Financing Options for Women-Owned Small Businesses

If you are a woman, then you know the glass ceiling is real.  Just clear enough to let you see through, but keeping you from reaching your ultimate goals.  It could be the pay gap, or when it comes to starting or running a small business it is the difficulties that women face in getting financing.
 
According to the authors of A Rising Tide: Financial Strategies for Women-Owned Firms, women-owned businesses receive roughly 80% less financing than other businesses in their first year.  The book, which was published in 2012, does more than highlight the challenges that women-owned business face when seeking financing.  It also lays out financing options.
 
Bank Loans
 
Even with the rise of other financing sources, bank loans are the primary source of financing for women-owned businesses.  This is not to say that banks are more receptive.  In fact, getting a loan from a bank is just as difficult for women as it is for me.  First, you will need a personal credit score of 740 or better.  You will also need a business plan.  Non-profit business advisor Steve Bloom also points out that you will need a PH.D. – Passion, Heart, and Determination.
 
SBA Loans
 
The Small Business Administration (SBA) is another popular funding option for women-owned businesses.  Over its history, the SBA has provided invaluable support to small businesses all over the country.  It also has resources specifically for women-owned businesses.
 
However, it is important to remember that the SBA does not provide loans directly.  Instead, the administration provides loan guarantees through approved lenders.  The process to apply for a loan is also tedious and a cottage industry of ‘SBA advisors’ has cropped up in recent years to help business navigate the myriad of forms and requirements needed to qualify for loan guarantees.
 
That being said, the SBA’s resource page for women-owned business should not be overlooked.  At a minimum, the information, programs, and links to other organizations will provide insight to any business owner.
 
Home Equity
 
It is unfortunate that this is one of the top options for women-owned businesses.  This is not to say that you should not believe in your business and put your heart and soul into making it a success.  The problem with using a home equity loan or line for any business is the tremendous risk.  
 
Ask any experienced business owner and they will impress upon you the need to separate the business and personal finances.  So why would anyone revert to a home equity loan for their business? It is largely because it is viewed as one of the simplest forms of funding.  While the process might take a week or it could cost hundreds of dollars to close and will impact your personal credit score – as well as risking your home.
Angel Investors
 
Another form of funding which his becoming increasingly popular is Angel investment.  While this form of finance can also be in the form of debt.  It is usually achieved by selling a portion of your business to an investor.  In simplest terms, this is what happens every week on the hit T.V. show, Shark Tank.
 
While this financing option for women-owned business has its appeal.  It can often take months, if not years, to move from first conversation to closing a financing deal.  All of this while your business is fighting for its survival.  So does it make sense to focus on finding investors when you should be focusing on making your business great?
 
One challenge facing women-owned businesses is often the lack of connection to the key networks that would provide angel investment.  According to TechCrunch, the real unicorns in startup investment are Female Angel Investors.
 
Alternative Financing
 
Looking at this list, there is little doubt that women-owned businesses face tremendous obstacles in obtaining the financing they need.  However, there is one option which has burst onto the scene in recent years and it is changing how women-owned business get the financing they need.  That is alternative financing.  
 
These lenders provide programs specifically catered to the needs of women-owned businesses.  Underwriting and payment terms tend to be more flexible that the options mentioned above.  Many lenders offer a wide variety of small business loan options for women-owned businesses.
 
Programs such as these can provide the flexibility that women-owned businesses need to get funded quickly, without the red tape of bank or SBA loans.  Another plus is that you don’t need to take on the risk of leveraging your home just to pay for your business.  
 
While women-owned businesses still face an uphill struggle.  The glass ceiling is beginning to crack.  This is good news as small businesses, regardless of who owns them, are the backbone of the American economy.