There are numerous factors to consider when applying for a small business loan or capital for your business. Funders will look at your credit history, cash flow, and other factors. However, whether purposely or not, there appears to be another factor at work: Gender.
In 2020, male-owned companies more frequently received the total loan amount for which they applied (60 percent compared with 58 percent). Women-owned businesses, in contrast, more often received none of the credit for which they applied (14 percent compared with 12 percent for male-owned firms).
Although there may be a gap in the number of loans businesses owned by women receive, it should not discourage female entrepreneurs from seeking loans or business financing.
As a woman business owner, you can use that extra capital to finance company-related purchases and operating expenses, such as equipment, payroll, inventory, or new staff.
In the following sections, we will go through some of the most frequently asked questions about small business loans. Also, we will review some of the small business loans for women that you can start looking into today!
Can women get a small business loan?
Absolutely. The same loans are available to male and female business owners alike, including gender-nonconforming individuals. Business loan or financing applicants cannot be subjected to gender discrimination by funders. Additionally, there is specific financing available just for women, which we will explain in the following sections.
Is it hard to get approved for a small business loan?
Depends on your numbers. Small businesses have long relied on various informal and formal sources to meet their credit needs. According to ABS data, approximately 15% of companies formally applied for new credit in 2020, excluding pandemic-related programs. Almost 60% of the businesses that applied for credit received the requested amount, while approximately 12% received none.
A small business's ability to get business financing will depend on several variables, including its cash flow, length of operation, credit rating, business plan, and targeted loan amount. The more a small business can demonstrate that it will be able to pay back the loan, the simpler it will be to be approved for one. You can check out our article about business loan requirements for more information.
Can I get a business loan with a 500-credit score?
Yes, but just with particular funders. Many online funders, bank loans, and Small Business Administration (SBA) loans often require applicants to have credit ratings of at least 650. But don't worry if your credit score is low; we will explore other financing options, such as revenue-based financing, working capital, and microloans.
How much can you borrow for a small business loan?
How much you can borrow depends on how much you want and the loan term. Some loans are better suited for significant investments, while other types of capital work best for meeting urgent requirements. According to the statistics from the Federal Reserve, $663,00 is the typical small business loan amount. The average small business loan for alternative funders is $80,000. Loans for small businesses can be as high as $1.2 million. For comparison reasons, small business loans from alternative funders range from $5,000 to $200,000.
Best types of small business loans for women
Whether you're just starting or looking to expand, the best small business loans can help you get the capital you need to thrive. In the following sections, we will compare business loans and business funding options for women-owned businesses.
1. SBA Loans
Loans are available through several banks, online funders, and other financial organizations backed by the U.S. Small Business Administration (SBA). They are a fantastic alternative for general expenses because the loan amounts may range from $30,000 to $5 million depending on the kind, and interest rates may change depending on the funder and loan type
It's crucial to review which SBA loans apply to you and your business. Even though they are not reserved particularly for women, SBA loans provide attractive interest rates and payback terms. They frequently offer relief to business owners who are unable to find funding elsewhere. However, they frequently have stringent standards, and because they are in high demand, approval takes time. You can find providers in your area on the SBA website.
2. Commercial banks
These are the traditional loans you consider when you think of borrowing money. Even while bank loans for small businesses frequently have the lowest interest rates, their eligibility standards are the hardest. Additionally, the acceptance rate for small business loans is shockingly low, given the current financial climate.
It's important to mention that a bank or other funder will eventually require payment of the borrowed funds plus interest. Your credit score could be negatively impacted if you don't make loan payments on time. Determining the appropriate borrowing quantity is crucial for this reason. Alternatively, you can try other avenues like the ones we mention on this list!
3. Working capital loans
You can get a working capital loan to cover a business's day-to-day operating expenses. With these short-term loans, you can cover ongoing business costs like rent, salaries, utilities, and inventory purchases. While working capital loans are not ideal for long-term expenses, they can assist companies in controlling operational costs and maintaining a steady cash flow.
Working capital loans can be a lifeline for companies with significant seasonality or cyclical sales during downtimes. Working capital funding is a good option if you need to get money fast and in the short term, but if you need something for a big project, there might be better routes.
4. Equipment loans
Funding for equipment is another great option since your business most likely needs equipment to function. The cost can work as collateral depending on the type of equipment you buy.
Equipment loans make good small business loans for women-owned startups without a long operational history, solid credit, or substantial assets. The cost of the pricey equipment might be paid for gradually over time. However, it's important to mention that you might end up paying more than the equipment's actual value because of the interest payments and the possibility that your funder would demand a down payment.
5. Revenue-based financing
Revenue-based financing, also known as merchant cash advances (based on the business’s future revenue), is a method of acquiring working capital in which funders agree to provide money to a company in exchange for a percentage of the company's ongoing total gross revenues. It is a different financing model than more traditional equity-based investments and it is technically not a “loan” but an advance against your future revenues.
With Revenue-based financing, a company can raise capital without sacrificing some of its equity or pledging some of its assets as collateral. In this case, your company repays the capital over time using the revenue it receives from doing business. Until you pay back the financing, the funder will take a percentage out of your business banking account daily or weekly.
Get your business financing with One Park Financial.
At One Park Financial, we believe in the growth and potential of women's small businesses, and since 2010, we have been making a difference in the lives of small business owners across the country. We will work individually with you to get you the capital you need and access to a network of affiliated or third-party funders that offer a variety of flexible financing without all the hassles, hurdles, and games associated with traditional bank financing.
You must have been in operation for more than 90 days and have a monthly revenue of at least $7,500. You only have to respond to a few quick questions in our online form if you're ready to get started and have a fantastic chance to push your company to the next level with us!
Disclaimer: The content of this post has been prepared for informational purposes only. It is not intended to provide and should not be relied on for tax, legal, or accounting advice. Consult with your tax, legal, and accounting advisor before engaging in any transaction
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