Women are breaking financial glass ceilings more today compared to any period in history. We’ve taken hold of the reins of business ownership while generating both increasing revenues and employment opportunities. Nevertheless, securing a small business loan can be difficult. A business loan is the fastest, and probably most secure form of getting the much-needed financing.
However, if there is good news, there is also bad news. The thing is that women tend to have greater obstacles when it comes to securing a business loan, thus hindering them from reaching their full potential as an entrepreneur.
Reasons Why Women Find It Hard to Get a Business Loan
- Women may not taken as seriously as men. While this sounds really unfair, it is true that most banks or lending companies find it hard to take a woman entrepreneur more seriously. This is because many women entrepreneurs only own small businesses. While these businesses are rising steadily, most banks do not welcome the concept that a woman can own and manage a business successfully.
- Lower credit scores. This does not only apply to women, but in all loan applicants in general. Credit unions, banks, and any other lender types have a universal standard when it comes to credit scores. Having a low credit score usually prevents a loan application from getting approved.
- Not in the business long enough. Again, this does not only apply to women, but in general loan applications, as well. Typically, banks will not approve a loan application if the business in question does not meet the minimum operational years, which is two years. Your business must have a verifiable business history with a positive cash flow for two years.
- Business does not have enough collateral. This rule also applies not only for a woman getting a small business loan, but also to every other business, too. When applying a loan, you must back it up with equipment, real estate properties, cash savings, or other forms of collateral. Sometimes, not only the business assets can serve as collateral, personal assets, such as your car or house can be included as well.
How to Make It Easier to Get a Small Business Loan If You Are a Woman
For most business owners, making a small business loan is a lot easier. There is actually a wide array of choices when it comes to business loans.
Financial institutions, for one, are a great option for women planning to get more funding for their business. As long as you are a capable business owner, applying for a loan won’t be much of a problem. Just pay attention to marketing campaigns targeting women entrepreneurs so you can get the most out of your selected financing channel.
In addition, it is also good news that interest rates have mostly dropped considerably lower compared to the rates in the past. The repayment terms are much more flexible, too, making it easier and more affordable even for a small business like yours. It is also nice that these days, there are a lot of women-run organizations that advocate female entrepreneurship. These organizations can help you get the business loan you need along with the support required to make your small business flourish.
Small Business Loans for Women
Here are some ways businesswomen can get business loans:
- Traditional Banks
- The best choice for a business loan will still be with a traditional bank. It is safer and more secure. However, banks usually have a stricter set of requirements when it comes to loans. Repayment terms are stricter as well, but expect a lower interest rate when you get a business loan from a reputable bank. Banks usually require collateral, as well.
- Credit Unions
- Apart from banks, you can also apply for a loan to credit unions catering to small businesses. They offer flexible payment terms, and some may not even require a collateral. However, the interest rates are higher compared to traditional bank loans.
- Government-Funded Loans
- You may also get a small business loan or grant from government-managed organizations. But, getting a government loan is usually a long process and quite invasive, not to mention the limited loan amounts. Prepare to do a lot of paperwork if you are planning to apply for a government loan.
- Alternative Lending Companies
- If you are in a hurry and need to have that business funding as soon as possible, you may try applying for a loan from other alternative lending sources. Loans from these sources usually take faster and easier to process.