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This post is by Zoe Weisner, a marketing writer with BlueVine. Zoe is passionate about all things messaging and learning about the fintech industry. In her spare time, she enjoys spending time with her pint-sized poodle, Zella.
More women are starting their own businesses. But when it comes to entrepreneurship, it’s still a man’s world.
This is particularly true when it comes to funding. Less than 5% of women-owned businesses were part of VC deals in 2016. As Fortune reported recently, women-owned businesses typically receive less funding due to a lack of female VCs.
Women entrepreneurs continue to encounter gender bias when it comes to raising capital, as Fundera also reported. This is especially visible in certain industries like technology, fashion, and finance, where women were perceived to be less successful and weaker managers than their male counterparts. So, when it comes to financing, women business-owners still face many hurdles.
Fortunately, women business owners now have more business loans for women with the rise of alternative business lenders.
Online alternative lending offers a streamlined application and approval process that also makes it convenient for women business owners trying to juggle their many responsibilities.
“I have four kids,” Misty Cooley, owner of Penick Concrete Services, says. “I don’t have time to go to the bank. I can do everything online while taking care of my kids at the same time.”
For women entrepreneurs, there are more options when it comes to raising capital for a small business, from traditional loans offered by their local banks to new types of online financing offered by fintech startups.
Here’s a quick overview of financing choices for women business owners:
A term loan is a lump sum you borrow and repay based on set terms over a fixed period of time. Term loans normally last from 1-10 years, but some long-term loans can last up to 25 years or longer. Term loans may have fluctuating interest rates.
When it’s a smart option: Because it is based on fixed payments on terms that generally last more than a year, a term loan is typically the most cost-effective way of financing a major business expense. A term loan is a smart option if you need funds for a major business expense, such as buying a piece of equipment or remodeling a store. A term loan is also ideal if you’re looking to expand your small business by opening a new location or hiring more people.
The best type of business term loans are those guaranteed by the U.S. Small Business Administration. SBA loans can go up to $5.5 million based on low interest generally under 10% and are payable from 7 to as long as 25 years.
But before you look for a loan through the SBA, however, women business owners need to determine exactly how much funding they need.
“Too often I hear women business owners say they will take whatever they can get rather than defining their need. Businesses will be more successful if they seek the full amount of funding needed, rather than accepting whatever they can get,” San Francisco SBA District Director Julie Clowes says.
It also pays to understand the different types of SBA loans for “there are loan programs for every stage in the business cycle,” Clowes says.
Getting an SBA loan can entail a long and tedious process involving stringent requirements. You will be required to present a long list of documents and information.
“Often it is the back and forth with the lender for missing documents that takes longer than the processing of a complete application” Clowes states. Fortunately, she adds, the SBA has several resource partners “that offer free one-on-one counseling to help you prepare for meeting with a lender.”
These resources include organizations such as the Service Core of Retired Executives (SCORE), Small Business Development Centers (SBDC), and the SBA’s own national network of Women’s Business Centers.
A business line of credit offers women business owners more flexibility. Unlike term loans, which offer borrowers a fixed lump sum upfront, a business lines of credit gives a business owner access to a set amount but with the option of drawing and paying fees only they funds they need. Traditional banks offer business lines of credit, but they typically have stringent requirements. Fortunately for women business owners, business credit lines are now also accessible through alternative lenders.
When it’s a smart option: A business line of credit is good to have for addressing short-term funding needs, including emergencies. It is also a less expensive and more flexible form of financing for women business owners who do not wish to be saddled with a huge debt. In many cases, a business line of credit is also ideal for growing a business.
Invoice financing is ideal for businesses that cater to other businesses, especially if their customers typically take weeks to pay for their products or services. This type of financing, which is also known as accounts receivable financing or invoice factoring, lets you get cash on unpaid invoices. Instead of waiting 30, 90, or even 120 days for a customer to pay, you’re able to get access to funds that you’ve already recorded as revenue.
With invoice factoring, for example, you can immediately get a huge chunk of the funds in an unpaid invoice—sometimes up to 95% of the total amount. Once the account receivable is paid off by your client, your business will receive the remaining rebate minus a fee from the factoring company.
When it’s a smart option: Invoice financing is best used for businesses that sell products or services to other businesses and that have reliable clients. Additionally, invoice financing benefits businesses with inconsistent cash flows because they can choose which invoices to submit for payment. Like a business line of credit, invoice financing is also a smart option both for plugging cash flow gaps and for growing a business.
A strong support system of women entrepreneurs and business owners who can offer advice and networking opportunities is crucial to take your business to the next level. Here are some of the most well-established resources for women business owners:
One of the oldest and well-respected women’s business associations, NAWBO has a network of over 10.1 million women-owned businesses in the United States. Created with the intention to provide women-owned businesses the opportunity to connect with other women business owners, NAWBO equips its members with the tools to succeed in any industry.
The Office of Women’s Business Ownership raises women entrepreneurs through business training, counseling, and federal contracts programs coordinated by SBA district offices. Take their courses to update your skills or get into contact with your local business center.
Although women-only grant programs are far and few, we’ve compiled a list of recent women-focused grant and mentorship programs that are always on the lookout for fresh applicants.
Regional Grant Programs
National Grant Programs