An exciting shift is happening in the U.S. economy: female entrepreneurs. According to recent data released by the U.S. Census Bureau, two out of every ten businesses are owned by women. In fact, female entrepreneurs employ over 10.1 million people and generate $1.8 trillion in revenue annually. However, despite this fact, many of these women struggle to secure financing.
A recent Federal Reserve report revealed that funding requests from women are less likely to be approved compared to their male counterparts. If they are fortunate enough to receive approval, oftentimes it is not in full.
If you’re a female entrepreneur, there are other options available that make this process less stressful and more successful. Understanding all your loan options is the first place to start. Here are some more traditional and alternative lending solutions you should consider.
Traditional business loan options:
- Bank and credit union loans. When you apply for a small business loan at a bank, the amount you’re eligible for will depend on each institution’s guidelines. Qualifying can be difficult for women who don’t have a credit history or an established operating history. Keep in mind the approval process is also notoriously long.
- SBA loans. Through an SBA 7(a)loan, women business owners are able to borrow up to $5 million with terms ranging anywhere from five to ten years. While there is no official minimum credit score for eligibility, most lenders look for a minimum score of at least 620.
- Microloans. As the name suggests, microloans are smaller loans under $50,000. Many female entrepreneurs have used this option to help them get started and cover minor capital needs. A typical repayment term for this type of loan is six years.
Online business loan options:
- Merchant cash advances. Technically, a merchant cash advance (MCA) is not a loan. Rather, it’s a financing tool that allows you to borrow against future debit and credit card sales. Because these lenders do not require years of business history and a stellar credit score, they are known to be easy to qualify for.
- Invoice factoring. Like an MCA, invoice factoring is not a loan. Your business is selling its outstanding invoices at a discount in exchange for an advance of cash – up to 90% of the invoices’ value. This option is also easier to qualify for, but make sure you watch out for hidden fees and high costs.
- Line of credit. Essentially, a business line of credit is a revolving line of capital you can draw from as needed. You only pay interest on the amount of credit you use.
All in all, just make sure you research all your options and understand the ins and outs of each loan type. Once you choose a method, compare the different lenders on the market. Make sure they offer industry-leading services and support. They should also specialize in providing affordable small business loans for women.
Women entrepreneurs struggle to secure business funds. Find out how and where to get affordable small business loans for women.