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Top 5 Small Business Loans For Your Women-Owned Business

Launching a business presents its challenges, particularly when it comes to financing. For many, business loans seem overwhelming. This is due to the complexity of financial terms and the vast array of options.

This guide will help you understand different types of business loans and financing for women-owned businesses. The following sections will explore SBA loans, lines of credit, revenue-based funding, and grants. This will give you the knowledge to decide about your business's financial future confidently.

Let's begin!

A joyful woman business owner displays an 'OPEN' sign, representing success enabled by small business loans for women.

1. SBA Loans for Women Entrepreneurs 

The U.S. Small Business Administration is a federal government agency that supports entrepreneurs and small businesses. It sets guidelines for loans so small business owners can get the funding they need, with reduced risk for funders. 

SBA loans offer women entrepreneurs attractive financing options with lower interest rates. Here are three popular choices:

  • 7(a) Loans: Offer up to $5 million for various business needs, including real estate, equipment, working capital, and AI-related expenses. Repayment terms range from 5 to 10 years.

  • 504 Loans: Provide long-term, fixed-rate financing for up to $5.5 million. These loans are ideal for acquiring or improving buildings, land, or machinery to support business growth and job creation.

  • Microloans: Offer smaller amounts (up to $50,000) through non-profit intermediaries to help startups and existing businesses expand. Microloans can be used for working capital, inventory, equipment, and improvements. Interest rates typically range between 8% and 13%.

What are the drawbacks? While conditions for the financing are advantageous, the process to obtain them is elaborate and complex. 

First, business owners need to:

  • Create a business plan.

  • Define the amount and use of funds.

  • Get their credit history checked.

  • Show their financial projections.

  • Offer some collateral (if required).

  • Demonstrate industry experience (is not a must but helps).

After going through all those steps comes a second phase where applicants must:

  1. Describe their needs for SBA.

  2. Get matched with potential lenders.

  3. Talk to potential lenders (compare rates and fees).

  4. Apply for the loan.

It's important to note that the SBA doesn't lend the money directly to business owners but connects them with local lenders that follow their guidelines. 

For more benefits and requirements, visit the SBA funding programs page.

2. Business Line of Credit: Flexible Funding

A business line of credit is a flexible form of financing, more similar to a credit card than a loan. Both traditional and online funders offer it. Like a credit card, it allows you to access a pre-determined amount of money and only pay interest on what you borrow. Here's what you need to know:

  • Lower Interest Rates: Compared to traditional business credit cards, lines of credit typically offer lower interest rates. 

  • Flexible Borrowing: You can borrow what you need up to the credit limit, making it ideal for covering short-term expenses like payroll or inventory purchases.

  • Variety of Lenders: Explore options from banks, credit unions, online funders, and alternative financing companies.

Remember that qualification factors like credit limit, minimum credit score requirements, and collateral needs can vary from lender to lender.

But what are some of the cons?

  • It may have several "hidden fees" (origination fee, monthly maintenance fee, annual fee, draw fee, wire transfer fee, payment processing fee, late fee, and early repayment penalty).

  • It may have short repayment terms.

  • Rates tend to be higher (against traditional business loans).

  • It may not help build your credit rating.

  • It requires more organization with payments (since the amount you borrow is not always the same).

Remember to carefully analyze your business's needs, financial projections, rates, terms, and payment dates before acquiring a business line of credit.

A focused woman using a tablet in a store, highlighting the role of small business loans in empowering women entrepreneurs.

3. Bank Loans: Traditional Financing

Bank business loans are usually the first ones people think about when they're looking for money for a significant investment or business need. But sadly, while there are many options, such as different funders, rates, and terms, they're not easy to obtain. 

The first thing you will need is an excellent credit score; this way, lenders will offer you lower interest rates and higher amounts of money for your loan. A pro tip: if you have a business or personal bank account, ask your current bank first for a loan because they know your credit history firsthand and could reward your loyalty with better loan conditions or a faster application process.

Lenders will also ask you for your business plan and loan proposal to understand why you need the money and determine how much you need and how you plan on paying the loan alongside your business cash flow. Some lenders may also consider how long you have been in business, ask for a minimum annual revenue of $100,000, or require collateral to approve your loan. 

These processes are highly tedious because they require much paperwork and take much longer to be approved. Also, some lenders have so many requirements that some start-ups can't obtain loans.

For more information about requirements and the process, visit Business Loans Requirements.

4. Revenue-Based Financing: Growth-Focused 

Revenue-Based Financing, or RBF, is an alternative option that has helped many small to medium-sized businesses that don't qualify for traditional financing methods or simply need a faster option to invest in a particular expansion opportunity.

How does it work? Based on your projected future sales (revenue), you receive an initial lump sum of capital and commit to repaying daily or weekly a portion of your business's revenue until you've repaid the initial sum plus an additional percentage, referred to as the "factor." Typically, the factor ranges from 1.2 to 1.5 times the sum received. It depends on a myriad of factors and the funders' underwriting criteria.

Revenue-based financing tends to offer an extensive list of benefits:

  • Uncomplicated Requirements: An impeccable credit score is less crucial than traditional funders; it requires less paperwork and is easier to access with companies such as One Park Financial, which can help you quickly find the capital you need.

  • Maintain Control: You keep full ownership of your business and decide how to spend the funds you get with this financing.

  • Personal Asset Protection: Your assets (like your car or house) are not used as collateral, so they're protected even if your business faces challenges.

  • Flexible Payments: With RB, you will pay according to your income, not struggle to get money to pay for a loan when your business is not generating enough.

  • Fast Funding: Unlike traditional bank loans that can take months to approve, RBF provides access to capital when needed. Companies like One Park Financial can help you acquire RBF very fast. The process is so fast that you may get the capital within 72 hours.

RBF could be the perfect financing product for your business because it focuses on your business's potential rather than its current assets or credit score. For more information about this type of financing, see Revenue-Based Financing: Grow Your Business Without Traditional Debt.

A cheerful woman making an "OK" sign in a lab setting illustrates the success of women-led businesses, possibly supported by specialized loans.

5. National Grants for Women-Owned Businesses

National grants offer an excellent opportunity for women entrepreneurs. They can get funding without taking on debt. They provide vital resources to start, grow, or innovate your business. However, with such attractive benefits, competition to get them can be fierce.

Where can you find them? The federal government, state governments, and other organizations offer them.

Here's an overview of five noteworthy grants tailored for women-owned businesses:

  • Amber Grant: The Foundation honors the memory of a young woman named Amber Wigdahl, who died at 19. It offers small grants to women-owned businesses. The foundation awards a $10,000 grant to a different female entrepreneur each month. To apply or learn more about the eligibility criteria, visit Amber Grant.

  • Ifundwomen is a crowdfunding platform specifically designed to support women entrepreneurs. In addition to providing money, Ifundwomen offers coaching, resources, and a supportive community. They help women bring their ideas to life. Whether launching a new product, service, or business, Ifundwomen offers a platform for women to fund their dreams. Explore more at Apply for Grants.

  • The Cartier Women's Initiative Awards aim to help and celebrate women entrepreneurs worldwide. They lead innovative, socially responsible businesses. It launched in 2006. It provides funding, coaching, networking, and media visibility to female entrepreneurs. They are in the early stages of business. To learn more about this prestigious award and how to apply, visit Cartier Women's Initiative Awards

  • The EmpowHER Grant is for women-owned businesses and female entrepreneurs. It is designed by Boundless Futures Foundation to give them money and resources to achieve their business goals. The grant amount varies based on the recipient's needs. It aims to empower women. They use it to overcome barriers and succeed. To learn more about the Empowher Grant and how to apply, visit Our Impact.

  • Comcast RISE was launched to help underrepresented business owners. It aims to aid small businesses hit hardest by COVID-19 to recover and thrive. They provide 500 grants of $5,000 and marketing and technology upgrades. Their focus is empowering businesses owned by people of color and women. To learn more, visit About Comcast RISE Program Benefits.

To access a federal database for grant opportunities, visit Search Grants.

Choosing the right financing option empowers you to take your business to the next level. Consider your business goals, stage of growth, and comfort level with debt when making your decision. Many resources are available to help women entrepreneurs secure funding. Consult financial advisors or explore government programs to support your success.

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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