Women-owned businesses are an economic powerhouse in the United States, accounting for almost 12 million ventures employing nearly nine million people and generating $1.7 trillion in sales.
Even more encouraging is the fact women-owned businesses are growing faster than businesses owned by any other demographic group. Women launch more than 1,200 new businesses every day, and women-owned companies lead growth in eight of the 13 fastest-growing industries.
Despite the outsized role that women-owned businesses play in the greater economy, women have long been underrepresented in many areas, particularly equity capital distribution. Recent years have seen an increase in the volume of applications for small-business loans for women, yet average funding amounts themselves actually decreased. In addition, women often experience greater difficulty securing as much financing; women entrepreneurs received 31% less funding, on average, in 2018 than their male counterparts.
That’s why we’ve assembled this ultimate guide of small-business loans for women, including types of loans and where to apply.
Although many women business owners take advantage of grants in addition to loans, we’ve focused solely on loans because of the often-lengthy application processes and stringent eligibility criteria inherent in many grant programs.
The Small Business Administration (SBA Loans)
The first port of call for many women entrepreneurs hoping to secure small-business loans is the Small Business Administration (SBA).
The SBA serves as a resource for entrepreneurs seeking funding, connecting them with lenders. Borrowers provide the SBA with details about their ventures, which the SBA then uses to determine which lenders are most appropriate for that specific business. This ultimately saves borrowers time and effort by ensuring that applicants are submitting loan applications to financial institutions that can meet their needs. Unlike some traditional lenders, SBA loans generally have favorable terms for small businesses.
Some loans, such as the 7(a) Small Loan, are administered by the SBA itself, although the SBA does authorize certain private lenders to make loan determinations on its behalf. This means that although the SBA itself often isn’t the lender, it can and does make eligibility and credit decisions that directly affect whether or not a loan offer is made.
One type of loan is directly administered by the SBA via the 8(a) Business Development program. This initiative aims to provide resources to typically underrepresented communities. Applicants must certify their businesses before submitting an application, but this program is designed to be more accessible to women business owners than other programs are. To qualify for the 8(a) Business Development program, applicants’ businesses must be at least 51% owned by an individual who qualifies as economically and socially disadvantaged per the Code of Federal Regulations, and whose average adjusted gross income for three years is $250,000 or less.
The SBA’s Office of Women’s Business Ownership (OWBO)
Women seeking loans to launch their own businesses can also find qualified lenders by contacting the SBA’s Office of Women’s Business Ownership (OWBO). This office connects borrowers with Women’s Business Centers (WBCs), which are dedicated regional offices that help women prepare to launch their own businesses.
WBCs do not administer loan funding directly but assist entrepreneurs with every other aspect of preparing to launch a business, from writing a business plan to one-on-one coaching. The SBA’s Office of Women’s Business Ownership is a great resource for women-owned small businesses.
What you’ll need to apply
There are several documents that prospective applicants should have on hand before contacting the SBA:
- Most loan providers will expect to see a detailed business plan
- Some lenders may also require separate cash flow projections in addition to a business plan
- Most lenders won’t ask to see a copy of a resume before making a loan decision, but a summary of professional and academic qualifications may help borrowers establish greater credibility
To be matched with prospective lenders, business owners should use the SBA’s Lender Match tool to provide the SBA with some preliminary information. Borrowers can expect to be contacted by an SBA representative within two business days to further discuss a potential business loan.
Alternatively, prospective applicants can contact their nearest WBC by using the SBA’s WBC locator tool, which lets you discuss your options in person or over the phone.
Private lenders specializing in loans for women-owned businesses
While there are hundreds of organizations dedicated to providing women entrepreneurs with the support and resources to launch their own businesses, there are comparatively fewer online lenders that administer small-business loans for women hoping to start their own companies.
In the vast majority of cases, loans are typically provided by private lenders.
Shopify Capital makes it easy for founders to get funding based on their history with Shopify. Eligibility is based on a store’s merit—not gender.
If your Shopify store meets certain criteria, you may be invited to apply for a loan via Shopify Capital. There’s no formal application required; eligible borrowers are prequalified, so there’s no need to worry about submitting extensive paperwork.
Once prospective borrowers have reviewed and agreed to their pre-qualified loan terms, funds are typically dispersed within two to five business days. Repayment terms are flexible and are calculated as a percentage of net sales. That means borrowers will never have to worry about meeting higher fixed repayments during slower periods and can repay more when sales are stronger.
Kabbage is a small-business funding specialist that offers small-business loans to women-owned businesses via Kabbage Funding. A small business loan is something to take seriously, which is why it’s great to see Kabbage make such an effort to do so with its resources and education around small business loans.
Kabbage has provided more than $9 billion in funding to almost 200,000 businesses since 2011 and specializes in business lines of credit. Unlike loans, which are often dispersed as lump sums, business lines of credit can be drawn upon at any time as long as the borrower does not exceed the maximum figure as agreed in their financial agreement.
To determine eligibility, Kabbage evaluates a range of criteria. This includes annual revenues, the length of time a business has been established, and the industry or sector in which a business operates. Unlike some lenders, Kabbage is more forgiving when it comes to credit score. Prospective borrowers must have a credit score of 560 or higher to qualify. However, the annual percentage rate (APR) can be high—between 24% and 99% in some cases—which can have a significant impact on repayment terms.
Tory Burch Foundation Capital Program
This partnership between Bank of America and the Tory Burch Foundation has helped more than 2,500 women business owners launch businesses in 17 states. In 2019 alone, the Tory Burch Foundation Capital Program invested $100 million to help women-owned businesses get the funds they need.
Similar to the SBA, the Tory Burch Foundation Capital Program connects prospective borrowers with community development financial institutions (CDFIs), a network of private lenders that specialize in loans designed for underrepresented communities. There are currently CDFIs in 13 states.
At present, the Tory Burch Foundation Capital Program has been temporarily suspended due to the COVID-19 pandemic, as many of its participating CDFIs are also helping businesses with short-term emergency loans. Follow the Tory Burch Foundation on Twitter for frequent updates on the foundation’s many programs and helpful resources for women-owned businesses.
Union Bank Business Diversity Lending Program
Union Bank is one of the few lenders in the United States that offer financing under the Equal Credit Opportunity Act.
Union’s Business Diversity Lending Program offers financing similar to its traditional loan programs, but with eligibility criteria that are much more generous, making the loans more accessible to women and other underrepresented communities.
Union offers a range of financing options to businesses that qualify, including fixed-rate, secured, and unsecured loans, as well as financing for commercial real estate. To qualify for financing via Union’s Business Diversity Lending Program, businesses must have been in operation for at least two years and at least 51% owned by a woman, a member of a minority group, or a military veteran. Eligibility is restricted to United States citizens, and borrowers must not exceed annual sales of more than $20 million.
OnDeck Online Term Loans
OnDeck is an online lender that specializes in short-term loans.
This type of financing is ideally suited to specific short-term goals, such as investing in new equipment or hardware, launching a new marketing campaign, or expanding to an additional physical location.
One of the key advantages of OnDeck’s term loans is the speed with which borrowers can be approved. Unlike traditional bank loans or some online lenders, OnDeck can disperse funds to eligible borrowers in as little as 24 hours, or, in some cases, even on the same business day that their agreement is finalized. This makes OnDeck’s online term loans a potential stopgap solution for sudden, unexpected financial challenges.
Borrowers can apply for term loans as little as $5,000 or as much as $500,000. APR varies, from 9% at the low end up to 99% at the maximum. Repayments can be made daily or weekly for periods of up to 36 months.
To qualify, borrowers must have been in business for at least three years, must have a minimum credit score of 600, and must have at least $250,000 in annual revenue; a personal guarantee is required in many instances.
Funding Circle is another online lender that offers short-term loans to small businesses. Like OnDeck, Funding Circle loans are typically processed much faster than traditional loans, and borrowers can receive funding in one business day.
One of the advantages of Funding Circle loans is their comparatively lower interest rates. The APR of a Funding Circle loan varies from 12.18% to 36%, making Funding Circle loans highly competitive among similar private lenders.
Submitting an application to Funding Circle can take just a few minutes. Prospective borrowers are contacted by a Funding Circle representative within one hour, and loan decisions are often made in a day or less. If borrowers are approved, funds are typically dispersed by the following business day. Loans range from between $25,000 to $500,000 and can be repaid over terms of up to six years, with no penalties for prepayment.
Find a loan that’s right for your business
Small business owners may want to use a loan estimator and then shop around and compare loan terms before submitting an application for financing or taking on a significant financial obligation. The good news is that submitting prospective loan applications or seeking more information about private financing won’t affect your credit score, and credit bureaus won’t penalize you for shopping around.
Before committing to any financial decisions, it may be worthwhile to consult a lending expert at a local community-based bank, speak with an SBA representative, or contact an SBA Women’s Business Center to connect with an adviser who can recommend financing options that work for you and your business.
FAQ on small-business loans for women
Before submitting an application for a small-business loan, it’s important to understand which types of businesses qualify for this kind of financing. Here are some commonly asked questions about small-business loans for women.
How do female entrepreneurs get a loan?
One of the fastest and most direct ways for women entrepreneurs to get a small-business loan is the SBA Express loan program. Offering loans of up to $350,000, the SBA Express loan program typically processes applications in 36 hours. Interest rates are variable, and collateral is not required for loans of up to $25,000. Credit decisions are made by qualified SBA lenders.
How do you qualify as a woman-owned small business?
To qualify as a woman-owned small business (WOSB) in the United States, your business must be:
- Considered a “small” business under the North American Industry Classification System (NAICS) code
- At least 51% owned by a woman/women who are United States citizens
- Managed and controlled by a woman, and a woman must hold the highest position/role in your company
Are there small-business loans for women with bad credit?
Shopify Capital can help women entrepreneurs with lower credit scores. Loans made via Shopify Capital are pre-approved based on merit, not creditworthiness. If your Shopify store meets certain criteria, you may be invited to apply for business financing through Shopify Capital. Repayments are calculated as a percentage of net sales, meaning you repay more when sales are strong and less during slower periods.
Are there small-business loans for businesses impacted by Coronavirus/COVID-19?
Yes. Many financial assistance programs have been put in place to help entrepreneurs mitigate the impact of COVID-19. This Shopify resource on government relief programs contains both federal and state/provincial financial resources for entrepreneurs in both Canada and the United States.