Women are leaders in small business growth. However, access to capital continues to be a primary barrier for women business owners. The Federal Reserve Bank's 2017 Small Business Credit Report on Women-Owned Firms found that women-owned businesses face persistent funding gaps: "Sixty-four percent of women-owned firms reported a funding gap, receiving only some or none of the financing sought, compared to 56 percent of men-owned firms." If traditional funding opportunities aren't an option for you, alternative financing options—like small business loans for women, lines of credit and credit cards—may provide the necessary funds to help your business scale and thrive.
Small Business Association Loans
The Small Business Association (SBA) partners with lending institutions and community organizations to provide federally guaranteed loans to small businesses that may not meet traditional bank loan requirements.
Over the years, SBA loans have been a go-to resource for women businesses owners looking for support. According to the SBA's 2018 Agency Report, the agency approved more than $30 billion in loans to small businesses in the 2018 fiscal year, a significant percentage of which went to helping women launch their businesses.
In a 2018 post on their blog, Kathleen McShane, the SBA's assistant administrator for the Office of Women's Business Ownership, wrote, “I know first-hand the resources, support and access to networks and financing that women need."
Like many working parents, McShane initially pursued entrepreneurship to answer the demands of work and motherhood. After founding platforms for women business owners to find the resources, networking and funding needed to start their businesses, she joined the SBA to do so on a larger scale.
If I could do it all again, I would have accessed the loan sooner. That line of credit gave me the flexibility to cover costs and pay my vendors while I built my firm.
—Kishshana Palmer, CEO, Kishshana and Co.
Speaking to the strength of the SBA's loan programs for women, McShane wrote, “Through our 68 district offices and network of resource partners, we have the proven tools needed to help bridge the gap for women entrepreneurs as they grow their businesses, reach new markets and realize their full potential."
For the many women who launch their businesses through loans guaranteed by the SBA, getting a supportive community is part of the return on investment. Having access to that network can help bridge the gap between women-owned businesses and the resources they need to thrive.
Lines of Credit
Small business loans for women come in many forms. A business line of credit through a bank or other lending institution can provide flexible financing—allowing business owners to borrow up to a certain limit and only pay interest on what they use, unlike traditional fixed loans.
For Teneshia Jackson-Warner, founder and CEO of Egami Group, a full-service, multicultural marketing communications agency, opening a line of credit through the bank provided the support she needed while launching and positioning her business for growth.
“Periods of substantial growth require cash flow," Jackson-Warner says. "The line of credit supported us while we scaled and it has sustained us in times where cash flow was low."
As Egami onboarded Fortune 100 clients, longer pay periods and significant outgoing expenses required increased working capital. Taking on debt should be strategic, Jackson-Warner says.
“As a small business that is 100 percent self-funded," she says, "it is very important to reinvest back in the business and create levers to support cash flow."
The return on investment of establishing a line of credit was creating a safety net that positioned the company for success.
“I view it as a tool needed for supporting growth in business. If you are going to do business at any level, you need to have money on hand to take action."
And Jackson-Warner is right: cash flow is essential. But not all women who are just starting out qualify for business loans from the bank.
Kishshana Palmer, CEO of leadership consulting firm Kishshana and Co., learned the value of having cash on hand through business loans for women when she left corporate and ventured into entrepreneurship. She was a single mom repairing her credit after a fresh divorce and doubtful she would qualify for funding.
“I didn't have money from my parents or elsewhere to start my own business," Palmer adds.
So she built her firm from scratch. When Palmer started to scale and sign bigger clients, she needed more cash flow to sustain growth. She established a line of credit through an online lender that weighs factors other than credit (like business performance) to cover costs.
“If I could do it all again, I would have accessed the loan sooner," Palmer says. "That line of credit gave me the flexibility to cover costs and pay my vendors while I built my firm."
Since business loans for women to start companies can be limited, the support and security that a line of credit offers can be helpful.
Microloans and Peer-to-Peer Lending
Peer-to-peer lending like microloans can offer small short-term business loans with low interest rates to business owners all over the world. They originated as a means for those in smaller economies to fund growth and start-up costs, but microloans have become a popular option for small-business owners in the U.S. as well, particularly for businesses that do not qualify for traditional (often larger) loans. As such, they are a great alternative source of small business loans for women.
When Shatha Barbour, founder and CEO of the woman-focused co-working space Hera Hub Phoenix, approached her bank for a loan to start her business, she was denied outright.
“[The bank] thought my project was too small and didn't want to take on the risk—they told me 'We don't fund these kinds of things,'" she explains.
So Barbour turned to an organization that provides microloans, and was able to access the capital she needed to launch her business. The cash flow the loan provided sustained the company during that initial period of growth.
“The loan was cash-flow support," she says. "I used the money for operations, to cover overhead costs—and I still have some of it. You can find ways to do what's needed by being lean and creative."
A year in and Barbour's experience affirms that there are alternative ways to access loans for women to start their businesses and have great success doing so.
Business credit cards can provide loans for women to start a business by allowing quick access to capital. Many founders rely on this form of funding to float their overhead costs and projects, short term.
Jinny Hyojin Oh, founder of WANDR, a product strategy and UX design firm, used her credit cards when cash flow was tight in order to cover important up-front expenses, like paying her employees while she launched her business.
With steady revenue and a strong vision for the future of her company, Oh was positioned to leverage credit cards to her advantage.
"Managing cash flow is a normal part of growing a business," she says. "Money in, money straight out. I didn't want inorganic growth, I wanted to scale quickly without outside investment, so I put our expenses on my credit card."
Doing so allowed Oh to stick to her vision, launch her business successfully and faster than if she went with a traditional loan.
Business loans for women do not have to fit the traditional mold in order for women to launch and scale thriving organizations. Women business owners carve out spaces for themselves using what they have, despite barriers to growth. The experiences of these entrepreneurs show that women continue to leverage tools like small business loans to rise to the challenge.
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