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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 will 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 be 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 LLC. 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 704-904-0774 or you can apply today.

Financing 101: How do Hard Money Loans Work?

Did you know that 70% of small businesses have outstanding debt?

Without the financing necessary to keep the engine running, your business has a higher chance of crashing. For many entrepreneurs who get rejected by traditional lenders, alternative lenders have become lifelines, including hard money lenders.

But how does a hard money loan work, and are there any benefits to taking out this type of a loan? Keep reading to find out.

What are Hard Money Loans?

A hard money loan is a type of short-term bridge loan you get against collateral you own. These loans are common in real estate transactions where private investors and companies, rather than banks, are the lenders.

How Does a Hard Money Loan Work?

Most hard money leaders are either private investors or companies. You’ll rarely find a bank dealing in hard money loans.

When you approach a hard money lender, they will take a close look at the collateral you have to offer. In most cases, it is going to be real estate assets that is used to secure the loan.

Since the lender is more concerned with your assets’ value, your credit score and financial history aren’t a big part of hard money loan requirements. If you fail to pay back the loan, the lender will liquidate the collateral to recover their money.

You should know that hard money loans carry a higher interest rate than traditional loans. On average, the interest rates for a hard money loan range between 7% to 15%. That’s nearly double or triple that of a bank loan.

As such, due to the high interest rates, you should not make the mistake of using the loan for long term purposes, such as funding for a startup.

You can get a hard money loan for a term of between one to five years. Ideally, though, you should structure your loan for six months. Since the interest rate is higher, the shorter your loan term, the more affordable the loan.

Hard Money Loan Points

With every loan proposal, hard money lenders try to limit their risk by using points. A point is an origination fee the lender uses to cover costs associated with administering the loan.

These points are valued as a percentage basis, with one point equating to 1% of the total loan amount. Depending on your situation, the points you’ll can pay range from 2% to 10%.

For example, if a borrower pledges collateral that will take longer to sell, the risk factor rises. To mitigate this, the lender will charge more points. A borrower pledging collateral that can be liquidated quickly will be charged fewer points.

Once the loan application has been approved, you will pay these points as part of the closing costs. Points are a reason why you should know how hard money loans work before you actually apply for the loan.

Why You Should Apply for a Hard Money Loan

In contrast to other traditional loan types like asset-based lending, several advantages make a hard money loan attractive. They include:

Fast Applications

One of the challenges that make traditional bank loans slow to get approval for is the “know your customer” process. Traditional lenders need to take time and investigate your sources of income, financial history, and your creditworthiness.

Hard money lenders, on the other hand, do not need such lengthy processes. Their primary focus lies in the value of the collateral you bring to the table. As long as they can recoup their funds by selling the collateral, they are good to go.

For example, let’s say you face foreclosure when applying for a traditional loan. That fact alone makes a successful application incredibly hard. A hard money lender will focus more on your collateral without letting the foreclosure slow down the application process.

Flexibility

Hard money lenders don’t use a generalized approach to approving loans. Instead, they approach each applicant on a case-by-case basis. What that does is offer you the flexibility that can help you access the funds when you need them.

If, for example, you’ve been in business for less than six months, it will be difficult to get a traditional bank loan. However, a hard money lender can look at your collateral and determine a repayment schedule that enables you to tap into the credit facility.

Easy to Qualify

Hard money lenders take the risk based on the assets being pledged by the borrower. As such, that neutralizes other potential lending risks and enables much-needed financing to more people.

Do you have poor or bad credit but high-quality assets? You’ll likely be approved for a hard money loan. The easy application process gives you a lifeline to turn to even during times when finding funding is hard to come by.

The Drawbacks of Hard Money Loans

As with almost anything else in life, hard money loans have a few cons you should think about prior to submitting an application. These include:

High Interest Rates

Hard money loans attract higher interest rates than traditional credit facilities. Hard money lenders assume significantly more risk than banks, and the high interest rate helps cover their risk and overall exposure.

That doesn’t mean this type of a loan can’t work for you. It just means you must be wise in how you use this type of financing. Conventional wisdom dictates that hard money loans work best over shorter periods of time. Less than a year would be best.

For business owners, that means avoiding the classic business funding mistake of taking out a high interest loan for an extended period of time such as a few years.

Your Collateral is at Risk

The instant you use your assets as collateral to secure the loan, you agree to the lender seizing them if you default. Thus, if the assets you put up are critical to operating your business, you place the future of your business at risk.

Of course, you must put this in context as you think through your decisions. Any loan you take out will always have a level of risk attached to it. Even unsecured loans come with risk should you fail to pay them when due.

As long as you’re using the hard money loan proceeds wisely, your assets face a calculated risk.

Hard Money Loans Can Save Your Business

Without proper funding, many businesses fail, and that’s typically due to the constricting nature of traditional lending. A hard money loan can be a financing alternative that helps your business thrive. Make a point of answering the question, “How does a hard money loan work?” to help you pick the right financial solution.

Your FundingTree LLC is a marketplace matching borrowers with the most suitable lenders for their business. Apply today to secure a loan that attracts a lower interest rate, and that comes with exceptional customer service.

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