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Top 6 Small Business Finance Options for Women

Corporate Finance

Finding a loan to fund your business is not an easy job. Historically, women have found it even harder to get business financing than men. However, the number of women owning small businesses is steadily growing. At present, 36 percent of the small businesses across the world are owned by women, which certainly paints a hopeful picture. Accordingly, the number of financing options for women has also increased in the last few years.

So, if you are thinking of taking a loan for your business but don’t know which avenue to choose, here’s a showing you the way.

Top six financing options for women

The type of funding that you can access varies based on the nature of your business. As such, these are the six most viable options for you to consider:

#1 Small business loans for women

Getting a small business loan is the most popular way to finance your business needs. Typically, you need to pledge an asset (collateral) to secure these types of loans. Most lenders take the following factors into account to sanction a small business loan:

  • your credit history
  • the type of business
  • the current company assets
  • the duration of being in business

After you get the loan, you will have to pay it back in regular instalments of a predetermined amount. You will also have to pay the interest that’s charged on the rest of the money you owe. Traditionally, it took three to four months to process these loans. However, thanks to the online application facility, now you can apply and get the loan within one or two days.

#2 A line of credit for the business

Think of this as borrowing money through credit cards – you borrow an amount that you need at the moment. Then, you pay the amount back within a certain time and pay interest only on the amount you borrowed. If you have working capital loan eligibility, a business line of credit can be a good idea.

#3 Lease financing

Rather than straight away buying all the equipment you need at the time, you can lease them for your business. It is a comparatively affordable option than buying because you don’t have to spend too much in one go. You can lease things like machinery, computers, and cars for a particular time period.

Lease financing can be short-term or long-term. In the case of the former, you return the equipment after the lease time period is over. An advantage of this option from the business point of view is that you can upgrade to the latest version of the equipment through a new lease once your old lease expires.

On the other hand, long-term leases or capital leases are meant to fund the purchase. You are supposed to be partnering up with your lender in buying the equipment. You need to make the payments in instalments until the amount is paid completely.

#4 Small Business Administration (SBA) loans

A variety of loans for women in business have been designated by the Small Business Administration. You mainly need to tick two boxes to get your hands on these loans – a solid business plan and a good credit report. Now, the SBA is not the one giving out a professional loan here. However, they are the ones promising to ensure that the business is going to pay the loan back duly to the lender.

#5 Working capital loan

If you have a well-running business with a good revenue stream, a working capital loan would be great for your small business. It gets you benefits like the flexibility of usage and shorter payment periods. Thus, if you have an emergency need for funds anytime, these loans are a simple and versatile way to arrange the money.

#6 Merchant cash advances

It is a kind of finance that allows you to get a lump sum amount as a cash payment in return for a part of future sales receipts. Instead of paying monthly instalments as you do with conventional loans, merchant cash advances are paid through the individual sales of your business. It can also be paid through weekly or daily payments if the terms are laid down that way.

Typically, merchant service companies lend out such cash advances. It is beneficial because the application for the funding, receiving the advance, and the repayment becomes streamlined. Thus, this kind of funding might be a good choice for any business with a high sales volume.

The bottom line

There is no denying that you have more financing options now than ever. However, you need to choose an option with extreme care. Before you forward that financing application, figure out how you are going to repay it. The last thing you would want is for your business to suffer because you could not pay the amount back on time.