Best Small Business Loan Options for Women

Funding Options for Women Owned Small Businesses

young women business start up meeting
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Women are starting and running small businesses in record numbers, yet fewer women than men apply for and receive small business loans. This is not because small business financing for women doesn’t exist; although there aren’t any small business loans open only to women applicants, several lenders and loan programs focus on supporting women entrepreneurs.

Beyond small business loans for women, there are women-only business grants, mentorship programs, and resources that can mean the difference between success and failure for women-owned small businesses. Finding the best small business loans for women-owned businesses will entail taking detailed stock of all of your options, knowing what your credit rating is, and deciding what repayment terms work best for your small business.

Why Do Women-Owned Small Businesses Face Funding Challenges?

Although female entrepreneurship is rapidly growing, access to capital lags behind that growth. Why is that? Explanations vary, but some challenges can be traced to industry. For example, many women-owned small businesses are in the retail sector, which is difficult to finance. Societal factors may also play a role; small business lenders are often run by men, who may be biased against women entrepreneurs.

However, the climate is changing as more women become venture capitalists and fund women-owned small businesses, and as more grants and federal and state programs aimed specifically at women come on line.

For now, the best you can do is research your options:

  • Talk to people in your network
  • Approach venture capitalists
  • Compare loan offers from the best lenders working with female entrepreneurs

Small business financing options depend on how long you’ve been in business, the soundness of your credit, and your particular cash flow needs.

Small Business Loans for Women

If your business is a start-up or less than two years old, you can expect to pay a higher interest rate for your small business loan. This is also true for women entrepreneurs who don’t have excellent credit. If your credit is good, you can apply for a personal loan for your business. If not, try an online lender like Kabbage, QuarterSpot or OnDeck. Borrowing costs may be high, but these lenders are good sources of speedy funds for emergency or short-term needs.

If you need a long-term loan and have good credit, the SBA offers various small business loans, even for start-ups and those who have only been in business for a few years. These small business loans for women come with a government guarantee, so lenders find them less risky and are more likely to work with you, even if you’re just starting a business.

SBA loans for women are great financing options for those who can qualify—you’ll get low interest rates and long-term financing (seven years or longer).

These are perhaps the best types of small business loans for women, so it’s worthwhile to see if you qualify.

Small Business Grants for Women

Female entrepreneurs should consider applying for small business grants for women. A business grant can technically be considered “free money” since you won’t have to pay it back. However, most grants are much more restrictive than small business loans in terms of qualification requirements and what you can use the funds for. Plus, they’ll require grant-writing expertise and a lot of time and energy. Because of this, loans for women-owned small businesses are often a more convenient option.

There are three types of grants that you should research when you look for financing:

  • Federal Grants
  • State and Local Grants
  • Grants from Private Organizations

Although you shouldn’t rely on receiving small business grants, it’s definitely worth your while to do some research and to apply if you think you’re qualified.

VC Firms and Angel Investors

Debt financing and equity financing are two very different ways to achieve the same goal: raising money for your business. When a company borrows money from a lender and pays the lender back over time with interest added on, that’s debt financing. Equity financing is when a business owner raises money from venture capital (VC) firms and investors. In return for capital, investors get a portion of ownership (or equity) in your business. Partners are great if you’re looking for mentorship and advice, but aren’t a good option if you want to run your business independently.

If you need a lot of capital to start or expand your small business, equity financing is a great option.

However, unless your business is experiencing rapid growth, investors can be hard to find. Investors prefer to work with businesses that can give them a huge return.

Although most VC firms are run by men who may be unfamiliar with the product or service provided by a woman-owned business, many women have started their own VC firms, focused on funding other women-led businesses.

Some VC and angel investment firms geared toward women to check out include:

Female Founders Fund: Early-stage fund investing in e-commerce, web-enabled products and services, marketplaces, and platforms.

Merian Ventures: VC fund focused on women-led innovation in cyber, artificial intelligence, machine learning, and consumer-facing technologies.

Golden Seeds: Provides investor funding for women-led companies in the B2B and B2C technology, health care, and consumer products or services industries.

Women’s Capital Connection: Provides investor funding for companies with a female founder or woman in a C-level position.

Springboard Enterprises: Supports high-growth companies seeking equity financing for expansion.

Resources for Women who Own Small Businesses

Growing and sustaining your business isn’t just about money. Advice, mentorship, and networking are also essential to the small business owner. Fortunately, there are several organizations dedicated to providing guidance to female entrepreneurs.

However, networking doesn’t have to rely on national organizations. Don’t forget about your local Chamber of Commerce and other local business organizations, which are a great way to meet other small business owners of all genders.

Article Sources

  1. American Express. "The 2018 State of Women-Owned Businesses Report," Accessed Oct. 10, 2019.

  2. American Express. "The 2018 State of Women-Owned Businesses Report," Accessed Oct. 10, 2019.

  3. University of Richmond Robins School of Business. "Management Faculty Publications: The Second Glass Ceiling Impedes Women Entrepreneurs," Accessed Oct. 10, 2019.

  4. U.S. Small Business Administration. "Loans," Accessed Oct. 10, 2019.