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Getting Business Loans for Women-Owned Firms

By Elena Malykhina

Women have been starting businesses at twice the national average over the past 20 years but, typically, they haven’t been getting a business loan to launch their small businesses.

The number of women-owned businesses has grown 114 percent over the past two decades, compared to a 44 percent increase of businesses overall, according to the 2017 State of Women-Owned Business Report (commissioned by American Express).1 Despite that growth rate, though, the U.S. Small Business Administration (SBA) says women-owned businesses are less likely than their male-owned counterparts to even try to get a small business loan, and are disproportionately more likely to feel discouraged from seeking outside start-up financing at all.2


But like all entrepreneurs, businesswomen will eventually need funding other than personal finances to stay competitive and continue to grow. There are several options available for getting business loans that can help women entrepreneurs achieve their goals.


Challenges for Women Seeking Business Loans


As of January 2017, there are an estimated 11.6 million women-owned businesses in the U.S., employing nearly 9 million people and generating more than $1.7 trillion in revenues.3 However, the SBA found that women are only half as likely as men to finance businesses by getting bank loans.4 Women-owned businesses are more likely to use credit cards and put up personal assets — such as home equity — as a source of financing. But forming a relationship with a bank is often necessary for future business financing, potentially putting women-owned businesses at a disadvantage, according to the SBA.5


Notably, the SBA found that a key reason women-owned businesses feel so discouraged that they don't even pursue business loans is because they're convinced they will be turned down.6 A key difference between men and women entrepreneurs is the ability to secure capital from external sources. For example, Entrepreneur magazine reports that women-owned businesses receive only 7 percent of venture capital investment money, in part because the venture capital business is male-dominated.7


But the discrepancy in financing between male and female entrepreneurs is also linked to the types of businesses that most women own, not necessarily due only to gender discrimination.8 While men typically look to start a business outside of the home – often in construction, restaurants, or real estate – women tend to launch businesses from inside their homes. Home-based businesses may require less capital, but can lead to shortcomings down the road. Women who rely on personal finances may have a hard time getting a business loan later without a good credit profile, while men are likely to seek credit early to start their businesses.9


Types of Small Business Loans for Women


Women have several options when it comes to acquiring small business loans. But first, it's important to understand the different types of small business loans. Any business may find different loans more suitable depending on the company's individual needs.


  • Getting a small business line of credit allows a firm to access funds from a lender as needed. Different from term-based loans, businesses can borrow up to a certain limit — $50,000, for example — and pay interest only on the amount borrowed.10
  • Working capital loans can be used by companies to finance daily expenses like payroll or rent. Obtaining this type of loan offers a business the flexibility to invest in short-term growth; experts say it shouldn't be used for long-term investments like real estate.11
  • Small business term loans are typically given for a set amount and used for business operations, capital expenditures, or expansion. Term loans are offered by traditional banks, credit unions, and online lenders.12
  • Some banks offer low-interest-rate loans for small businesses, backed and guaranteed by the SBA. The SBA's Microloan program, for example, involves smaller amounts of money than conventional business loans,13 making them a potentially good match for the low-initial-capital businesses women tend to launch.
  • Small business credit cards can also be used for short-term small business financing, although credit cards may not be the best option due to generally higher interest rates.


There are several types of lenders that offer such loans, including: large commercial banks, local community banks, online lenders, and bank lenders backed by SBA guarantees. A lender's decision to give a small business loan usually depends on the borrower's credit and risk profile. A business should have its finances in order, since lenders closely review financial statements and accounting records — such as balance sheets, income and loss statements, and cash flow statements.14 This related article offers more detailed insight into what lenders look for in small business loan applicants.


But if a situation arises making it impossible to obtain a business loan from a bank, unconventional lenders might be available for funding. However, it may be worth noting that unconventional lenders tend to be costlier than most traditional banks.15


According to the SBA, low-risk ventures stand a better chance of getting a small business loan, compared to a company that starts out on shaky ground.16 That's why a female entrepreneur may want to wait to apply for a loan until her credit scores have improved. It's also good practice to plan ahead. She should know the exact amount she wants to borrow before approaching a lender and request the loan well in advance, before she needs it. SBA loans, for example, can take 45 to 60 days for approval.17


All those factors, coupled with a solid business plan that clearly states what a company does and how it will make money, can influence a lender's decision.




Getting a small business loan can be an essential part of launching a company. Female entrepreneurs increasingly have more resources available to them — both from traditional and alternative lenders — so they can avoid using personal assets as a source of financing and instead use options that might help position their business better for long-term growth.

Elena Malykhina

The Author

Elena Malykhina

Elena Malykhina is professional writer who has covered science, technology and business for more than 10 years. Her work has appeared in InformationWeek, Scientific American, Newsday, The Wall Street Journal and Adweek, as well as through the Associated Press.


1. The 2017 State of Women-Owned Business Report, American Express; http://about.americanexpress.com/news/docs/2017-State-of-Women-Owned-Businesses-Report.pdf
2. Small Business Finance, U.S. Small Business Administration; https://www.sba.gov/sites/default/files/Finance-FAQ-2016_WEB.pdf
3. The 2017 State of Women-Owned Business Report, American Express; http://about.americanexpress.com/news/docs/2017-State-of-Women-Owned-Businesses-Report.pdf
4. “Small Business Finance,” U.S. Small Business Administration; https://www.sba.gov/sites/default/files/Finance-FAQ-2016_WEB.pdf
5. Ibid.
6. Ibid.
7. “Why Women Entrepreneurs Have a Harder Time Finding Funding,” Entrepreneur; https://www.entrepreneur.com/article/281733
8. “Why don’t women get more small business loans?” Business Woman Media; https://www.thebusinesswomanmedia.com/dont-women-get-small-business-loans
9. Ibid.
10. “Business Line of Credit: How It Works and Best Options,” NerdWallet; https://www.nerdwallet.com/blog/small-business/business-line-of-credit
11. “Best Working Capital Loans of 2018,” NerdWallet; https://www.nerdwallet.com/blog/small-business/small-business-loans-cash-flow-working-capital
12. “What is a Term Loan and Where to Find Options,” NerdWallet; https://www.nerdwallet.com/blog/small-business/small-business-term-loans
13. “Financing Your Small Business With a Microloan,” U.S. Small Business Administration; https://www.sba.gov/blogs/financing-your-small-business-microloan
14. “10 Key Steps To Getting A Small Business Loan,” Forbes; https://www.forbes.com/sites/allbusiness/2017/03/22/10-key-steps-to-getting-a-small-business-loan/#5efaa1f240f6
15. “Why don’t women get more small business loans?” Business Woman Media; https://www.thebusinesswomanmedia.com/dont-women-get-small-business-loans
16. “Small Business Loans for Women,” U.S. Small Business Administration; https://www.sba.com/funding-a-business/small-business-loans-for-women
17. “10 Ways to Improve Your Chances of Getting a Small Business Loan,” Salesforce; https://www.salesforce.com/blog/2017/01/improve-chances-small-business-loan.html