Authored by Phil Cohen
Small Business Loans for Women—the Uphill Battle
Women business owners are the driving force behind our generation’s economic growth, yet they have considerable trouble funding their operations. Grants for female business owners are next to impossible to secure, and it seems as though loans for female small business owners are equally challenging to obtain.
According to the 2014 OPEN State of Women-Owned Business report, women are responsible for approximately 40% of new businesses in the American economy. However, banks continue to decline women-owned businesses for financing at an alarmingly high rate. There are a number of potential reasons for this systematic problem, reasons that seem to target women-owned small businesses at a disproportionately higher rate than male-owned small businesses:
- Businesses with poor cash flow are typically overlooked for traditional business loans despite the availability of loans specifically tailored to businesses with less than $25,000 in revenue.
- Female-owned businesses often lack collateral that can be used to secure a business loan, even if they have a solid history of sales and revenue. Online businesses are at particular risk for this issue because they have fewer assets on-hand in terms of property and inventory.
- Strict lending requirements have affected all small-business owners in the wake of the recession and subsequent belt-tightening on the part of banks. Borrowers are often turned down for insufficient credit scores, though women more often than men. Women’s credit ratings trail men’s by an average of 20 points.
Two other reasons cited in the article above are perceptions that are more conceptual than empirical – perceived risk and lack of preparation.
What Can Help Female Small Business Owners Get Loans?
A Senate bill that is currently in the Committee on Small Business and Entrepreneurship may help shift the tide of lending to women. Senator Maria Cantwell (D-WA) introduced the Women’s Small Business Ownership Act of 2014 to empower the Small Business Association to craft funding solutions that will help women business owners in particular.
In the meantime, business owners of any gender may find fast cash flow relief through small business factoring. Small business factoring is a debt-free alternative traditional lending for business owners providing goods and services to other businesses. A factoring company will purchase a company’s unpaid invoices and advance up to 90 percent of its value, providing necessary working capital in as little as 24 hours.
Another financing option for small businesses selling to individual customers is an unsecured business loan. These loans for female small businesses are provided by a variety of alternative lenders that can approve transactions without pledging collateral or meeting the stringent requirements of other conventional lending options.
Factor Finders connects small business owners in every industry with the funding option that is right for them, and we specialize in helping female entrepreneurs secure the financing that they need in order to launch their enterprise. As stated earlier, female small businesses are bolstering our economy– but they can’t do so without the proper funding. Ready to start invoice factoring? For more information or a free small business factoring quote, contact Factor Finders today.