The Ultimate Guide To SBA Loans For Women

Until the passage of H.R. 5050: Women’s Business Ownership Act in 1988, women in many states couldn’t even receive a business loan without having a male cosigner. Thanks to this legislation, more resources are available for women business owners, including SBA loans for women.

The Small Business Administration offers affordable loan programs and additional resources to female entrepreneurs and small business owners. Read on to learn how you can use these resources to grow your woman-owned business.

What Is The SBA?

The Small Business Administration (SBA) provides resources to help small business owners be successful. This includes in-person and online counseling, low-cost training, and advocacy for small businesses. One of the SBA’s most significant resources is its low-interest loan programs.

Securing a traditional loan from a bank or credit union can be tough for any business owner. These financial institutions view small businesses as a risk, even when the business has established a track record of success.

Alternative lenders have fewer requirements but much higher rates and less favorable terms. Low borrowing limits through these lenders may also prove to be a problem.

Instead of simply accepting a loan with less-than-desirable terms, many business owners look to the SBA to receive loans with competitive rates and terms, even when they’ve been turned down for other loans.

How The SBA Helps Women-Owned Businesses

Not only does the SBA provide funding for women, but it also has online resources, counseling, training, and more. Here’s what the SBA has to offer women with small businesses.

Types Of SBA Loans For Women-Owned Businesses

While all SBA loans are available to female entrepreneurs, SBA 7(a) loans, Microloans, and CDC/504 loans may be the most suitable options.

How To Qualify For An SBA Loan

Women can apply for any SBA loan product, provided they meet lender and SBA requirements. While specific requirements vary based on lender, type of loan, and other factors, these are the general requirements for receiving an SBA loan.

Can I Get An SBA Loan If I Have Bad Credit?

Most lenders want to see a credit score of at least 620, while scores over 700 are preferred. If your credit score falls below 620 or your credit report has negative items such as bankruptcies, foreclosures, or collections, the chances of receiving an SBA loan are slim to none.

If your score falls short, there are steps you can take to potentially qualify in the future:

• Access your free credit score online
• Review your free credit report
• Dispute credit report errors with the credit bureaus
• Pay your current debt obligations as agreed

If your financing need is urgent, you can apply for loans for bad credit borrowers. While these options offer fast funding, these loans have less favorable terms, higher interest rates, and an overall higher cost of borrowing than SBA loans.

How To Apply For An SBA Loan

If your business needs financing and you meet the requirements of the SBA, you can apply for an SBA loan. The steps that you take next are determined by the type of loan you select.

The first step is to find your lender. The lender you select is based on the loan you’re pursuing:

• 7(a) Loans: Use the SBA’s Lender Match service to connect with an intermediary lender or get referrals through your existing financial institution. Banks, credit unions, online lenders, and other SBA-approved lenders can help you get the funding you need.
• Microloans: A nonprofit SBA-approved lender is required to receive an SBA Microloan.
• CDC/504 Loans: You will need to find a CDC that is licensed with the SBA, as well as a private lender that will loan money to cover 50% of your project costs.

Once you’ve found a lender, you’ll fill out an application for an SBA loan. In addition to details about your business, your lender may also need:

• Breakdown of ownership
• Summary of how loan proceeds will be used
• Details about how you plan to repay your loan

Documentation will also be submitted with your application. This documentation will be used to determine if your business qualifies for funding. While requirements may vary by lender, expect to present the following items:

• Personal credit reports & scores
• Business credit reports & scores
• Business licenses & permits
• Articles of Incorporation
• Business & personal federal income tax returns
• Cash flow statements
• Balance sheet
• Profit & loss statements
• Business plans
• Financial projections

Depending on the loan product you select, additional documentation may be required. For example, a letter of intent from a private lender is needed when applying for an SBA CDC/504 loan.

As you move through the application process, be prepared to provide information on the collateral being used to secure the loan (if required) and all owners should be ready to sign a personal guarantee.

Once all documentation and information are gathered, the lender will evaluate your application, taking into consideration factors including credit score, credit history, time in business, and your ability to repay the loan. Don’t be surprised if the lender has questions or requests more information throughout the process. Make sure that your contact information is up to date and that you make yourself available to keep the process moving forward.

The underwriters may take several weeks to review your full loan application. With banks and traditional lenders, you may wait two to three months (or longer) from the application stage to funding. Some lenders offer expedited services to help you get the money you need fast, so if time is an issue, shop around for intermediary lenders that offer fast approvals and funding, like online lenders SmartBiz and Lendio.

Other Business Resources For Women

There are plenty of other resources for female entrepreneurs outside of the SBA. The National Women’s Business Council offers a range of resources through its initiatives, including accelerators and incubators, business competitions, conferences, crowdfunding, and alternative lender programs.

Another free resource worth taking advantage of is SCORE, a nonprofit organization and SBA resource partner. SCORE connects entrepreneurs with experienced volunteer mentors, many of whom are retired business owners and executives. These mentors can provide guidance on everything from writing a business plan to managing cash flow — all at no cost.

The National Association of Women Business Owners also provides resources to help empower women business owners. This organization offers training, education, and virtual networking to female entrepreneurs.

Entrepreneurs can also take advantage of many funding opportunities outside of SBA loans, including grants and small business loans.

The Bottom Line On SBA Loans For Women

Women have come a long way in recent years, especially when it comes to entrepreneurship. The great news is that there are plenty of resources available to female entrepreneurs — you simply need to know where to look.

Before you apply for SBA loans, do your research. Evaluate your loan options, shop around the various lenders, and make sure that getting a loan will help you take your business to the next level.