7 Financing Options for Women-Owned Businesses

What’s more, women are leading the charge with entrepreneurship. Nearly half (49%) of new small business owners in 2021 were women, compared to just 28% in 2019, according to 2022 data from Gusto.

However, despite women business owners’ growing influence and achievements, they still face challenges securing business financing. Biz2Credit’s 2022 Women-Owned Business Report found that women-owned businesses account for only 29.2% of borrowers, while men-owned businesses account for 70.8%.

When women do get approved for loans, they tend to receive fewer funds; according to the same report, the average loan size for women-owned businesses in 2020 was 33% lower than men-owned businesses.

No matter your business’s size or goals, financing can play a key role in your growth. Below, we will break down the best small business loans for women business owners, and share tips on how you can position yourself for success.

4 types of small business loans to consider

Women business owners have a variety of options when it comes to funding. Though there are no specific business loans designed for or available only to women, certain types of loans may be more accessible or flexible.

The four most common types of small business loans include: Small Business Administration (SBA) loans, bank loans, online loans, and microloans.

SBA loans

The Small Business Administration (SBA) has a handful of loan programs women can take advantage of, the most popular of which is the SBA 7(a) loan. You can use an SBA 7(a) loan to secure more working capital, refinance business debt, purchase real estate, construct or renovate a building, start a new business, or pay for furniture, fixtures, and supplies.

You can qualify to borrow up to $5 million with repayment terms between five and 25 years and interest rates ranging from 5-11%.

How to qualify

To be eligible to apply, you need to operate for profit, meet the SBA’s small business size guidelines, and do business in the US. You also need to demonstrate a strong need for the loan, use the funds for a sound business purpose, and prove that you’ve already tried using other financial resources.

Qualifying can be tough. The SBA generally looks for applicants with credit scores above 640 and 140 for FICO business credit scores. You may also need an operating history with strong revenues and cash flow.

Best for: Businesses that have great credit and need access to larger borrowing amounts

Bank loans

Bank loans have a reputation for quality customer service and affordable interest rates. They also offer a variety of financial products, from term loans and business lines of credit to equipment financing and business credit cards.

Though many banks have extra fees associated with getting a loan, they also have more wiggle room with borrowing amounts, repayment periods, and interest rates. The average size of a small business loan from a large bank is just below $600,000, with an average APR of 3-7%.

However, the application and underwriting processes for bank loans can take a few months, and you may have to visit the bank in person to answer questions or provide more information before getting approved.

How to qualify

The qualifications for bank loans are pretty high. Most banks want you to have a credit score of 680 or higher, two years of operating history, and an annual revenue above $250,000. Many banks also request a portfolio of different financial documents—from bank statements and tax returns to balance sheets and cash flow statements—as well as a detailed business plan.

Best for: Established small business owners with excellent credit and a good operating history, as well as a flexible financing timeline.

Online loans

Many small business owners seek out online loans for their flexibility and speed. Online lenders vary with their offerings, but there’s usually a wide array of options to meet your needs. Think: term loans, business lines of credit, invoice factoring, merchant cash advances, and equipment financing.

Applying for an online loan is fast and straightforward; you can usually submit an application in under half an hour with only a few key documents. Plus, because online lenders use underwriting technology to expedite the application review and loan approval processes, they can generally get you an answer within just a few days.

Loan amounts and terms vary greatly depending on the lender, but the average small business loan amount is $50,000 to $80,000, with an average APR of 11-44%.

How to qualify

Qualifying for an online loan tends to be easier than qualifying for a bank loan or SBA loan. You don’t always need excellent credit, a long history of revenue, or a certain amount of cash flow. The average online lender wants to see a credit score of 600, six months of operating history, and an annual revenue of $100,000, but some online lenders have looser qualification standards.

Best for: Businesses that need quick funding, want the convenience of applying online, and have average credit

*Want a fast and affordable online loan? Check out Funding Circle’s term loans.

Microloans

Known for their accessibility, microloans are a great solution for small business expenses or short-term financing to improve your operation. A microloan is a small term loan, usually between $5,000 and $50,000. There are certified microfinance institutions (MFIs) that offer microloans, but one of the most common programs in the US is the SBA microloan program.

The average SBA microloan is $13,000, but you can qualify for up to $50,000 to use on working capital, inventory, machinery, or startup costs. Interest rates are slightly higher than the SBA’s other loan programs, ranging from 8-13%.

How to qualify

Eligibility requirements vary depending on the intermediary lender you apply with, but in general, microloans have relaxed qualification standards. You need to operate for profit, fit the small business size guidelines, demonstrate good character (meaning you can’t have a criminal record), and have average credit (a minimum score of 575).

You may also need to write up a business plan outlining your goals and repayment abilities, and put up some form of collateral.

Best for: Businesses that need a small amount of money and have average credit

Alternative financing options for women business owners

Here are three options beyond business loans to consider:

Small business grants

Unlike business loans, there are many small business grants specifically designed for women.

Not only do federal and state governments offer grants, many corporations, non-profit organizations, and professional associations do too.

Though grants give you debt-free money, they usually come with highly specific eligibility terms and strict application requirements, plus lots of competition. That’s why it’s a good idea to apply only if you meet all the eligibility criteria.

Start your search by reaching out to your local city council and regional government agencies. From there, you can search “[your business industry] + grants” on Google or reach out to the professional associations you belong to. You can also check out this comprehensive list of small business grants for new businesses and the definitive list of small business grants for women.

Here are several notable options from the lists:

• The Amber Grant gives out a $10,000 grant to women business owners each month.
• Women Founders Network Annual Fast Pitch Competition gives $55,000 in cash grants and $100,000 in professional services to women startup founders who have raised outside funding.
• The Cartier Women’s Initiative gives out regional fellow awards to women business owners around the world. Third-place winners get $30,000, second-place winners get $60,000, and first-place winners get $100,000.
• The Tory Burch Foundation Fellows Program provides educational and mentorship resources, as well as $5,000 to 50 different female entrepreneurs each year.
• The Women of Color Grant Program, run through Fearless Fund and Tory Burch, gives 75 Black women-owned businesses grants of $10,000-20,000 each year.

Venture capital firms and angel investors

Another option is to fundraise with outside investors, either through individual angel investors or venture capital firms that look for startups to invest in. If you succeed at finding interested investors, you can potentially fundraise hundreds of thousands—if not millions—of dollars to grow your company.

However, the venture capital world is cut-throat competitive, especially for women entrepreneurs. Most venture capital investors focus not on small businesses, but on high-growth startups in tech or consumer spaces.

If that’s you, you can gather resources and insights from the below communities to learn more about fundraising opportunities:

• Female Founders Fund
• Women Founders Network
• Female Founder Collective
• Coralus (formerly SheEO)
• Plum Alley Investments
• Women’s Startup Lab

Crowdfunding

Crowdfunding can help you drum up excitement and funds for your business. You create an account on sites like Kickstarter and Indiegogo, then send your business information to friends, family, neighbors, and community members who want to contribute money to your campaign.

Though it’s fairly easy to set up a campaign page, you may have to spend a lot of time marketing to ensure your campaign gets to the right audience. If you don’t reach your funding goal, you won’t get any of the money you raised. If you do reach your funding goal, you’ll have to give away a certain percentage to the site you use.

Additional resources for women business owners

The best way to improve and grow your business is to take advantage of the resources around you. Here are just a handful of organizations and communities that can provide mentorship, education, and opportunities:

• Certification as a woman-owned business: Getting certified as a women-owned small business (WOSB) can help you score business contracts with the government and attract customers who want to support women-led operations. You can inquire about certification requirements and fees through the Women’s Business Enterprise National Council, the National Women Business Owners Corporation, and the US Women’s Chamber of Commerce.
• SBA’s Office of Women’s Business Ownership (OWBO): OWBO provides women entrepreneurs with business training and financing, as well as free or low-cost counseling through the SBA’s women’s business centers.
• National Association of Women Business Owners (NAWBO):NAWBO is a national organization dedicated to educating and uplifting female entrepreneurs.
• Ellevate Network: Ellevate is a professional membership community that connects women and supports women in business.

Getting business financing as a woman-owned business

As a woman-owned business, you have a unique contribution to make to the economy and culture—and financing can help you get there. If you need funds to fuel your growth or reach your goals, it’s helpful to review your books. Start by determining how much money you need to borrow and how much debt you can realistically carry. From there, research your options.

If you value speed, ease, and flexibility, consider applying for financing through Funding Circle. Funding Circle’s business term loans let you borrow up to $500,000, with fixed interest rates and repayment periods ranging from six months to five years. You can apply in just a few minutes, and receive funding in as few as three days if you qualify. Learn more or apply today.