The Best Small Business Loans (And Other Resources) For Women
Obtaining financing can be a significant hurdle when starting or expanding a business, but this is particularly true for women. While comprising nearly a third of small business owners, women receive less than one sixth of all business loans. Why is this? How can you get around lending bias and procure a business loan for your small business, even with the odds stacked against you?
Keep reading to learn the answers to these questions and find all the resources you’ll need to finance your amazing woman-led business.
Table of Contents
Why Do Women Have Trouble Receiving Financing?
Despite making up 30% of the small business owner demographic in the United States, women only receive 16% of conventional small business loans and 17% of government-backed Small Business Administration loans, according to the 2014 Majority Report of the U.S. Senate Committee on Small Business and Entrepreneurship (one of the only comprehensive reports about business financing for women).
The reasons women have trouble receiving business financing are multifold. However, one of the main culprits is gender bias against women among traditional lending institutions. Simply put, banks are more likely to reject a loan application if it comes from a woman. This in-built bias additionally leads to fewer applications from women due to a supposition of rejection.
Even when women’s business loan applications are accepted, we receive smaller loans than our male counterparts, according to the above-mentioned report. This is in part due to that same institutional gender bias, and in part because women request smaller loans than men, on average.
Women entrepreneurs may also face challenges receiving relevant business training and counseling, due to a lack of funding, according to the U.S. Senate report.
Best Small Business Loan Options For Women At A Glance
SBA Loans Government-backed loans offered by the Small Business Administration and its partner lenders. Online Loans Fast, automated loans offered by independent business lenders online. Business Lines of Credit A credit facility from which the business can borrow money at any time. Business Credit Cards Credit cards used for business expenses. Microloans Small loans, often used by startups, offered by the SBA, nonprofit lenders, or other sources. Nonprofit Business Loans Business loans offered by nonprofit lenders. Crowdfunding Funds sourced from a network of backers or investors. Business Grants Free funds granted to businesses, normally for a specific project. VC Funding/Angel Investors Investors who give money to businesses in exchange for equity in the company.
Government-backed loans offered by the Small Business Administration and its partner lenders.
Fast, automated loans offered by independent business lenders online.
Business Lines of Credit
A credit facility from which the business can borrow money at any time.
Business Credit Cards
Credit cards used for business expenses.
Small loans, often used by startups, offered by the SBA, nonprofit lenders, or other sources.
Nonprofit Business Loans
Business loans offered by nonprofit lenders.
Funds sourced from a network of backers or investors.
Free funds granted to businesses, normally for a specific project.
VC Funding/Angel Investors
Investors who give money to businesses in exchange for equity in the company.
The best type of financing for you depends on your unique business and financial situation. Learn more about each type of business financing by reading below.
Small Business Administration (SBA) Loans
A government business loan is one way women entrepreneurs can get a low-cost loan to start or expand a business. The U.S. Small Business Administration (SBA) doesn’t actually originate loans; rather they guarantee loans originated by banks or other lending institutions, thereby reducing the bank’s risk and allowing them to offer you a lower interest rate. Some of the more useful SBA loan programs include Standard 7(a) loans, Community Advantage Loans, and Express Loans.
Small business loans that can be used for many many business purchases, such as working capital, business expansion, and equipment, inventory, and real estate purchasing.
Small loans, with a maximum of $50,000, which can be used for working capital, inventory, equipment, or other business projects.
Large loans used to acquire fixed assets such as real estate or equipment. 504 Loans are offered in partnership with Community Development Companies (CDCs) and banks.
Loans used to rebuild or maintain business following a disaster.
As mentioned, SBA loans have a slightly higher approval rate for women when compared to traditional bank loans (17% vs. 16%).
Although SBA loans can have a lengthy application process and may be more difficult to qualify for than some other financing options such as online loans, SBA loans are high-quality loans with fair and reasonable repayment terms.
Online business loans, sometimes called “alternative loans,” are loans originated by alternative lending institutions—basically, any lenders that aren’t directly associated with a bank—and which are easily accessible online. Online lenders such as LoanBuilder, OnDeck, Fundation, and many others offer fast and easy business loans without the borrower ever having to step foot in a bank.
|Lender||Borrowing Amount||Term||Req. Time in Business||Min. Credit Score||Next Steps|
|$5K - $500K||3 - 36 months||x1.003 - x1.04/mo||12 months||600||Apply Now|
|$5K - $500K||13 - 52 weeks||x1.029 - x1.1872||9 months||550||Apply Now|
|$2K - $5M||Varies||As low as 2%||6 months||550||Apply Now|
|$20K - $500K||1 - 4 years||7.99% - 29.99% APR||2 years||660||Apply Now|
Some online lending services, such as Streetshares, have a P2P structure whereby you borrow money from peer-lenders online.
In addition to their convenience, online loans are also attractive to many borrowers in that they typically have more relaxed borrower criteria compared to banks. For example, while a bank loan typically requires two years’ time in business and an impeccable credit history, an online lender may accept one-year-old businesses with a “fair” credit score.
The downside of online loans is that they usually have higher interest rates and faster repayment terms than traditional loans. So, you’ll need sufficient cash flow to repay large, frequent amounts.
Applying for an online business loan is one way a female entrepreneur can overcome bias in the lending market. Because alternative lenders use algorithms to approve applicants, gender bias is reduced. The fear of being rejected for a loan—again, a contributing reason why women don’t apply for as many business loans—is also lessened when you’re applying online as opposed to applying in person.
Personal online loans can be a viable financing option for startups; these loans usually can be used for any purpose and therefore do not require the applicant to have any time in business or business income.
There are also online-SBA loan hybrids such as SmartBiz, which provide a faster, easier way to get an SBA loan (albeit with slightly higher rates).
Streamlines SBA loan process for:
Business Lines Of Credit
A line of credit is a financing option for businesses that don’t necessarily need a set amount of cash but would benefit from a cash “cushion” that they can draw from as needed to cover working capital needs, for example. You only accrue interest on what you withdraw, and once you repay what you’ve taken out, the full amount is restored to your limit (in the case of a “revolving” LOC). LOCs are useful for frequent or infrequent, large or small cash infusions to your business.
A line of credit functions similarly to a credit card, though LOCs have higher credit limits than credit cards in most cases—you can get a LOC of up to $10 million, depending on the strength of your business. Some LOCs will even give you a debit card you can use to pay bills directly from your LOC, without having to wait the typical 2-3 days it takes to transfer funds to your bank account.
As with loans, lines of credit can be obtained from a bank or credit union, from the SBA (CAPlines), or from an online lender. Also just like business loans, online lines of credit are faster and easier to obtain; however, online LOCs have higher interest rates than bank LOCs. With that said, for a woman who hasn’t had success obtaining bank financing and wants to look at alternatives, a LOC from an online lender such as Fundbox can be a fantastic way to get that those much-needed business funds.
|Lender||Borrowing Amount||Draw Term||Draw Fee||APR||Next Steps|
|$6K-$100K||6 months||None||Starts at 13.99%||Apply Now|
|$5K-$5M||6 months||1.50% per draw||21% - 65%||Apply Now|
|$1K-$100K||12 weeks||None||12%-54%||Apply Now|
Business Credit Cards
A business credit card is another option for financing business expenses. Credit cards are generally easy to get and can be used for large purchases. Of course, the true cost of a credit card “loan” depends on how quickly you pay back the money you borrow. If you get a card with a 0% 12-month introductory APR and pay off your balance within the first year, you might not have to pay any interest at all. But if you only pay the minimum payment each month and use it regularly, you could be paying your card off for, like … ever.
Like a line of credit, a small business credit card is a good backup financing tool to have if and when you need it. With a business credit card, you can even earn rewards, including cash back. Of course, not all business expenses can be put on a credit card, so if you need liquid cash, then a LOC will be a better choice. It’s often possible to get a credit card cash advance, but you should really only do this in an emergency, since the fees you’ll pay will exorbitant, to say the least.
Chase Ink Business Preferred
18.24% - 23.24%, Variable
Microloans are small loans under $50,000—an amount frequently sought by women entrepreneurs. These loans are especially relevant for startups, with a particular focus on disadvantaged borrowers such as women. The SBA Microloan Program, established in 1988, is especially popular among women entrepreneurs.
|SBA 504 Loans|
$500 - $50,000
Up to 6 years
6.5% - 13%
Possible fees from the loan issuer
Guarantee required from anybody who owns at least 20% of the business
Collateral normally required, but depends on the lender
According to the aforementioned Senate report, women have fared much better under the SBA’s Microloan program compared to the other SBA loan programs, with women receiving 57.4% of SBA microloan funds.
Unfortunately, while this important source of small business funding for women was expanded under the previous administration, the Trump administration has cut funding for the SBA’s microloan program by 20% in 2018, and the administration’s proposed SBA budget for 2019 slashes the microloan program even further. Other (male-dominated) SBA loan programs such as the general 7(a) business loan and 504 capital investment loans have not seen similar cuts.
Fortunately, there are a few nonprofits that also offer microloans. For example, Accion and Kiva are a couple nonprofit lenders offering microloans. Some Community Development Financial Institutions (CDFIs)—financial institutions dedicated to facilitating community growth in disadvantaged areas—may also offer microloans.
We recommend starting your search for a microloan with one of these lenders:
|Lender||Max. Borrowing Amount||Rates||Req. Credit Score||Next Steps|
9.4% – 99.7% APR
2.9% - 18.72% factor rate
Starts at 9% factor rate
Nonprofit Business Loans
In addition to microloans, some nonprofits also offer larger business loans with a focus on disadvantaged borrowers such as women. For example, Accion (mentioned above) also originates loans as large as $1 million, as well as microloans.
Generally, nonprofit business loans have more relaxed borrower qualifications (lower credit score requirements, for example) and more lenient repayment terms. You may also qualify for a very low interest rate, or possibly even be able to borrow the money interest-free. Still, it’s not a grant, meaning you will need to pay the money back. This type of loan may also be harder to get if it is awarded on a “grant” type basis, which is basically a contest you enter wherein only the most qualified candidate “wins” the loan.
With nonprofit CDFI loans, on the other hand, rates may be much higher than you’d get from a bank. Nevertheless, CDFIs can often work with businesses that would be turned away by a traditional financial institution.
Most people associate the word “crowdfunding” with charitable causes where people use social media to raise funds for a good cause. But while charitable crowdfunding is the most popular form of crowdfunding, there are also crowdfunding options for businesses, and particularly for startups with an innovative idea they’re trying to get off the ground.
The types of business crowdfunding include:
- Debt: Also called “crowdlending” or “P2P loan,” wherein the investor gets paid back on a fixed schedule with interest
- Equity: Backers become investors who receive an ownership stake in your company
- Rewards-Based: You offer each backer a tangible or intangible reward, such as one of your finished products (ala Kickstarter)
With crowdfunding, the focus on is you, as an individual, telling your personal business story — this is of particular advantage for women, especially during this time where more awareness is being brought to the ways against which women are discriminated
With the exception of debt-based crowdlending, funds you raise with crowdfunding can be considered “free money” in that you don’t have to pay it back; but as mentioned above, you may have to offer backers equity in your company or some other reward.
Business grants are generally quite difficult to get, especially for non-government, for-profit businesses. However, some nonprofit organizations and companies offer business grants specifically for women entrepreneurs. With grants, the focus on telling your story could be an advantage. You may be able to set yourself apart, especially if you emphasize your unique ideas and qualifications, as well as the challenges you have faced as a woman entrepreneur.
Some business grants for women are very competitive business competitions that award just one or several applicants a substantial grant per year—an example would be the Cartier Women’s Initiative, an annual international business competition in which the first-place winner takes home $100,000 and second place takes $30,000.
Sadly, there is no longer any federal grant money earmarked specifically for women-led businesses. There used to be a small business grant for women offered through the SBA—an annual business grant competition called innovateHER which rewarded innovation among women entrepreneurs— but it was discontinued under the current administration (it’s kind of hard not to see a disheartening pattern here, eh?). You can still find some grant opportunities on grants.gov but these are mostly for scientific and medical research rather than for-profit businesses.
Nevertheless, nonprofit organizations and even private businesses have picked up the slack to fund more than a handful of business grants for women.
VC Funding/Angel Investors
Venture capitalist (VC) funding/angel investors are still overwhelmingly dominated by men, but there is some focus on working with women, as well as people of color and minority-owned businesses.
VCs and angel investors put forth seed money for businesses, typically in exchange for a stake in the company. The main difference between VCs and angel investors is that VCs are normally firms or corporations, while an angel investor could be just one affluent individual. VCs also usually have more money to invest in a company than do angel investors. However, the basic idea is the same.
The #Angels investment group backs women-run startups (the hashtag is part of the name), as do Pipeline Angels. Pipeline Angels specifically invests in women and non-binary femme entrepreneurs who run for-profit social ventures.
Frequently Asked Questions
I want to start a small business. What are my best funding options?
If you don’t have much savings to dedicate or family/friends you could borrow from, then your best option is probably a startup loan. Startup loans are offered by both banks and online lenders, but are not as easy to come by as a loan for an already-established business. It helps to have good personal credit.
You might also consider taking out a personal loan for business from one of the following lenders:
|Lender||Borrowing Amount||Term||Min. Credit Score||Next Steps|
|$1K-$50K||3 or 5 years||8.16%-27.99%||620||Apply Now|
|$2K-$35K||3 or 5 years||6.95%-35.99% APR||640||Apply Now|
|$1K-$40K||3 or 5 years||5.32%-30.99%||640||Check Rate|
Crowdfunding, VC/angel investors, and grants are also a possibility, albeit more of a long shot. You may be eligible for a microloan, though these typically will not cover the entire cost of getting a new business off the ground.
I want to purchase a small business. Where do I start?
Depending on one’s qualifications, there is available funding for women purchasing a business. I would recommend starting your research by reading my blog post on business acquisition loans. In that post, I go over the main types of loans you can get to buy an existing business. Some of these options include startup loans, bank loans (including SBA loans), and business expansion loans.
I have bad credit. Am I still eligible for financing?
Yes (unless your score is below 500-550), but you’ll pay higher fees than you would if you had good credit. You will also have fewer options, as most business lenders will want you to have good credit.
You can find some lenders that will lend to bad credit borrowers in the following lists:
- The 6 Best Small Business Loans For Bad Credit 2018
- The 4 Best Small Business Loans With No Credit Check (FYI Shopify Capital is another option where you can get a cash advance if your business uses Shopify Payments)
- The 6 Best Business Lines Of Credit For Bad Credit
Bear in mind that there are a lot of “payday” type loans out there that will accept bad credit applicants, but the terms are often opaque and even predatory. Be sure you research any company that will lend to you, especially if the terms are vague or sound too-good-to-be-true. Ideally, you should improve your personal credit score before applying to loans.
I am a woman of color. What are my best funding options?
People of color face even greater challenges in obtaining financing, particularly when they’re female. We do have a list of the best funding options for minority business owners with bad credit, though this, of course, assumes you have bad credit and is not specific to women. I would recommend contacting the Minority Business Development Agency. In addition to online resources, the MBDA maintains business centers in most major cities. One of the services they offer is helping minority-owned businesses connect with lenders.
Other Resources For Female Entrepreneurs
Here are a few more links with further business help for women entrepreneurs:
- SBA Office of Women’s Business Ownership – SBA’s branch for women business owners includes resources on topics such as starting a business, applying for a business loan, and finding government contracting opportunities.
- Girlboss Foundation – Awesome community and resources for young female entrepreneurs. The Foundation awards a bi-annual business grant to women entrepreneurs and also recently teamed up with Uber for Uber Pitch, a program awarding more than $200,000 in prize money to three women-led startups.
- National Women’s Business Council – Non-partisan federal advisory council which conducts research and provides resources about and for women in business.
The best type of loan for your woman-owned business depends on various factors, including your income, time in business, credit score, amount of capital needed, how fast you can pay it back, and some other considerations. If you think you want to apply for a loan but don’t have much free time to research lenders, you might want to use a “lending matchmaker” service that allows you to compare and apply to multiple lenders at once (example: Lendio).
If you have any further questions about business financing for women, ask in the comments and I’ll get back to you!