SBA Loans for Women: What Are Your Options?
Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
Women entrepreneurs in need of financing can turn to programs from the U.S. Small Business Administration. SBA loans for women include those for general business expenses, commercial real estate purchases or construction projects and small financing needs.
- SBA loans for women
- How to apply for SBA loans for women
- SBA resources for women-owned businesses
SBA loans for women
Women business owners could take advantage of several loan programs the SBA offers. The SBA doesn’t directly lend to business owners. Instead, the SBA guarantees a portion of loans issued through lending partners.
|Amount||Terms||Interest Rates||Fees||Best For|
|7(a) loans||Up to $5 million||Up to 25 years||Variable: Prime rate plus 2.25% to 4.75%
Fixed: Prime rate plus 5% to 8%
|0% to 3.75%||General business needs|
|CDC/504 loans||Up to $5 million or $5.5 million||10 to 25 years||Based on the current market rate||Up to 4.368%||Commercial real estate or heavy equipment purchases|
|Microloans||Up to $50,000||Up to 6 years||Typically between 8% and 13%||No fees||Minimal business expenses|
7(a) loan program
The 7(a) loan program is the SBA’s main financial assistance program for small business owners. Standard 7(a) loans are available up to $5 million. The SBA guarantees up to 85% of loans as big as $150,000 and up to 75% of loans exceeding $150,000. Express 7(a) loans are available up to $350,000 with an SBA guarantee of 50%.
Repayment terms would depend on the use of the loan. Equipment, working capital or inventory loans would have terms up to 10 years, while real estate loans could have terms up to 25 years. The SBA puts a cap on interest rates, which can be based on the prime rate or Libor rate.
Variable rates are based on your loan amount and repayment term:
- Loans less than 7 years:
- $25,000 or less: Prime rate plus 4.25%
- $25,001 to $50,000: Prime rate plus 3.25%
- Over $50,000: Prime rate plus 2.25%
- Loans 7 years or longer:
- $25,000 or less: Prime rate plus 4.75%
- $25,001 to $50,000: Prime rate plus 3.75%
- Over $50,000: Prime rate plus 2.75%
Fixed rates would be based on the Prime rate plus 5% to 8%. As of March 16, 2020, the Prime rate is 3.25%.
The SBA also charges 7(a) loan fees that range from 0% to 3.75%. Loans of $1 million or more have a 3.5% fee on the guaranteed portion up to $1 million, plus a 3.75% fee on the guaranteed portion exceeding $1 million. It may take the SBA five to 10 business days to respond to standard 7(a) loan applications and up to 36 hours for Express 7(a) applications. Express loans don’t come with loan fees when issued to qualified veterans or their spouses.
CDC/504 loan program
The CDC/504 loan program helps business owners cover commercial real estate or heavy equipment purchases. CDCs, or Certified Development Companies, fund loans along with SBA-approved lenders.
Loans are available up to $5 million, though some energy-efficient or manufacturing projects could qualify for $5.5 million. A CDC would provide up to 40% of the funding while a partner lender would provide up to 50%, which the SBA would guarantee. The borrower would need to contribute the final 10% to 20% of the loan amount.
Repayment terms could span 10 to 25 years. Like 7(a) loans, interest rates on fixed CDC/504 loans are based on the current market rate, although no specifics are given. Borrowers could also expect fees up to 4.368% of the total loan amount.
The microloan program provides loans up to $50,000 to small businesses and nonprofit child care centers. The average loan is $13,000. Borrowers could use microloans for working capital or to purchase inventory, supplies, furniture, machinery or equipment.
The maximum repayment term is six years. Rates are typically between 8% and 13%. Microloans don’t come with any additional fees from the SBA, though you may owe lender-specific fees.
Microloans are reserved for women business owners and other underserved demographics, including minority, low-income and veteran business owners. Loans are made through nonprofit microlenders that have partnered with the SBA.
How to apply for SBA loans for women
Business owners must apply for an SBA loan through an intermediary lender. You could use the SBA website to look up lenders or use the Lender Match tool to be connected with a financial institution in two business days.
Applicants for all SBA loans need to meet the same criteria. You must:
- Be a for-profit business
- Be located and do business in the U.S.
- Have invested your own money in the business
- Be unable to secure financing elsewhere
Borrowers must also meet the SBA’s size standards. The SBA sets industry-specific thresholds on the number of employees or average annual receipts that businesses must fall below to be considered a small business.
An SBA loan application requires you to submit several documents to illustrate the business’s financial standing and your personal experience. Before applying, prepare the following information:
- Business plan
- How much money you need and why
- Personal credit history
- Financial projections
- Collateral, such as inventory or property
- Personal industry experience
To qualify, you may need to have at least two years in business, though you could be approved with less time. You could also be required to supply two to three years’ worth of tax returns.
The application and approval process could take two to three months, so you may not see funding as soon as you’d like. Keep this time frame in mind when applying for SBA loans.
Before issuing a loan, the SBA would require any business partners with 20% ownership or more to provide a personal guarantee. A personal guarantee would make you personally liable to repay the loan if the business defaults.
Can I get an SBA loan with bad credit?
Business owners typically can’t secure an SBA loan if they have bad credit. You may be required to have a credit score of at least 650 to be eligible for financing, depending on the lender with which you’re working.
SBA resources for women-owned businesses
In addition to financial assistance, the SBA provides several resources to support women business owners.
Women-Owned Small Business Federal Contracting program
The SBA reserves a portion of government contracts for women-owned businesses participating in the program. The SBA selects contracts from industries where women-owned small businesses are underrepresented or economically disadvantaged. Program participants can compete against each other for these contracts.
To be eligible for the program, a business must meet the SBA’s small business size standard. Women who are U.S. citizens must own and control at least 51% of the business and women must manage day-to-day operations and long-term decisions.
Your business must also be certified as a women-owned small business. You can certify your business through the SBA or an approved third party, including:
- El Paso Hispanic Chamber of Commerce
- National Women Business Owners Corporation (NWBOC)
- U.S. Women’s Chamber of Commerce
- Women’s Business Enterprise National Council
Office of Women’s Business Ownership
The SBA’s Office of Women’s Business Ownership (OWBO) coordinates programs to support and assist women entrepreneurs. Services include business training, counseling, help with federal contracts and assistance accessing credit and capital.
The OWBO also manages Women’s Business Centers across the U.S. These centers are designed to address specific challenges women face in business ownership. You can find your nearest Women’s Business Center on the SBA website.
National Women’s Business Council
The National Women’s Business Council (NWBC) is an independent federal advisory committee representing women entrepreneurs throughout the U.S. The council provides advice and policy recommendations to the SBA, as well as the President and small business congressional committees in the Senate and the House of Representatives.
The organization advocates for issues of importance to women business owners and all entrepreneurs. You can fill out an online form to contact the NWBC.
Additional business resources for women
Outside of the SBA, a number of organizations provide resources for women business owners:
You may also find women-focused entrepreneurship groups in your local community.