Small business loan resources for women: Where to find them and how to qualify.

Jul 20 2020 | PayPal Editorial Staff

Women-owned enterprises now make up the fastest-growing segment of the U.S. business economy.1 But sometimes you need some extra cash to meet your business needs. That's where small business loans come in.
With small business loans, women entrepreneurs can tap into the capital they need to:
  • Launch their startup
  • Develop new product lines
  • Open a new location or renovate an existing one
  • Buy essential business equipment or inventory
  • Hire and train new staff
  • Level up their advertising and marketing strategies
  • Cover payroll, insurance premiums, and other day-to-day expenses
When it comes to small business financing, there are a variety of options and tools – both traditional and nontraditional.   Here are some of the less traditional funding options. 
 
1. Small Business Administration loans and programs
While the SBA doesn't issue loans directly, it does partner with lenders to guarantee loans for small businesses, including women-owned businesses. Some of the SBA-guaranteed business loans options include:
  • 7(a) loans: The 7(a) loan program is the SBA's primary program for providing financial assistance to small businesses, and offers up to $5 million in funding.
  • Microloans: If you have smaller capital needs, a microloan could be a good fit. The SBA's microloan program offers up to $50,000 in loan funding to small businesses seeking capital to get started or expand. The interest rates for microloans vary, but are generally between 8–13%.
The SBA also has an Office of Women’s Business Ownership, which has local offices that can help with grants and loans. Visit their website here.
 
2. Online business loans
If you’re looking for fast financing, online business lending is another place for women to look for small business loans. These lenders typically offer the same borrowing options as traditional banks (and in some cases, more), including:
  • Term loans
  • Inventory and purchase order financing
  • Accounts receivable financing
  • Equipment financing 
Loan types and terms vary from lender to lender, but what's usually consistent with many online and alternative lenders is the speed and convenience they can offer. Depending on the lender, it's possible to get loan funding within 24–48 hours of being approved - a major plus when you have an immediate funding need.
 
3. Other microloan options
In addition to SBA microloans, organizations like private organizations, alternative lenders, smaller state banks, and credit unions also offer microloans for women-owned businesses.
 
Microloan amounts are smaller and repayment terms are different for every lender. Some lenders offer microloans strictly for startups, while others are open to established businesses.
 
Microloans also tend to offer more leniency with the credit score because they’re willing to consider alternative forms of collateral. That said, microloans also typically come with higher interest rates.
 
Keep in mind: Some microlenders may limit loans to certain types of small businesses. You might be able to get a loan to open a daycare, for instance, but not to buy kitchen equipment for the food truck business you're about to take to the streets.
 
You can locate a microlender in your area using the Opportunity Finance Network Community Financial Development Institution (CDFI) locator.
 
How to help increase your chances of qualifying for a business loan.
Asian business owner applying for a loan on laptopSo, 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. Things that can influence business loan decisions include:
  • Personal and business credit scores
  • Length of time in business
  • Annual revenues
  • Financial statements
  • Cash assets and collateral
  • Business debts
  • Business and personal tax returns
  • Capital needs
  • Business plans
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 beforehand can help save time during the loan application process. The better you understand what lenders expect from borrowers, the easier it becomes to find a financing option that's tailored to your situation.
 
Weigh your loan options carefully.
Understanding your options for small business loans is a good first step, but it's just as important to know how to compare them. Business loans vary, just like lenders do, and the loan terms and qualification requirements can differ greatly.
 
As you research different loan options, a few things to pay attention to include:
  • Minimum and maximum loan amount offered.
  • Loan repayment terms.
  • APR range and whether the lender charges a fixed or variable rate.
  • Minimum qualification requirements for credit score, revenues, and time in business.
  • Loan fees, including origination fees or prepayment penalties.
  • Approval and funding speed.
Also, find out which loans require collateral and/or a personal guarantee. A personal 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.

Is a business loan right for you?
Measuring the return on investment can help you decide if it's the right move. For example, borrowing $100,000 to develop a new product could yield a stellar ROI if that product increases your revenues by 25% annually. But borrowing money to buy equipment may not be worth it if you're going to have to replace it 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, if you don't pay it back, you risk souring the relationship. 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 who lend to women-owned small businesses.

The great thing about small business loans for women and small business funding, in general, is that 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, traditional lender at a bank, etc. – doing your homework beforehand means you can approach business borrowing with confidence.

 
The content of this article is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision.

 1 Women Entrepreneurs, U.S. Senate Committee on Small Business & Entrepreneurship.

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