10 Helpful Tips to Applying for Small Business Loans for Women
Statistics show that 39% of businesses in the US are owned by women but the statistics on business loans for women paint a different picture. Unfortunately, female small business owners receive 157 times less funding than male-run businesses.
This gender bias predominates in funding and capital raising scenarios. Fortunately, when it comes to loans, the approval process is more structured, meaning that there’s less chance of your application being turned down, on the illogical reason that you are a woman.
However, to maximize your chances of getting approved, you will want to know about all the tips around getting business loans for women.
Read to find out how you can ensure success for your 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, but to ensure that you cover all your bases, get the following paperwork prepared.
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 Women-Specific Lending Programs
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.
A good way to optimize your chance of gaining a loan is to apply for both regular loans and lending programs for women simultaneously, and then compare the offers 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 going forward, as well as your growth milestones, and how you plan to deal with competition and increase market share.
When drawing up a business plan, ensure that the projections you make are based on facts such as market data and consumer behavior. Particularly, make double 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 plans. 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. So, if you love your business’s offering, you shouldn’t hold yourself back with doubts. A stellar business plan should reflect this.
Another top tip for a great business plan is to ensure 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 grasp the value and potential success of your business.
4. Be Clear on the Type of Loan You Need
When loan hunting, it is important to ascertain what type of loan will fit 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 capital, but rather some funds to ease cash flow issues, you might want to consider a line of credit, such as a credit card. Take note, however, that you will need to manage the line of credit tightly, to ensure that you don’t end up paying high rates of interest.
On the other hand, if your business has been running for more than a year, and you want a capital injection, small business loans can be a good choice. One place to start is with the Small Business Association. They offer loan programs and also assist business owners in gathering the necessary resources for applying.
Another type of loan you may want to consider is accounts receivable funding. Accounts receivable funding allows you to sell your accounts receivable or use them as collateral for a loan.
The upsides to this type of loan/funding are that it can improve cash flow, approvals are often a lot easier than regular bank loans, and you do not need collateral. The downsides to accounts receivable funding are that it can be pricey and contracts may run for longer than you need them.
When looking into business loans for women, it’s also a good idea to weigh up loan options from chain banks vs smaller lenders. Chain banks tend to offer competitive rates, however, their approval process can be very stringent, and take months to finalize. Smaller lenders, on the other hand, tend to offer solutions with easier approval processes.
5. Know How Much You Need and What the Funds Will Be Used For
Before applying for potential loans, you also need to be certain 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 common reasons business owners take out loans:
- Invest in assets that will grow the business
- Start a new business
- Bolster expense budgets (often to be able to achieve growth)
- Ease cash flow
If you are vague about how much you need to borrow, and what it is going for, lenders may see a red flag and decide not to approve your application.
6. Check out Business-Government Grants
Besides all of the different loan options and lending programs for women, you should also take a look into business-government and other women-specific grants.
Grants pose a great benefit as they do not have to be repaid. Thanks to this, there is a lot of competition around grants. However, if you are prepared to put in the legwork, you may be able to benefit from a capital boost with no repayment required.
7. Consider Microloans
Although microloans are not specifically business loans for women only—they are also something you might want to consider.
In some cases, microloans can be one of the best types of business loans for women who are just launching their company. Their application requirements are more flexible, making it easier to get approved even if you are just starting your business.
They also come with very reasonable interest rates, and some organizations that give out microloans also provide different types of training.
The downsides to 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 fledgling stages of your business—right when you need it most—can be tough. Chain banks are not likely to grant you a loan unless you have been in business for a year or more.
Loan application processes can also take months, which is not ideal if you are trying to make a quick business move.
Fortunately, loans from smaller lenders and online lenders can fill this gap. Online loans can be particularly fast to apply for, with fewer requirements than other loan types. What’s more, there are also matching tools and services (such as ours) that can help you to find and compare the most competitive offers within a few minutes.
9. Shop Around for the Best Business Loans for Women
When seeking out a loan for your business, comparing loan options is important. To get the best deal possible you will need to compare different business funding solutions and their terms.
By calculating the interest over the term of the loan, you will be able to ascertain which loans are the ‘cheapest’. You should also consider the loan size, as well as whether you can pay it back within the term.
Comparing loan options can take some time, however, you can get smart about this if you leverage a loan comparison service such as ours here at Your FundingTree.
10. Ensure That You Can Make the Payments
Lastly, before you have signed on the dotted line, ensure that you can make the required payments on your choice of loan.
Payments for loans can become crippling if the loan is not generating additional profits within the 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 Tool to Find the Best Business Loans for Women
If you are 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 application process. Once that is done our financial advisors will match you with up to five lenders who will compete for your business. Once you have found a competitive solution that fits your needs and have been approved with the lender, you can start funding with them as soon as the next working day.