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Get StartedWomen-owned small businesses are starting and growing at record highs. According to data from Kauffman, 40% of new entrepreneurs in the U.S. are now women, and the number of new women-owned businesses is growing at double the rate of male-owned businesses. So, the number of small business loans obtained by women should be growing with a corresponding trajectory, right?
Unfortunately, these numbers don’t match up. Based on Fundera’s own in-house research, only one in four female entrepreneurs apply for business loans, and those who do ask for approximately $35,000 less than male business owners. And that’s despite the fact that women-led businesses ultimately have greater profit potential than businesses with mostly men at the helm
With all of this in mind, if you run a women-owned business, you’re probably wondering where you can get financing. Luckily, government-guaranteed SBA loans for women and alternative online lending have made it easier to obtain financing.
So let’s explore the best options for small business loans for women.
This guide covers:
Additional sources of financing:
There are many lenders and loan programs focused specifically on supporting women entrepreneurs. In fact, the business loan options can be too numerous to keep track of. There are SBA loans, online loans, lines of credit, and microloans. Let’s review all these loan options so you can find your business’s best source of financing.
Best for: Women who need a long-term business loan and have strong credit.
Perhaps the best small business loans for women (or any business owner for that matter) are SBA loans. Although there aren’t SBA loans for women exclusively, SBA loans have some of the most competitive payment terms and interest rates on the market—plus, SBA loans can be used for nearly any business purpose.
As a government entity, the SBA guarantees loans for small businesses; however, the SBA itself does not make these loans. Instead, banks and other direct lenders actually make the loans, and the SBA subsidizes a portion of the loan if the borrower defaults.
Because of this, lenders are more likely to work with small businesses. Therefore, SBA loans for women are great financing options for those who can qualify—you’ll get low interest rates (4% to 9.5%) and long-term financing (seven-year terms or longer).
Plus, the SBA offers multiple programs within their suite of business loans. For example, the SBA microloan program lends small amounts of money—up to $50,000—for startups and micro-businesses. There is also the SBA 7(a) loan program, which offers general-purpose working capital for businesses that are already a few years old. And, the SBA 504 loan program provides money specifically for the purchase of commercial real estate or equipment.
To qualify for an SBA loan, you’ll need to meet a range of requirements, typically including a high credit score and a decent annual revenue. Along these lines, the process to apply for an SBA loan for women is also very involved—meaning significant paperwork and a longer time to get approved.
Best for: Women with either strong or poor credit who need money quickly.
If you can’t qualify for any of the SBA loans for women, online lenders are a great place to look next. Online lenders offer up almost every type of business financing. There are lenders that provide short-term three- to 18-month loans for working capital, medium-term two- to five-year loans for women who can’t qualify for bank loans, and more creative arrangements like invoice financing.
Applying for a loan online is the way to go when you need to jump on an opportunity quickly. Lenders can process these loans within days, sometimes even the very same day you apply. Some alternative lenders—like Funding Circle and Lending Club—offer low-rate, long-term financing to borrowers with good credit. Others—like OnDeck and Kabbage—work with lower credit borrowers and charge higher interest rates.
Ultimately, although working with an online lender may not offer the same benefits as an SBA loan, there are a variety of loan types and lenders available in this category. Therefore, you’ll likely be able to explore a range of different options to find a solution that will fit your needs.
Best for: Women business owners with strong or poor credit who want more flexibility in how they use the funds.
Next, one of the best small business loans for women isn’t technically a “loan” per se, but instead, a business line of credit. With a business line of credit, you receive a line of credit that gives you access to a specific amount of money, but you don’t need to use all of it. Similar to a business credit card, you only pay interest on the funds you use, and once you’ve paid back what you draw, your credit line goes back up to its original amount.
Therefore, a business line of credit is one of the most flexible small business loans for women—which is helpful for women in industries with cyclical revenue cycles, such as retail and food services.
Moreover, business lines of credit can be acquired from many different sources, including online lenders. For example, lenders like Lending Club or Fundation offer low-rate lines of credit for women entrepreneurs with solid credit and a few years of business history. On the other hand, if you have less-than-stellar credit or have been in business for a shorter amount of time, you can try lenders like Kabbage or BlueVine.
Best for: Women-owned businesses with smaller capital needs or those who can’t qualify for larger business loans.
If you need just a small amount of capital to jumpstart your business, then a microloan might be one of the best small business loans for your women-owned business. Even a few thousand dollars can help you purchase essential supplies and inventory, for instance.
This being said, microloans are great options because they’re typically easier to qualify for, especially if you have little-to-no revenue history or a short amount of time in business. In this way, microloans can be particularly useful small business loans for women who run sole proprietorships or home businesses or who work as freelancers or consultants.
Small business loans aren’t the only place you can go for financing. Female entrepreneurs may also be eligible for a small business grant. A business grant is “free money” since you won’t have to pay back the cash you receive as you would a loan. However, most grants are much more restrictive than small business loans in terms of qualification requirements and what you can use the funds for. This being said, depending on your financing needs, you may still decide to explore the grants that are out there—especially since there are grants designed specifically for women-owned businesses.
To get your search started, check out our guide to the top small business grants for women.
Instead of applying for a business loan, you could also look into equity financing for your women-owned business. 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. Working with an investor can be a great option if you need a large amount of capital to start a new business or scale your business—and could use some solid business wisdom from investors along the way.
However, finding the right investor can be challenging. Here are some options to help you get started:
Female Founders Fund: The Female Founders Fund provides early-stage fund investing in ecommerce, web-enabled products and services, marketplaces, and platforms led by women.
Merian Ventures: This VC fund focuses on women-led innovation in cyber, artificial intelligence, machine learning, and consumer-facing technologies.
Astia: Astia is a network of over 5,000 investors funding high-growth startups at any stage beyond concept—designed specifically to level the playing field for women entrepreneurs.
Golden Seeds: The Golden Seeds early-stage investment firm provides funding for women-led companies in the B2B and B2C technology, health care, and consumer products or services industries.
Women’s Capital Connection (WCC): The WCC firm provides investor funding for companies with a female founder or C-level executive.
37 Angels: Angel investors invest $50,000 to $150,000 in high-growth startups. You’ll receive an investment decision within four weeks after pitching your business to 37 Angels. This investment firm accepts pitches from men and women-led businesses, but about one-third of funded companies are owned by women.
Belle Capital: This is an early-stage angel fund that targets digital, technology-enabled products and services, life sciences, medical devices, health IT, and cleantech market sectors. Additionally, businesses applying for funding with Belle Capital must have at least one female founder or C-level executive.
Springboard Enterprises: Springboard supports high-growth, women-led companies seeking equity financing for expansion. Since 2000, 800 companies within Springboard’s portfolio have raised $1o billion, including 20 IPOs.
Once again, although inherently different from small business loans for women, VC platforms can be a great way to raise capital, particularly if you have a rapidly growing company and need significant investment to take your business to the next level.
As you can see, there are dozens of small business loans, grants, and other resources for female entrepreneurs. However, as we mentioned earlier, funding between male and female entrepreneurs isn’t evenly distributed.
Why is that? There are a few different explanations to consider:
Some people hypothesize that on the whole, female entrepreneurs choose low-growth industries like retail, with about 10% of women-owned businesses fitting into the retail category—and making up 30% of all retail businesses. And—because retail is considered a low-growth industry, lenders and other investors are less likely to provide capital.
Some surveys show that women entrepreneurs are hesitant to ask for as much capital as their male counterparts, both for small business loans and equity financing. Generally, these business owners are more conservative about their company’s prospects of success, so they don’t ask for as much money.
Most investors are white men—and only 9.65% of “decision-makers” at VC firms are women. Therefore, cultural differences and problems of harassment can make it harder for women to successfully pitch their ideas to male investors.
Plus, not only is it harder for women-owned businesses to secure financing, but they also tend to pay higher interest rates on the loans they’re able to secure. According to Fundera’s own study, women pay 5.4 percentage points more on short-term business loans than men do.
At the end of the day, despite the inequality that still exists between male and female entrepreneurs, there are more financing options for women-led businesses than ever before.
Ultimately, the right financing for your business will depend on a variety of factors—including your specific needs, qualifications, and more. This being said, as you explore your options for different small business loans for women, as well as other types of financing, you’ll want to think carefully about what you can afford, what you can qualify for, and what will work best for your business.