Women-owned businesses are a vital part of the economy, with enterprises owned by women employing more than 10.1 million workers and contributing about $1.8 trillion to the economy.1 It’s, therefore, important for women entrepreneurs to be aware of the different ways to source funding.
With small business loans, women entrepreneurs can tap into the capital they need to:
When it comes to small business financing, there are a variety of loan types to choose from. Here's what entrepreneurs need to know about funding, plus tips for getting approved for a business loan.
One thing to remember is that not all loan types or lenders are right for all types of businesses. Some may focus only on certain types of operations, startups, or established businesses. That said, here are the most common small business loan types for female entrepreneurs:
What does it take for women business owners to improve their chances of qualifying for a small business loan? Knowing what lenders are looking for is a good start. Details that can influence business loan decisions include:
Take time to review your financials, check your credit scores, and get your paperwork organized. Most lenders will want to review this information, so having your documents prepared in advance can help save time during the loan application process. The more you understand what lenders expect from borrowers, the easier it becomes to find a financing option that's tailored to your situation.
When comparing business lenders, a few notes to pay attention to include:
Use a loan estimator to compare loan terms before you apply for financing. This allows you to understand the full benefit and cost you'll get from the loan before you take on a significant financial obligation.
Before you commit to a decision, you may want to seek out the advice of a lending expert to see if they can recommend financing options that work for your business.
Also, find out which loans require collateral and/or a personal guarantee. A guarantee means you're personally committing to repaying the loan, even if it's in your business's name. Signing a personal guarantee could help your loan application, but remember that doing so can put your personal assets on the line if you default on the loan.
Measuring the return on investment can help you decide if getting a business loan is the right move. For example, borrowing $100,000 to develop a new product could yield a stellar ROI if that product increases your revenue by 25% annually. But borrowing money to buy equipment may not be worth it if you’ll have to replace or upgrade it before the loan is repaid.
Also, take a good look at your budget to make sure you can handle loan repayments without it being a burden on your cash flow. The goal is to get ahead with a loan, not fall behind.
Finally, consider whether something other than a loan makes sense for funding your business. For example, consider:
Each alternative has its pros and cons. Asking your friends and family for money means you may not pay interest on what you borrow, but you may risk souring the relationship if you don't pay them back. And with venture capital funding or angel investing, you're typically giving up an ownership share in your business in exchange for funding.
If you're interested in learning more about some of these options, the National Women's Business Council offers resources on financing for women business owners. Additionally, the Association of Women's Business Centers provides access to a national network of women's business centers, many of which lend to women-owned small businesses.
One of the great parts about small business loans for women is you don't have to adhere to a one-size-fits-all mold. You can pick and choose what works best for your business. And if it's a loan — either from the SBA, an online lender, a microlender, a traditional lender at a bank, or another resource — doing your homework beforehand means you can approach borrowing and funding with confidence.
In partnership with three expert business owners, the PayPal Bootcamp includes practical checklists and a short video loaded with tips to help take your business to the next level.
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