There are many challenges that successful entrepreneurs must overcome. Finding the right idea, choosing the right partnerships, understanding how to market your product and how to reach out to your target demographic are all part of a successful business strategy. But an enterprise also needs money in order to thrive – and female entrepreneurs often get the short end of the stick by receiving less than their male counterparts. Whatever the reasons behind this imbalance, there are many funding opportunities for women-owned businesses that offer opportunities to financially support your company.
Women Entrepreneurship is Booming – but Struggles to Access Funding
Companies that are at least 51% owned by women have seen a boom in recent years, as female entrepreneurship has taken off. During the last two decades, women-owned businesses have grown to account for 39% of all US enterprises, rising by a whopping rate of 114% according to American Express and its seventh annual 2017 Report on the State of Women-Owned Businesses – by comparison, the average growth rate of the nation over that same period was 44%. In 2017, companies owned by women amounted to an impressive 11.6 million in total, created jobs for 9 million employees among them and returned an annual revenue of $1.7 trillion. Those female-owned businesses that produce a yearly revenue of over $1 million have demonstrated a 104% growth since 1997, while those making more than $500,000 and less than $1 million grew by almost 90%.
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Despite this impressive figures, female entrepreneurship has to overcome many challenges, several of which have to do with difficulty to raise funding. According to a 2018 survey, the odds are almost twice as high for male entrepreneurs to raise at least $100,000 in external financing for a startup compared to their female peers – 28% of men succeed in doing so and only 15% of women. This spills over to other aspects of running your own company: while 53% of men are likely to have more than 2 employees, only 32% of women entrepreneurs can say the same, while women are more likely to work longer hours and during the night. Chances are also higher for female entrepreneurs to run their company out of their home – 68% of women as opposed to 48% of men. Many of these challenges would be solved by easier access to capital – which is why identifying opportunities for loans for female entrepreneurs is key to their success.
The Different Financing Options for Women-Owned Businesses
There are many different types of small business financing for women and the first step when trying to identify the perfect one for you is to do some proper research. One of the first options to take a look at are the loans provided by the Small Business Administration (SBA), which partners up with financial firms to offer small business funding specifically designed for women. These are quite coveted and hard to get as they are available to companies that might not qualify for other financing options and they also tend to have favorable terms. One prominent advantage is that they typically offer a lower interest rate as the SBA mandates that there is a cap to how much revenue can lenders get from each loan. While funding options may differ according to the particulars, there is usually flexibility with regard to the size of the loan and repayment terms. However, the time that SBA loans need for approval is longer than average and you need to provide some collateral or personal guarantee in most cases, which might not be your ideal option.
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Another relatively inexpensive way to finance your business is to apply for a traditional banking institution loan. You will need to go through some paperwork by providing a business plan and a detailed credit report, as well as your company’s financial projections and a lot of personal and business tax and banking documentation, but if you succeed you will enjoy quite low and fixed interest rates while you will also have the opportunity to cultivate a relationship with a banker that might prove mutually beneficial in the long run. However, bank loans tend to go to men and you also might need to provide collateral and wait a long time for funding. By contrast, peer-to-peer business loans by platforms tend to be quicker and easier to get. P2P loans platforms like Lending Club try to bridge the gap between SMEs and investors that can provide funding and offer flexible loan sizes and terms without too many restrictions. However, the downside is that they usually come with fees and higher interest rates and businesses that are just starting out might not qualify.
Last but not least, are also many local groups that are geared towards supporting female entrepreneurship in a specific region – which includes funding. While these might offer smaller loans, the terms are usually very agreeable, and they are specifically designed for women-owned businesses, so it is worth checking out what opportunities are available at your location. Whatever the option you end up going with, it requires to put in the time to understand which plan works better for you and your business model – and then choose where to direct your efforts.
