10 Helpful Tips for Applying for Small Business Loans for Women
Statistics show that 39% of businesses in the U.S. are owned by women. However, the statistics on business loans for women paint a different picture. Unfortunately, female small business owners receive less funding than male-run businesses.
This gender bias is more common with larger capital raising scenarios. Fortunately, when it comes to business loans, the approval process is more structured.
This mean that there’s less chance of your application being turned down, on the illogical reason that you are a woman. To maximize your chances of being approved, you will want to know about all the tips for getting business loans for women.
Read on to find out how you can be successful when applying for a small business loan.
1. Organize Your Financial Information
When looking to take out a loan for your company, the first order of business is to get your financial information organized and ready for the application process.
If you do not have the required documents at hand, this can get your loan application turned down. It can also draw out the process while you scramble around getting the necessary paperwork together.
Different lenders will have different requirements. To make sure you cover all your bases, you should get the following paperwork organized.
The first thing to get together is your business’s financial statements. These include your profit and loss statement, balance sheet, cash flow statement or forecast, etc. You will also want to gather your business’s past tax returns.
In addition, you may want to get your credit report and verify that your credit score is high enough to qualify for a loan. Banks typically approve borrowers who are showing a credit history that’s reliable and with a score of 680 and over.
2. Find Specific Lending Programs of Business Loans for Women
Thanks to the fact that women face a number of gender-bias obstacles when applying for funding, there is a growing trend of lenders offering loan programs that are exclusively for women.
Considering that research shows that women are better at paying back debt than their male counterparts—these programs are advantageous for both the lender and female entrepreneurs.
A good way to optimize your chance of gaining a loan is to apply for both. The traditional loans and special lending programs for women simultaneously. Then, you can compare the different loan proposals you receive.
3. Build a Strong Business Plan
Another task you should undertake (if you haven’t already) when seeking out a loan is to write a rock-solid business plan. Business plans are designed to show investors and lenders the financial projections of your business. They also show data about company growth and explain how you plan to deal with competition.
When writing a business plan, make sure the projections you make are based on facts such as market data and consumer behavior. You need to also make sure that all financial projections are well drawn up and as accurate as possible.
At the same time, don’t be scared to go big with your projections. One common piece of advice from business owners that have been extremely successful is that if you are doing what you love, you have a shot at success. If you love what you’re doing, then a well-written business plan should reflect this.
Another top tip for a great business plan is to make sure that you provide just the right amount of detail. Too little detail and lenders won’t be able to see the scope of your vision and how it ill be carried out. Too much, and you will lose the attention of loan officers before they can see the value and potential success of your business.
4. Be Clear on the Type of Loan You Need
When searching for small business loans for women, it is important to decide what type of loan fits your needs, and which ones you have the best chance of being approved for.
For example, if you don’t want a lump sum of money all at once, but rather some funds to ease cash flow issues, you might want to consider a business line of credit. Take note, however, that you will need to manage the line of credit tightly, so you are not paying high rates of interest.
On the other hand, if your business has been open for more than a year, and you want an affordable loan, small business loans from the SBA can be a good choice. They offer loan programs and also assist small business owners with gathering the necessary paperwork for applying.
Another type of loan you may want to consider is accounts receivable financing. Accounts receivable financing allows you to sell your accounts receivable to a lender in exchange for money. Your accounts receivable serves as collateral to secure the loan.
The upside to this type of funding is that it is quick and can improve cash flow. Approvals are often a lot easier than bank loans, and you do not need additional collateral besides accounts receivable.
When looking into business loans for women, it’s a good idea to compare banks vs traditional lenders. Banks tend to offer lower interest rates, however, their approval process can be tough, and take months to finalize. Traditional lenders, on the other hand, tend to offer funding with easier approval processes.
5. Know How Much You Need and What the Funds Will Be Used For
Before applying for a loan, you need to know exactly how much money you need, and what you will use the loan for. Being clear about how the money is going to be utilized can help you get your business loan application approved.
Here are some of the more common reasons why business owners take out loans:
- Invest in assets or expansion that will grow the business
- Start a new business or buy an existing one
- Increase expenses in order to grow the business
- Improve cash flow
If you are vague about how much you need to borrow, and what the funds are going to used for, lenders may see a red flag and decide not to approve your application.
6. Government Grants for Small Business Loans for Women
Besides all of the different lenders offering small business loans for women, you should also look into government grants for women. Grants pose a great benefit as they do not have to be repaid.
Thanks to this, there is a lot of competition around grants. If you are prepared to put in the time and effort, you may be able to benefit from a loan with no repayment required.
7. Consider SBA Microloans
Although SBA microloans are not specifically business loans for women, they are something you might want to consider. In some cases, SBA microloans can be one of the best types of small business loans for women who are just starting their company.
Their application requirements are more flexible, making it easier to get approved even if you are just starting your business. SBA microloans come with very reasonable interest rates.
The downsides to SBA microloans, is they are, as the name suggests, small. Their terms are also very short, meaning that you will be required to repay the loan quickly.
8. Look Into Online Loans
Securing a loan in the early stages of your business—right when you need it most—can be tough. Commercial banks are unlikely to offer you a loan unless you have been in business for a year or more and are showing a profit.
The loan application process with a bank is complicated and can take months before a decision is made. This is not ideal if you are trying to make a quick business transaction. Fortunately, loans from smaller lenders and online lenders can fill this gap.
Online loans can be particularly fast to apply for, with fewer requirements. The downside to online loans is that their interest rates are a lot higher than those of banks and other traditional lenders.
9. Shop Around for Small Business Loans for Women
When searching for a loan for your business, comparing loan proposals is important. To get the best deal possible you will need to make a comparison among the different lenders and their terms. By comparing their interest rates, fees, terms, etc. you will be able to decide which lender is best for you.
You should also consider the loan size, as well as whether you can pay it back within the agreed upon term. Comparing loan proposals can take some time and effort on your part, but is necessary if you want the best deal.
10. Make Sure You Can Make the Loan Payments
Lastly, before you have signed the loan agreement, be sure that you can make the required loan payments. Interest payments on loans can become a major problem if the loan is not generating any additional profit for your business.
A common piece of advice from business owners is to only borrow what you need. Just because a higher amount is available, doesn’t mean that it has to be borrowed.
Use Our Site to Find the Best Business Loans for Women
If you’re looking for business loans for women, one of the easiest places you can start is with Your FundingTree. All you need to do is complete our quick 90-second application. Then, you will be matched with up to five lenders who will compete for your business.
Pick the best lender for your business and begin funding with them shortly after being approved. To get started, call us at 888-782-0348 or you can apply today.