Small Business Loans for Women
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.
Securing business financing can be an uphill climb for many small business owners, and business loans for women can be even more elusive.
Even though four out of 10 businesses are owned by women, they are more likely than men to rely on their personal finances to establish and grow their businesses. And when women business owners are approved for financing, the average business loan size is about $40,000, compared to an average loan size of about $69,000 for men, according to a study from Biz2Credit.
There are few loan programs offered exclusively for women, but we’ve highlighted a number of lenders with flexible options for all types of entrepreneurs. There are also grants and development programs to help women build their enterprises without putting personal funds on the line.
Types of small business loans for women
There are many types of business financing you could consider to fund your business’s growth. A number of online business lenders offer these loans, too, and they tend to have more lenient requirements and faster time to funding than traditional banks. Some common financing options for women business owners include:
|Small Business Loans for Women|
|Loan Type||Lender||Amount||Rates||Repayment Terms|
|Long-term loans||SBA 7(a) program||Up to $5 million||Variable: 5.5%-8%*
|10 to 25 years|
|Short-term loans||OnDeck||$5,000 to $250,000||Starting at 35.00%||Up to 18 months|
|Business lines of credit||BlueVine||Up to $250,000||Starting at 4.80% for a 26-week repayment period||6 or 12 months|
|Working capital loans||Credibly||Up to $400,000||Factor rates starting at 1.15**||6 to 18 months|
|Equipment loans||National Funding||Up to $150,000||Not disclosed||Up to 84 months|
|Accounts receivable factoring||Noble Funding||$500,000– $8,000,000||APRs between 7.50% and 12.00%||Ongoing; rates increase after the first 90 days|
*Assuming a prime rate of 3.25% **As of Nov. 29, 2020
Long-term business loans, or simply term loans, are for a specific amount with a definite repayment schedule. Terms can extend up to 20 years or more. Interest rates are typically fixed, meaning your rate stays the same for the length of the loan. Term loans are good small business loans for women looking to make large investments, like purchasing a point-of-sale system or a piece of commercial equipment. Make sure, though, that whatever you purchase with your loan will benefit your company for a long period of time.
Where to look: SBA Loans for women
SBA loans for women include the standard business loan programs from the U.S. Small Business Administration (SBA), which guarantees business loans made through banks. Though not specifically reserved for women, SBA loans come with favorable interest rates and repayment terms, and often provide reprieve for business owners who cannot secure financing elsewhere.
Popular SBA loan programs include:
- 7(a) loans: Up to $5 million for general business expenses. Terms between 10 and 25 years with variable rates from prime plus 2.25% to prime plus 4.75%, and fixed rates at prime plus 5% to 8%.
- CDC/504 loans: Up to $5 million for real estate or equipment purchases. Repayment terms span 10 to 25 years, and interest rates are based on current market rates.
- Microloans: Up to $50,000 for women, minority, low-income and veteran business owners. Rates tend to average between 8% and 13% and terms may be up to six years.
It can often take two months or longer to receive an SBA loan, as the lender and the SBA would typically need to review your application. However, some institutions are SBA preferred lenders and are able to independently approve loans, which may speed up the process.
Short-term loans are like regular-term loans, but business owners must pay them back over a short period (about 3 to 18 months). Payments are more frequent, often weekly instead of monthly like many loans. Short-term business loans are generally for smaller amounts of money, but often have high interest rates and fees. Short-term loans are ideal small business loans for women who have an immediate financial need, such as an inventory purchase or a temporary gap in cash flow.
Where to look: OnDeck
Online business lender OnDeck offers short-term business loans between $5,000 and $250,000, and the repayment terms may be as long as 18 months. Rates start at 35.00% but your rate could be much higher. OnDeck requires business owners to have one year in business, $100,000 in annual revenue and a personal FICO score of 600 or higher.
Business lines of credit
A business line of credit is different from a loan. Rather than loaning one lump sum of cash, lenders issue a maximum credit line that business owners can draw from as needed. You would only need to pay interest on the amount you have used, and the full credit amount would become available again once you repay your debt. A line of credit may be a better option over a business loan in case of financial emergency, or if you have short-term funding needs like purchasing supplies and inventory.
Where to look: BlueVine
Online lender BlueVine offers business lines of credit up to $250,000. Repayment schedules span 6 or 12 months. Rates start at 4.80% for a 26-week repayment schedule. To be eligible, borrowers need at least two years in business, a FICO score of at least 650 and $40,000 in monthly revenue.
Working capital loans
A working capital loan is a short-term loan designed to finance a business’s day-to-day operations. Borrowers must pay them in full pretty quickly, and they tend to have higher interest rates because of the short repayment terms. However, these can be a useful financial tool when you need some cushion to cover everyday expenses.
Where to look: Credibly
Credibly, another online lender, offers working capital loans up to $400,000 with terms between 6 and 18 months. Credibly uses factor rates to calculate interest, which are decimal figures rather than percentage points. To determine how much your loan would cost, multiply your factor rate by your loan amount to find the total amount you would pay back. Credibly’s factor rates start at 1.15 for working capital loans. Business owners must have at least six months in business, $15,000 in monthly bank deposits and a minimum credit score of 500 to be eligible for funding.
Equipment financing helps businesses purchase expensive equipment like vehicles and machinery, and the equipment itself acts as collateral. Equipment loans make great small business loans for women-owned startups without a lengthy operating history, good credit or valuable assets. You’d be able to pay for expensive equipment little by little over time. However, you may end up paying more than the value of the equipment because of your interest payments, and your lender may require a down payment.
Where to look: National Funding
National Funding, another online lender, provides equipment financing up to $150,000. Repayment terms range up to 84 months, although the lender does not disclose interest rates. Eligible borrowers need at least six months in business, a FICO score of 575 and an equipment quote from a vendor.
Accounts receivable factoring
Accounts receivable factoring, or invoice factoring, involves a business selling its accounts receivables at a discount for immediate cash. The factoring company then collects on the invoices, charging a fee before sending you the remaining amount. Unfortunately, this funding option has potentially high fees — still, accounts receivable factoring could be an ideal small business loan for women with bad credit, since factoring companies don’t often require high credit scores.
Where to look: Noble Funding
Online lender Noble Funding offers an accounts receivable line of credit up to $8,000,000. The amount you may borrow would depend on your invoices — Noble Funding lends up to 90% of the value of invoices that are less than 90 days old and at least $500,000. This company is a best fit for high-revenue companies, but you could look to lenders we’ve already mentioned on this list, including BlueVine which requires a minimum of $10,000 in monthly revenue.
Alternative small business financing options for women
Taking out small business loans can be a valuable way for women entrepreneurs to finance their ventures. However, they aren’t the only way for women to secure funding.
Women’s small business grants
Small business grants are sums of money that organizations give charitably for specific purposes, like companies focused on doing social good. Unlike a loan, you normally don’t have to pay back the money from the grant. There are many small business grants for women who run nonprofits, though fewer exist for women-owned businesses.
Securing a grant is highly competitive and usually involves an application process. Typically, you would explain why your company needs the money, how you plan to use it and why your business is the best candidate for the grant. There are many resources online that list grant opportunities, such as Grants.gov.
Crowdfunding is the practice of raising money for your business. You do this by collecting small amounts of money from the general public via an online platform, such as GoFundMe. In most cases, businesses don’t need to pay back the money that the crowdfunding campaign raises. However, businesses do typically offer investors some kind of perk, like a first-run product or a T-shirt with the company logo. Fees tend to be reasonable: For example, GoFundMe charges 2.9% plus $0.30 per donation.
Peer-to-peer lending is a practice that matches individual lenders with would-be borrowers. Instead of borrowing from a financial institution, you borrow from a person or a group of people who see your loan as an investment that provides a return. In some cases, peer-to-peer loans can help you get funding that you may not be able to get through traditional types of loans. Typically, though, peer-to-peer loans have higher interest rates and come in smaller amounts.
Commercial real estate loans are similar to residential mortgages, but they’re connected to a commercial property. Unlike residential mortgages that usually have 30-year terms, the terms of commercial mortgages are more flexible. Instead of just considering the value of the property in a commercial mortgage, lenders also weigh its potential for income, too.
Merchant cash advances
A merchant cash advance is a lump-sum payment to a business from a lender. The business pays the money back over time from the money it makes on credit card transactions. The lender takes a small percentage of those transactions each day until the borrower pays off the loan. Businesses that use merchant cash advances incur some fees for the convenience of getting money upfront on future earnings.
How do women entrepreneurs get a loan?
Women entrepreneurs can apply for business loans from online lenders and banks. Online lenders typically have faster time to funding and more lenient requirements than banks, but rates are generally higher and loan amounts may be smaller than what banks offer.
How do I get money I won’t need to pay back to start a business?
You could apply for small business grants for women to secure business funding that you wouldn’t need to pay back. Databases like Grants.gov may help you find available grants that could be suitable for your business.
How can I qualify for a small business loan for women?
Your business loan eligibility would depend on your time in business, credit score and revenue. Certain funding options for women may be easier to qualify for than others. Business lines of credit, invoice factoring and merchant cash advances often have the most lenient requirements, but watch out for high fees and interest rates. Be sure to shop around to find the right financing solution for your business.