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Women in Business

Small Business Financing Options for Women Entrepreneurs: 5 FAQs

Posted by and Cara Treybal on Tuesday, July 25, 2023

Ready to start or grow your woman-owned business with financing options? Read our 5 FAQs on how to get started.

A Woman Business Owner Discussing Small Business Financing Options On The Phone With A Financial Len

More women than ever are taking the entrepreneurial leap. In fact, 42% of all U.S. businesses are women-owned, employing more than 9.4 million workers. While women are making remarkable strides, many need money to fuel their dreams. That’s where small business financing options available to women come into play.

We'll explore common questions about borrowing options and how financing can help you unlock your potential as a woman entrepreneur.

1. Why Can It Be Challenging for Women To Start a Business?

Your small business journey begins with a great product or service. But, as a woman, you may have unique needs and considerations when it comes to financing to help get your company off the ground. Here are a few reasons:

  • Not Enough Working Capital: Insufficient working capital can restrict a woman's ability to invest in necessary resources and infrastructure for a business. It can also impact negotiating favorable terms with suppliers and create cash flow challenges. Community banks, like Northwest Bank, and other organizations can help you with the right loans, grants and resources to address these disparities and promote growth for your small business.

  • Creditworthiness: Certain financial issues could indirectly impact your credit score. Such factors as differences in income, credit patterns and career interruptions due to caregiving responsibilities can potentially impact creditworthiness. But there are lenders that can work with you if you do have a lower credit score.

  • Networking and Mentorship Gaps: You may face challenges in accessing influential networks that can provide valuable connections and guidance. But there are small business financing options that also provide networking and mentorship opportunities. These platforms connect women with experienced business leaders, industry experts and fellow entrepreneurs. Workshops and professional courses can also help enhance business skills.

  • Balancing Work and Family: Women often have family and caregiver responsibilities, which can impact their ability to dedicate extra time and resources to a business. This can influence financing decisions because women entrepreneurs may want flexibility in loan repayment schedules or seek financial services that accommodate their unique circumstances.

2. What Financing Options Are Available for Women Small Business Owners?

Small business financing options can help empower you to grow and support your business venture. Here are a few types of small business loans:

  • Small Business Administration (SBA) Loans: The U.S. Small Business Administration offers many loans, including the SBA 7(a) loan and the SBA Microloan program. Both are designed to provide financing options for women who may not qualify for traditional loans. SBA loans are one way new entrepreneurs can gain the financial support they need.

  • Microloans: Microloans can be helpful if you need smaller amounts of capital to start or expand your business — or if you have limited credit history or collateral to secure larger loans. They are typically $50,000 or less.

  • Equipment Financing: Equipment financing loans provide the necessary funds for you to purchase or lease equipment. These loans typically offer flexible repayment options tailored to the specific needs and cash flow of the business. This flexibility can help women entrepreneurs manage cash flow more effectively while making loan repayments.

  • Real Estate Construction Loan: A real estate loan can help you buy or develop residential properties. It can help with construction lines of credit or the purchase of office buildings, industrial buildings, self-storage and more. You can choose the loan type and terms that best align with your business goals and financial situation. By buying property through a loan, women entrepreneurs can benefit from potential appreciation, building equity in the property and potentially increasing net worth.

  • Working Capital Loan: A working capital loan is money borrowed from your bank or lender. It helps bridge temporary gaps in cash flow by providing immediate access to funds. For instance, if your business is seasonal, a working capital loan can help you better manage expenses during the slow season and seize growth opportunities when you’re in your busy season. A working capital loan matures in one year and has monthly interest payments.

  • Grants and Nonprofit Loans: Women entrepreneurs can seek grants and participate in business competitions specifically designed to support women-owned businesses. These funds do not need repayment and may have low-interest rates. They are attractive options for financing business activities.

3. How Do Women Choose the Best Business Loan?

A loan requires careful consideration and evaluation. It must suit your needs, financial situation and long-term business objectives. Here are a few pointers:

  • Determine Your Financial Needs: Understand how much money you need. Do you need money for startup costs, expansion, working capital, equipment purchase or other business needs? This will give you a good starting point for your search. And it will help you narrow down the right options for your business.

  • Check the Criteria: Understand the requirements of each loan option. Check the credit score, time in business, annual revenue and collateral requirements. Focus on loans you will likely qualify for based on your current financial situation.

  • Compare Interest Rates and Repayment Terms: Understand the cost of borrowing and how it will impact your business's cash flow. Compare interest rates, repayment schedules and fees to ensure that it’s the best loan for your business.

  • Consider Your Business Goals: Make sure the loan will help you achieve your goals. For example, if you’re looking for working capital, make sure the loan has a short repayment term.

  • Seek Expert Advice: Consult with financial advisors, accountants or business mentors who can provide guidance on choosing the right loan option. They can help analyze your business's financial situation, evaluate loan terms and provide recommendations based on their expertise.

4. How Does the Small Business Loan Process Work?

Applying and qualifying for a loan will vary based on your lender and type of financing you need as a woman small business owner. Prepare for financing with these tips:

  • Gather Your Business Documents: Important documents include your business plan, financial and personal financial statements, tax returns, bank statements and legal documents.

  • Check Your Credit Score: Review your personal and business credit scores. Lenders often consider creditworthiness when considering loan applications. Your credit reports should be accurate. Build your credit score by paying your bills on time, maintaining a good credit history and using a business credit card.

  • Chat With Your Legal Team: Run your ideas past your tax, legal and accounting advisors. They can give you sound advice before you apply for a small business loan.

  • Submit Your Loan Application: Contact your lender to discuss the application process. You may be able to submit the application online, in person at a branch or via email. Follow your lender's instructions and submit your loan application package. After you have submitted your loan application, your lender will review your documents and decide whether to approve your loan.

  • Understand the Terms and Accept the Offer: If approved, your lender will give you a loan offer that includes the loan amount, interest rate, repayment terms and any other conditions. Review the offer carefully and make sure you understand the terms. Once you’re satisfied, accept the loan offer by signing the necessary agreements.

5. When Should a Commercial Banker Get Involved?

Visit with your commercial banker as soon as possible. They can guide you through small business financing options and offer advice about the different strategies you can use. They can also discuss what small business banking services are available and direct you to financial resources that can be beneficial for your small business.

Read stories of other successful women business owners that Northwest Bank has helped. Then contact our team of commercial bankers today to learn how they can help support your startup business.

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