Because you need money to make money
Imagine transforming a $900 loan from your mother and a small personal savings into a billion-dollar enterprise. This is not a fairy tale but the real-life story of Janice Bryant Howroyd, who founded the ActOne Group in 1978.
Her journey from a modest beginning to creating the largest privately held, minority-woman-owned personnel firm in the U.S. exemplifies what women can achieve with the right financial support.
This blog is for women like Janice, poised to turn their dreams into successful businesses but facing the common hurdle of funding. We explore the world of small business loans for women, demystifying the process and unveiling options that can propel your business forward.
Whether you're starting from your kitchen table or scaling up, understanding your financial avenues is the first step toward success. Let's explore how the right loan can be the key to unlocking your business potential.
For woman entrepreneurs like Janice, understanding the specifics of each loan type can be the key to making empowered financial decisions. Various loan options cater to different needs, from starting a new venture to expanding an existing one.
Here are some financing options you may consider for your business:
As the name suggests, long-term loans are often used by businesses to fund larger-sum projects, like expansions and real estate acquisitions. These loans, which can be repaid over three to ten years, offer flexibility in amounts ranging from $5,000 to over $500,000, with interest rates generally falling between 6% and 30%. Long-term loans offer several benefits for business owners seeking to invest in their company’s future.
These loans are particularly well-suited for:
On the opposite side of the funding spectrum, short-term loans offer quick financial solutions for urgent business needs. Typically, they are repaid within three to 18 months and provide amounts between $2,500 and $250,000. Interest rates for short-term loans are often higher, ranging from 10% to 80%.
For women entrepreneurs, short-term loans can be a lifeline during emergencies, quickly providing the necessary funds without long-term financial commitment.
Short-term loans can be used for a range of other immediate, small-sum needs, including:
In some cases, short-term lenders may require collateral like equipment or real estate. In other cases, a personal guarantee or a guarantor may be required. Women entrepreneurs seeking short-term loans should be aware that defaults could result in the repossession of assets or significant damage to their credit, as well as the guarantor’s.
Like Janice, many women may have a business idea that they’re passionate about. However, the biggest hurdle is finding financing without having established business credit or operational history. Small business startup loans for women emerge as a helpful resource in this situation.
Often, startup loans have more flexible eligibility requirements to account for a lack of credit or operational history. These loans offer financing between $500 and $750,000 with repayment terms of one to five years. The interest rates vary from 7% to 30%.
For entrepreneurs with innovative small business ideas for women, startup loans provide financial support for various initial business needs, such as:
If you are exploring startup loans for women, keep in mind that presenting a comprehensive business plan can greatly enhance the likelihood of securing a loan.
Many of the options mentioned above disburse funds in a lump sum. However, some women business owners may not know how much financing they’ll need in the future. This is where a business line of credit steps in.
With a line of credit, women entrepreneurs can be approved up to a specific amount, often between $1,000 and $500,000. When funding is necessary, women CEOs can draw from the line of credit as needed – there is no minimum amount they need to borrow.
Interest is only paid on the amount that is taken out, with rates ranging between 7% and 25%. Once the borrowed amount is repaid, it is available for use again without the need for female business owners to reapply for financing.
Business lines of credit are great for handling ups and downs in cash flow, unexpected costs, or quickly grabbing a business opportunity. A business line of credit can be effectively utilized to handle a range of financial needs and growth initiatives, like:
A working capital loan is designed to help cover daily business costs when income or demand fluctuates. With working capital loans, women entrepreneurs can borrow between $5,000 and $250,000 with terms from six months to two years and interest rates between 7% and 30%.
Working capital loans can help women business owners manage working capital effectively by providing them with funds to cover expenses during slower seasons or purchase inventory before higher-demand periods.
Working capital loans can be used by female entrepreneurs to:
If you already have an established business and need additional funds, you may be sitting on a gold mine without even knowing it. Female-owned businesses that have unpaid invoices from customers can sell these outstanding balances and receive a lump sum payment.
Rather than waiting for customers to pay, businesses can get most of the invoice value in advance from a lender. This amount usually is about 80% to 90% of what the customer owes.
When the customer finally pays their invoice, the financing company takes this payment and gives you the remaining amount minus a fee for their service. This fee is typically 1% to 5% of the invoice.
If you’re considering account receivable financing, keep in mind that it is often best reserved for bulk outstanding invoices rather than one-off late payments.
Equipment loans provide funds for women entrepreneurs to buy or lease the equipment they need to run their businesses – these include heavy machinery, computers, or even kitchen equipment.
When a business takes out an equipment loan, the amount borrowed typically covers up to 100% of the equipment's cost, although some lenders may require a down payment of 10% to 20%. The interest rates on equipment loans can vary, often depending on the business's creditworthiness, the life expectancy of the equipment, and market conditions, but generally range from 6% to 30%.
The terms of these loans are usually matched with the expected life of the equipment, which means a loan could last anywhere from a few years up to a decade or more. The equipment itself often serves as collateral for the loan, which can make this type of financing more accessible than unsecured loans.
Equipment loans cater to businesses looking to enhance their operational capabilities and efficiency. For women entrepreneurs, here’s how they can use the funds from an equipment loan:
Before you submit your application for small business loans, research the general requirements and eligibility criteria for each lender. Most lenders will require the following:
Once you have familiarized yourself with the requirements for business loans, you can submit your request. Here’s a step-by-step guide to help you through the process:
It is noted that women-owned businesses represent 40% of all U.S. companies. Despite this, they still face unique hurdles.
Recognizing these obstacles is key to devising effective strategies to surmount them and level the playing field.
Despite making up a significant portion of the business sector, women entrepreneurs often find it harder to access funding. Women business owners are 50% more likely to be denied loans or receive less funding than their male counterparts. To address the challenge of limited funding opportunities, women entrepreneurs can explore several resources for lenders and investors who support women-owned businesses. These include women-focused financial institutions and loan programs, online lending platforms with a mandate for supporting women, Women's Business Centers sponsored by the U.S. Small Business Administration, and networking groups like the National Association of Women Business Owners. Additionally, venture capital firms, angel investors focusing on women-led businesses, and women-centric crowdfunding platforms like iFundWomen offer viable avenues.
Many women entrepreneurs juggle business responsibilities with primary caregiving roles. For instance, employed women spend about 2.3 hours daily on housework, while working men spend 1.6 hours. To manage this, women can prioritize tasks, delegate responsibilities, and adopt flexible working arrangements. Embracing technology to streamline business operations can also save time and reduce stress, making it easier to fulfill personal and professional commitments.
Societal biases continue to pose challenges, often resulting in women being perceived as less credible or facing more scrutiny. Indeed, social and gender biases have historically limited women's participation in entrepreneurship. Building a strong network of mentors, peers, and advocates helps navigate these biases. Confidence, assertiveness, and honing negotiation and leadership skills can help women entrepreneurs counter these biases and establish themselves as capable and respected professionals.
For women entrepreneurs like Janice, finding funding doesn't always mean taking on debt. There are alternative sources of capital that don't require repayment, making them ideal for those who might struggle with high-interest loans. Let's delve into these options, offering financial empowerment without the burden of payback.
Crowdfunding is a way to raise money where you ask many people, usually through the Internet, to support your business financially. Platforms like Kickstarter and Indiegogo let you set up a campaign where you share your business idea and ask people to contribute money.
This can be a great option for women to gauge interest in their products or services. By offering donors something special in return for their support, women entrepreneurs can fund their businesses with the help of community support.
Women-focus entrepreneurship groups like Women Who Startup and Female Founders Alliance provide a blend of financial advice, professional mentorship, networking opportunities, and tailored resources specifically designed to address the unique challenges faced by women in business.
These resources cater to various needs, ranging from educational workshops and leadership webinars to platforms for promoting women-owned businesses and accessing funding. For instance, Women Who Startup emphasizes community building and skill-sharing, while Female Founders Alliance focuses on connecting women entrepreneurs with investors and mentors.
Below are the specifics of some other notable groups:
To join, visit the organization’s website, where you can fill out an application. Becoming a member of these groups unlocks a wealth of benefits, including access to special events, expert business advice, and a supportive community attuned to the unique challenges faced by women entrepreneurs.
Grants are great because you don't have to pay them back. Here are a few to look into:
Applying for small business grants varies by program. Generally, these grants have designated application periods and criteria, such as meeting certain business criteria and having a professional background. While applying, often directly through their websites, you'll be asked to present a comprehensive business plan, demonstrate your financial management skills, and explain how the grant will propel your business forward.
Exploring these grant options can open new avenues for growth and support, offering a valuable opportunity to fund your business aspirations without the burden of repayment.
Securing funding might seem daunting, but it's a manageable task with the right approach. Start by matching your business needs with the appropriate financing option. Strengthen your application with a comprehensive business plan and tap into the support offered by women's entrepreneurship groups.
With these strategies, obtaining the necessary capital to fuel your business growth is well within reach. Remember, each step taken is a leap forward in turning your entrepreneurial dreams into reality. Keep pressing forward; the world needs your unique contribution.
