Small Business Loans for Women With Good & Bad Credit

How hard is it for women to get small business loans?

According to the Women’s Business Enterprise National Council, about 40% of businesses in the U.S. are female-owned. Despite that, only 25% of women-owned businesses seek financing to grow their businesses. The Federal Reserve also reports that women are less likely to be approved for small business loans than their male counterparts.

The Equal Credit Opportunity Act makes it illegal to discriminate based on the sex of a borrower. And while on paper, women should be able to get small business loans as easily as men, there are challenges women face when applying for funding. These are systematic in nature but can prevent women from reaching equality regarding business loans and funding.

• Credit - Despite women and men having the same average credit score, women still face headwinds regarding credit. Women hold more student debt than men, and due to pay gaps, they make less money. These financial factors can prevent women from being seen as qualified borrowers.

• Industry - Lenders evaluate each loan application based on financial factors like revenue and industry. Women-owned businesses are more likely to be less profitable industries like health, beauty and hospitality, which could prevent banks from approving financing.

Before women apply for a business loan, they should review their credit history through the eyes of a lender. At mySMBscore women can access valuable insights that can increase their chances of qualifying for a business loan. 

Lenders for Women-Owned Businesses

Kapitus: Kapitus can offer loans up to $750,000 with funding in as little as 24 hours. For women entrepreneurs, Kapitus can be an attractive source for loans. With the ability to serve as a direct lender, or partner with external sources, Kapitus delivers options for funding. For women who love choices (and simplicity), Kapitus can offer both. 

Choose from invoice factoring or revenue-based financing with Kapitus. Additionally, Kapitus can offer long, medium, and short term loan options. As an SBA lender, you can access SBA loan offers through Kapitus too. As with most loans, Kapitus needs to make money too. Therefore, Kapitus loans come with a 2.5% origination fee or flat charge of $395, whichever is higher. Before shopping for a loan with Kapitus, familiarize yourself with factor rates, as this is how their rates are offered. On the downside, Kapitus restricts certain business sectors such as insurance, staffing agencies, financial services, and more. Additionally, if you have an existing business loan with Kapitus or a different lender, you will likely not qualify for a loan with Kapitus. Kaptus advertises not allowing stacking which means carrying multiple business loans simultaneously. 

To get started with Kapitus, review your business financials with mySMBscore. After reviewing and gaining a better understanding of where you stand when qualifying for a business loan, complete the online form with the lender. You may need to submit documentation such as identification, financials, and so forth. Approvals can be granted in as little as four hours after applying. However, SBA loans can take much longer for approval or a loan decision, typically a few weeks. 

OnDeck:

Female business owners, like you, choose OnDeck for a multitude of reasons. From a simple application process to valuable support, OnDeck is a true partner that can help your business grow. As a female business owner, you may face some diversity. As a human, you probably possess certain strengths that are more valuable than others. If financials are not your strong point, a lending partner you can trust can make all the difference. With loan amounts up to $250,000 and a low minimum credit score requirement, OnDeck is committed to helping as many business owners as possible. 

OnDeck can offer a business line of credit or term loan. With an OnDeck loan you can build business credit too which can position you better in the long run. As a business owner, you should always work toward maintaining a solid financial position. 

On the downside (depending on how you view it), OnDeck does require frequent repayments. The positive of frequent repayments is you can pay off your loan faster and monitor it on a more regular basis. With the structure in place to make frequent repayments, it’s harder to ignore or forget the commitment you made. Additionally, OnDeck requires a business lien and personal guarantee.

Small business loans for black, minority, and all  women are available - just as they are for men. A small business loan can help propel your business forward, but it’s a big decision so it’s important to do some research beforehand. Women have some resources specifically available that can help fund their dreams. The first step toward obtaining a small business loan is researching. The next is checking your SMBscore. Keep reading to learn more. 

What are the types of small business loans for women?

While there aren’t any specific business loans just for women, there are a few key types of small business loans that all business owners can apply for.

These include:

• Short-term and long-term loans: These loans are also called term loans. In this type of funding, borrowers will get a lump sum with a fixed interest rate that they repay over a designated time. Loans with fewer than two years of repayment are identified as short-term loans. Repayment periods longer than two years would be a long-term loan, with some loans going up to 20 years or more.

• Business Lines of credit: Obtaining a business line of credit differs from a loan. In this case, a bank will approve you for a credit line that can be utilized on an as-needed basis. While they usually have a higher interest rate and shorter repayment terms, they’re helpful for some owners who need smaller amounts of money for everyday expenses. Plus, you’ll only pay interest on the money you draw.

• Working capital loans: These short-term loans take into account a company’s regular operating expenses. With a high-interest rate and short repayment period, they’re not always a smart choice but can be helpful to cover short-term operational needs.

• ‍Equipment loans: If your small business needs to make a large equipment purchase like production equipment or machinery, this loan might be a good fit for you. They allow women-owned companies to purchase equipment and repay over a period of time and don’t require extensive credit history.

Aside from these traditional loan options, some women-owned businesses or nonprofits might qualify to apply for a grant. While highly competitive, they offer an opportunity to receive funding without having to repay it. To find a grant for a woman-owned business, you can utilize resources like the Women’s Business Center, federal contracting programs, or other government partnerships like Ascent online learning platform or DreamBuilder. We encourage female business owners to determine what type of business loan is best and then learn about the requirements. The next step would be reviewing your SMBscore to determine if you meet the requirements now or what you’ll need to do to qualify.

Are there small business loans for minority women?

Minority women can obtain small business loans through government programs, non-profit grants and specialty private lending programs.

The Small Business Administration offers several unique programs for minority women or under-represented groups. One of the most popular options is the SBA Community Advantage Loan program. This program funds minority business owners who might not be a good fit for traditional financing. With this program, the SBA will ensure up to 85% of the loan, and borrowers don’t have to provide a balance sheet or collateral to qualify.

Some private banks will offer minority business loans with fewer requirements than standard business loans. Additionally, several non-profits offer grant and micro-loan programs to help bolster minority-owned businesses in the community.

Are there small business loans for women with bad credit?

Obtaining a loan as a female business owner with poor credit can be challenging. While there are fewer options for lending, there are still loans available, but you’ll likely have to pay higher interest rates or fees. Most lenders require a good credit score of at least 680, but a few banks - like Fora Financial - can loan to borrowers with a credit score of 550.

You can shop around for online lenders offering loans to those with bad credit and check out local non-profit grant options that are geared toward borrowers with poor credit.

Another option for women entrepreneurs with poor credit is an alternative lending option like merchant cash advance or invoice factoring, which doesn’t rely as heavily on the borrower’s individual credit but is based on the business's income.

To understand all the elements of your credit report that lenders can consider when approving a loan, visit mySMBscore. 

How do you apply for a women’s business loan?

One of the first steps in applying for a women’s business loan is to check your SMBscore for a tailored risk assessment to understand the stability of your business through the eyes of a lender. With access to key lending metrics, you can make better financial decisions that will ultimately help you qualify for a loan. When you’re ready, you can start checking and comparing offers. MySMBscore can help connect you to lenders that are willing to extend you a loan. 

Once you’ve found the best option, you’ll likely have to provide financial information for yourself and your business. This could include tax returns, balance sheets, financial statements and more. Make sure to have these ready to submit as you apply to avoid any delays with obtaining your funding.

If the loan you’re applying for is specific for women or minority-owned businesses, you might have to show documentation that you qualify under those requirements.

How can I qualify for a small business loan for women?

Requirements to qualify for a small business loan will vary from lender to lender, and by the type of loan, you’re applying for. But most application processes will review a borrower’s credit score, the business's revenue and financial statements to determine how much you can borrow and at what terms.

It can be helpful before starting the application process to gather all financial statements for both personal and business accounts. Certain types of loans, like business lines of credit, will have fewer requirements than a traditional term loan. Shopping around for the best loan product for your goals and financial situation is important.

Is it easier for a woman to get a business loan?

Women continue to face systematic and institutional hurdles that make it more difficult for them to obtain a loan. However, whether it’s private lending or applying for grants through local non-profits, women have more options than ever to obtain a business loan.

What are some tips for comparing small business loans for women?

As you shop for the best small business loan, each loan option will be slightly different. And with so many options, it’s important to understand the differences between each loan. When comparing loans, make sure to examine each category:

• APRs. The rate for all fees, including the interest rate.

• Speed to funds. Depending on the funding option you choose, it can take anywhere from a few days to months to get your funds.

• Reputation and offerings. Make sure the bank or financial institution you’re borrowing from is reputable in the industry.

• Fees charged. Sometimes loans will have added fees like the origination fee, prepayment penalty and more. Take a close look at these, as they can be hidden in the fine print.

• Cost to borrow. A total amount of the interest and fees charged by the lender.

• Repayment period. Each loan will offer different repayment periods. If you need longer to pay back the loan and would prefer smaller monthly payments, a long repayment period is best. A loan that is paid off in under two years is considered a short-term loan.

Women that own a business will likely encounter the need for funding at some point. Constantly working to ensure financial stability can help you succeed as well as qualify for a business loan. The SMBscore was developed to create an industry specific, tailor-made risk assessment that can be used to determine the financial stability of small and medium-sized businesses (SMBs). It allows female business owners to review their finances through a similar lens that a lender will. At mySMBscore you can view insights that lenders look at to approve your financing. Our platform can help you determine areas of improvement so that you can be as prepared as possible before applying for a loan. We can even help connect you to lenders that you have the best chance of qualifying for. Our goal is simple - to help businesses prosper. 

Empowering women owned businesses to get the funding they need. . . check your SMBscore today!

‍