Best Small Business Loans for Women

How Women-Owned Businesses Can Get a Loan in 2023: The Definitive Guide

Clarify Capital is dedicated to helping women entrepreneurs live the American dream.

Small business loans offer a myriad of benefits to business owners. First and foremost, it provides companies capital when they need it, either for expansion or to manage their cash flows. A loan can also help businesses build credit. Hence, small business loans help companies survive, thrive, and succeed.

According to the National Association of Women Business Owners (NAWBO), more than 11.6 million firms are owned by women in the United States. These numbers show that women are becoming entrepreneurs and leading businesses more than at any other time in history. It also means more and more female entrepreneurs are out there fundraising and applying for grants and loans.

Since less than 3 % of all venture capital dollars go to female-owned companies, many women entrepreneurs turn to small business loans for funding. If this interests you, keep reading because we discuss the best small business loan options for women.

The Best Small Business Loan Options for Women

The best time to apply for business financing is when your business is in good shape. Now that you know what you need to apply for a loan, read on to learn about the different types of business loans you can apply for below.

SBA Loans

The Small Business Administration (SBA) is a federal agency that offers business financing through grants and loan programs. It also supports business development by offering business training and mentoring entrepreneurs. Check out their small business grants for women and see if you qualify.

Although the SBA doesn’t have loan options specific to women business owners, SBA loans are probably the best type of loan any business owner can qualify for. Borrowers typically get low-interest rates and longer repayment terms. Not to mention, you can use the funding for nearly any business purpose.

Even though the agency draws up the financing options, it doesn’t fund the loans. Instead, borrowers work with SBA-approved lenders. And then, SBA guarantees a portion of the loan if the borrower defaults. The most popular SBA loans are the microloan program and the SBA 7(a) loan program. Microloans lend small amounts of money — up to $50,000 — to startups, small businesses, and non-profit organizations. At the same time, the SBA 7(a) loan program offers capital for the purchase of real estate, operating expenses, and the establishment of new businesses.

For all its benefits, the main drawback of applying for SBA loans is the strict requirements. You’d have to submit a lot of paperwork, which makes the application process longer compared to other loan options in the market. So, it may not be the best choice if you are looking to get funding quickly.

Business Loans From Online Lenders and Banks

A small business loan gives you access to capital for your business needs. You can use the funds to buy assets such as equipment and machinery to increase your income. Business owners also borrow to manage their cash flow and pay for day-to-day operating expenses like rent and payroll while waiting for invoices to clear. In addition, business loans help companies fund their expansion ideas, such as opening a new location or hiring more people to increase production.

Small business loans come in many forms, including short-term loans, lines of credit, business credit cards, and many more. These loans can also be secured or unsecured. Depending on the type of loan product you are applying for, the requirements and terms can vary. Each lender would have its own requirements, so be sure to verify what they need from you.

If you’d rather not spend your time sending loan applications to every lender, fill out our online form or speak to a Clarify advisor. We will work with you to find the loan option best suited to your business needs.

Working Capital Loans

Businesses apply for working capital loans when they need additional cash to cover day-to-day operations. Operating expenses include:

• Rent
• Salaries
• Utilities
• Inventory

Working capital loans are commonly used to cover cash flow gaps to make sure the company’s bills are paid on time. Cash flow gaps can sometimes happen when customers’ payments come in late or there’s an emergency like equipment breaking and needing repair. Working capital loans also provide small business owners with funding to keep their businesses afloat during low sales seasons. This is why a working capital loan is ideal for women entrepreneurs who need access to quick funding to cover daily business expenses.

In addition, most working capital loans are unsecured, which is helpful for companies that may not have assets to secure a loan. These types of loans are also easy to apply for and qualify for. Most loans come with flexible repayment terms as well. The different kinds of loans that are considered working capital loans include some SBA loans, short-term loans, invoice financing, equipment loans, and merchant cash advances.

Business Line of Credit

Business lines of credit are the most popular loans for small business owners to access capital. The great thing about a line of credit is its flexibility. It provides quick access to working capital. And you’re free to use it for any business purpose, whether it’s to manage your cash flow or to expand your operations.

With a business line of credit, borrowers get access to capital with revolving credit. This means your account will have a set credit limit that you can use on an as-needed basis. It works the same as a credit card or a home equity loan. You only get charged interest and have to make payments for the amount you withdraw. Then, the amount gets replenished every time you pay, which you can borrow again.

A line of credit is an excellent loan option for businesses looking for flexibility and access to cash when they need it. This is why most small business owners choose to open credit lines even when they don’t need cash at the moment. Unlike other types of loans, a line of credit doesn’t have a repayment schedule, and the business owners are not burdened with unnecessary debt. It’s also an excellent way for entrepreneurs to build a credit profile for their companies.

Equipment Financing

Equipment financing provides small business owners capital to purchase new or used equipment needed to run their companies. It’s a type of loan that’s ideal for small or new businesses planning to buy business equipment and industrial machinery. Heavy equipment and specialized tools can be expensive, which can be difficult for businesses with limited capital to pay for upfront.

So, equipment financing offers a solution for business owners who need cash to buy the machinery necessary to run their daily operations. Companies can take out equipment loans to fund various purchases, including medical equipment, farm vehicles, or computer equipment.

You can apply for equipment loans through banks and online lenders. Although, banks would have more strict requirements because they generally offer more favorable interest rates and terms. The amount you qualify for will depend on the purchase price of the equipment. But you might be able to finance up to 100% of the equipment's value if you work with an online lender. In addition, the loan term typically follows the expected life of the equipment as well.

Invoice Factoring

Invoice factoring, also known as invoice financing, is a financing option that allows you to borrow money using your unpaid invoices as collateral. Factoring is technically a sale, not a loan because the factoring company is giving you an advance on your accounts receivables in exchange for a fee.

So, a lender pays you an upfront amount of up to 100% of your total invoice value. When the invoices come due, the lender collects them from your customers. Then, they deduct the factoring fee, and any remaining amount is paid to you.

The application process for invoice factoring is quick and easy. Most businesses that get approved receive their money within 24 hours of completing the requirements. Hence, it’s an excellent option for companies that need cash infusion fast. Since the approval for invoice financing is based on the creditworthiness of the customers with outstanding invoices, there are no personal credit score requirements. That’s why it’s also ideal for business owners with bad credit.

Furthermore, invoice factoring offers a solution for entrepreneurs who are looking for unsecured loan options. Because the account receivables are the collateral, no additional assets are needed to secure invoice financing.

Merchant Cash Advance

A merchant cash advance (MCA) is an agreement where a business receives cash upfront in exchange for a percentage of its future sales. Similar to invoice factoring, MCA isn’t a loan but an advance. Approval is based on a company’s creditworthiness, future sales, and past debit card and credit card sales.

In a merchant cash advance agreement, the borrower and the lender agree on the loan or advance amount, the amount to be paid back (loan amount plus fees and interests), and the holdback percentage. The holdback percentage represents your daily or weekly payment. The percentage is applied and withheld from your sales as payment until your balance is paid in full.

MCAs offer an alternative funding option for business owners to receive capital without collateral or personal credit requirements. It’s ideal for businesses that process a high volume of credit card transactions and have consistent cash flow. If you’re considering an MCA, make sure your business can handle daily or weekly reductions to your cash flow.

How Hard Is It for a Woman to Get a Business Loan?

10,000+ women-owned businesses trust Clarify

There’s no denying that female business owners face many challenges when starting and growing their businesses compared to their male counterparts. However, women do have equal business loan opportunities as other genders. Even though there is a disparity in the funding that men and women-owned businesses receive, the introduction of alternative lenders and crowdfunding have made it easier for female business owners to obtain financing.

Check out the most important factors that lenders consider when reviewing loan applications below.

What Determines Your Ability to Take Out a Business Loan?

Each lender has its own eligibility requirements. However, most lenders will look into your credit score, ask for proof of time in business, and require proof of monthly revenue. Keep reading to find out how they use these criteria to review your loan application.

Your Credit Score

Whether you’re applying for a mortgage or a small business loan, lenders check your credit score to assess your creditworthiness. Although it may seem arbitrary that a three-digit figure represents your financial history, a higher score means the ability to borrow money at the lowest rates available. Hence, it’s in your best interest to monitor your personal credit score, especially if you’re planning to apply for loans.

To start, you can get a free credit report through AnnualCreditReport.com. Credit reports detail personally identifying information such as:

• Your name
• Address
• Social Security number
• Open and closed credit card accounts
• Loans
• Bills in collections
• Liens
• Bankruptcies

If you want to be proactive, you can also check your credit score through FICO. It ranges from 300 to 850. FICO is the biggest source of credit scores and is most commonly used by creditors.

Traditional banks and other financial institutions typically require a minimum credit score of fair to excellent to approve small business loans. But at Clarify Capital, we work with small business owners with all types of credit. If you’re a female entrepreneur with a credit score of at least 550, we have financing options for you.

Your Time in Business

Your time in business also impacts your ability to get approved for loans because lenders use how long your company has been operating to assess their risk in lending to you. The rationale is that lenders have a better chance of getting their money back from established businesses.

In particular, traditional lenders like banks and credit unions require a verifiable business history of at least two years. However, working with Clarify Capital gives you access to more than 75 alternative lenders. So, you can get business funding as long as you’ve been in operation for at least six months.

Your Monthly Revenue

In addition to credit scores and time in business, your eligibility for a loan depends on the lender’s minimum annual revenue requirements as well. To confirm your business income, you may be requested to provide bank statements, income tax returns, and profit and loss statements, along with other necessary documents.

Of course, creditors want to know that you have a consistent cash flow. It shows you can afford to pay back your loans. At Clarify, we recommend that your business generates a qualifying revenue of at least $10,000 a month.

Your Desired Loan Amount

Lastly, your desired loan amount will be considered when applying for a loan. Lenders typically use your revenue to calculate the maximum loan amount you can qualify for. They review your debt-to-income ratio to determine whether you can afford to take on additional debt. This practice protects both lenders and borrowers because the creditors can make sure they’re getting paid, and you won’t be burdened with more debt than you can handle.

How to Apply for a Business Loan as a Woman Entrepreneur

The speed of the application process is a top priority for women-owned businesses. We take pride in having the quickest funding process — all you have to do is fill out our online application. It takes less than a couple of minutes.

Here is a complete overview of how our simple process works:

Step 1: Identify how much you need to borrow

While we’d all love to get $50 billion dollars, the best approach to figure out how much to borrow is understanding your business goals. Write down how much capital you need to pay for expenses to sustain and grow your company. This will help you borrow the right amount and lower your costs.

Step 2: Apply online

Once you apply for a business loan with us, you’ll wonder why can’t everything in life be so simple. It’s the core reason why over 10,000 women-owned businesses have chosen Clarify Capital as their lending partner.

Step 3: Get your documents ready

Once you’ve applied online, our team will reach out to you to better understand your business. All you need is three months of bank statements to verify your cashflow. That’s it. There is no lengthly paperwork to fill out — we’ve got you covered.

Step 4: Go over loan offers with your Clarify advisor

We’ll walk you through all your available options to help you make a better decision. There are no hidden fees or mumbo-jumbo to figure out. We keep it fully transparent.

Apply for a Business Loan

Why Female Entrepreneurs Choose Clarify Capital

There are many ways to raise capital to fund and grow your business. But fundraising, borrowing from family and friends, and taking on investors can sometimes take too much effort and time. And sometimes, these options require you to give up equity in your company.

However, you also recognize the importance of getting the capital you need to run and grow a profitable business. So, if you’re looking for accessible loans for female business owners, Clarify Capital is here for you.

At Clarify Capital, we handle all the application paperwork to save you time and money. We also know navigating small business loans can be overwhelming. That’s why you’ll have a dedicated Clarify partner who will work with you to choose the best option based on your financing needs. Apply now and receive your funding in as little as 24 hours.

FAQ about Business Loans for Women

We strive to make getting a loan simple and transparent. Here are the most frequent questions female-owned businesses ask our advisors before getting funded: