While women entrepreneurs continue to start businesses in increasing numbers, they often face unique challenges when it comes to running their businesses. Key among them is finding financing to help their companies thrive.
Research suggests it is tougher for women-owned businesses to secure outside financing than it is for their male counterparts. According to a 2018 report by the National Women’s Business Council, women start businesses with smaller amounts of capital than men and are less likely to raise capital from external sources. On average, women-owned firms get about 6% of the outside equity that male-owned firms do.
Studies have found that women do not have sufficient access to small business loans compared to their male peers. A U.S. Senate Committee on Small Business and Entrepreneurship report noted that women accounted for only 16% of conventional small business loans and 17% of SBA loans. In 2015, the funding approval rate for women entrepreneurs was 33% lower than that of men running small-businesses.
However, just as the number of women business owners grows, so do the number of sources providing funding. In addition to traditional loans, opportunities range from grants and bonds to alternative lending and crowdfunding. In conjunction with International Women’s Day, we put together a short list of financing options for women looking to launch or expand their businesses.
Angel Investors and Venture Capital
Angel investors are typically high net worth individuals and savvy investors who exchange their capital for an ownership interest in a newly formed business. As successful former business owners, they can provide a tactical benefit to your company by offering experience, guidance, and valuable business contacts as well as financial support.
A venture capital investment may be beneficial if your small business is on the fast track. Venture capital companies differ from angel investors in that they invest other people’s money in businesses with high growth potential. They get their return in the same way as angel investors, but they usually want a large ownership share as well as a say in the management and direction of the business. Be prepared to give up some portion of both control and ownership of your company in exchange for funding.
Although getting a venture capital investment can be difficult, this type of financing works well if you are having trouble qualifying for a loan. A venture capital company is interested in your long-term potential, not just your current creditworthiness.
Small Business Grants
Unlike loans, grants do not need to be repaid. You also don’t have to sacrifice control or ownership in your business the way you do with some investors. That said, grants are highly sought-after, and the competition can be fierce.
Companies must meet the qualifications established by the government organization, non-profit, or company providing the grant. Finding grants for which you are eligible, going through the application process, and following up requires considerable time and effort, and submitting a thorough and compelling application is crucial.
The U.S. government allocates billions of dollars of grant money to businesses each year, including specific grants for businesses owned by women, minorities, veterans, and Native Americans. The comprehensive resource tool www.grants.gov provides information on government agencies and the grants they have available.
Businesses and non-profits often sponsor grants as part of their charitable giving and community outreach efforts. Some company grant programs are specifically aimed at supporting women. For example, apparel company Eileen Fisher provides grants to innovative, women-owned businesses that are ready to expand their potential for positive social and environmental impact. Entrepreneur Tory Burch offers grants to women entrepreneurs through her fellowship program, along with education, mentoring, and peer support.
There are also websites that include data on a wide range of grant opportunities for women. WomanOwned.com offers online business tools and resources as well as access to an easily searchable database of thousands of business grants and state programs. GrantsforWomen.org provides information about obtaining grants and a directory of available grants for women.
The U.S. Small Business Administration (SBA) has an array of small business resources for women entrepreneurs and offers a variety of loan programs for specific purposes. These range from general business loans and short-term micro-loans to low-interest disaster loans. Details about financing options, eligibility, and applications can be found on the SBA website. In addition, the SBA’s Office of Women’s Business Ownership empowers women entrepreneurs by providing advocacy, outreach, education, and support to help them start and grow their own businesses.
Working Capital Financing
Over the last 10 years, there has been significant growth in alternative sources of capital for small businesses. Commonly referred to as online lenders, marketplace lenders, and alternative lenders, these unregulated, nonbank online lenders come in all shapes and sizes. Typically, they offer term loans, lines of credit, and financing for accounts receivable.
However, online lending is not necessarily for everyone. For small business owners who are seeking a partner who is invested in helping them grow, Summit Financial Resources bridges the gap between easy, but expensive financing and lower-cost, harder-to-get loans.
We offer custom financing solutions that use your accounts receivable and other assets as collateral. We can mix and match from a variety of product options, including invoice factoring, asset-based lending, inventory lending, and equipment financing. We are not regulated like a bank, so we can structure more flexible deals, take more risks, and make funding decisions quickly.
Women make significant contributions to the economy, the workforce, and entrepreneurship. Summit Financial Resources is proud to be a resource for women business owners who may find it difficult to obtain working capital financing. We are committed to providing the unique funding solutions you need to pursue your passions and bring your dreams to life.
Working Capital Financing is a few clicks away.
Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.