Business line of credit
Business loans are usually installment debts; you pay them off over time and the balance just goes down until it zeroes out. A business line of credit is a revolving line that you can draw against as needed. You only pay interest on the amount of your credit line you use, which makes it more like a credit card than a loan. But it’s still an option to consider as you research online business loans for women.
Microloans are small loans, usually for $50,000 or less. A microloan for women-owned businesses might be worth looking into if you’re just getting started, if you have a smaller capital need, or if you’re running your business as a sole proprietorship.
Microloans can also be appropriate for women that run their businesses as sole proprietorships. For example, if you’re a freelancer, run an in-home daycare or run a one-person housekeeping business, you might not require as much capital as a larger business with multiple employees.
The first place to look for microloans is the SBA. It’s possible to borrow up to $50,000 through the SBA’s microloan program. You can take up to six years to repay an SBA microloan.
Microloans are somewhat limited in how they can be used compared to other small business loans for women. For example, you can’t use one to buy real estate or refinance other business loans. But aside from those exclusions, you could use a microloan for virtually any other small financing need.
Aside from SBA microloans, there are other organizations that offer these loans to women and minority business owners. Accion, for example, is a nonprofit that lends up to $50,000 to eligible women-owned businesses. And you can borrow up to $30,000 through Opportunity Fund if you’ve been in business at least one year.
Small business grants for women
In addition to small business loans for women, women business owners can also explore grant options. Grants usually don’t have to be repaid, and there are many that are designed specifically for women.
That’s a good thing if you’re still in the early stages of growth, but it makes for a competitive environment. If you’re looking for grants just for women business owners, it’s good to cast the net wide. Start with federal grants, then look at what’s offered at the state level, followed by grants for women through nonprofits and private businesses.
Once you start to narrow down the options, read the guidelines carefully to make sure your business qualifies. Filling out grant applications can be a tedious process and you don’t want to waste time applying for grants that are out of reach. Make sure you submit any supporting documents needed for your application so it doesn’t get rejected for being incomplete.
Additional resources for women entrepreneurs
Besides loans and grants, there are some other financial resources that female entrepreneurs should know about:
- The Office of Women’s Business Ownership helps women business owners in a number of ways. That includes offering business training and counseling, connecting them with federal contracting opportunities and helping them get access to credit and working capital. Around 130 business centers are located across the United States.
- The National Association of Women Business Owners is an advocacy group for women in business. This organization offers training and resources related to becoming a certified women-owned business, getting government contracts and securing access to capital.
- The National Women’s Business Council is an advisory group to government agencies but it also provides resources for women entrepreneurs. That includes information finding capital, growing supply chains and increasing your brand’s visibility.
Are there any other small business financing options women could consider?
Yes, a few actually. Those include:
- Accepting angel investments
- Getting venture capital funding
- Raising money through a crowdfunding platform
- Asking friends and family for loans or donations
They all have their pros and cons. The biggest drawback of angel investments or venture capital, for instance, is having to sacrifice some of your equity in the business to get funded.
Crowdfunding is a way to get funding for your business quickly but it comes with its own challenges. If your campaign isn’t fully funded, you wouldn’t get anything at all. And if your campaign is funded, then the crowdfunding platform will likely take a cut.
Friends and family tend to offer loans with no strings attached. But the biggest risk there is having the relationship go south if you can’t repay what you borrowed.
Sticking with small business loans and grants can help you sidestep those kinds of issues.
How to become a certified woman-owned small business
Getting certified as a woman-owned business has its perks if you want to work on government contracts. As a certified WOSB, you can pursue public sector work and government “set asides”. Set asides are contracts the federal government earmarks for small businesses, including those owned by women.
There are two ways to get certified: you can self-certify or get certified through an SBA-approved third party. Organizations that are approved to certify women-owned businesses include the Women’s Business Enterprise National Council, the National Women Business Owners Corporation and the U.S. Women’s Chamber of Commerce.
One isn’t necessarily better than the other and in both cases, the process involves some lengthy paperwork. The first step is making sure your business meet some basic requirements. That includes:
- Meeting the SBA’s size standards for a small business
- Being a business that’s 51 percent owned by women
- Having women in charge of managing daily operations and making long-term decisions for the business
- Having a woman in the highest officer position in the company
There’s no set time in business that’s required. To self-certify, you first need to get started by registering on Sam.gov. Once your initial registration is approved, you can apply for self-certification at certify.SBA.gov. You’ll need the personal MPIN code you created at the Sam.gov site, your employer identification number and a DUNS number. But the good news is it’s free to self-certify.
If you want to get certified by one of the organizations mentioned above, they each have their own certification process available through their websites. Just keep in mind that you’ll pay a fee to use them, which can be as high as $400.
Women-owned business loans from Funding Circle
With so many loan options to choose from, it’s important to find the one that best fits your unique financing needs.
We’re invested in helping women-owned businesses like yours with low-cost business loans of up to $500,000, with terms lasting from six months to five years.
You can get a decision on a loan in as little as 24 hours after document submission with rates start at just 4.99 percent. Whether you need to hire new staff, expand your business operations or grow your product line, a loan from Funding Circle could help.
It’s simple and easy to get a rate quote. Check your eligibility for a small business loan from Funding Circle today!
How does Funding Circle serve women in small business?
Funding Circle is an online marketplace lender exclusively focused on small-business lending ($25K to $500K), including women-owned small businesses, of all types and various sizes. We connect investors who offer small business loans to the women like you who are looking to fund their work.
How does Funding Circle differ from a bank?
For small businesses, we know that time is money. Unlike a bank, our application process is quick, easy, and transparent. You can apply for a loan online in just 10 minutes, and get a decision in as little as 24 hours after document submission. We also know that a credit score isn’t the only indicator of healthy business. While the underwriting process at traditional banks is clunky and inflexible, we combine technology with seasoned underwriters to better understand your business and find terms that suit your needs.
What kind of businesses do you help?
We’ve helped thousands of established women-owned businesses grow, create new jobs, and stimulate economic growth in their local communities. In fact, we are proud to support women small business owners nationwide, from veterinary clinics and boutiques to salons and medical practices (and more). To learn whether your business is eligible, apply today or shoot us an email at firstname.lastname@example.org with any questions.