Despite the need for skills and determination to start a small business, there is a need for money. Competitive business environment makes it harder. Women being the fair gender face more challenges due to market constraints. Such constraints include limited access to information and bias.
In the U.S women own 39% of all companies. Although the numbers seem good there is the need for improvement towards reducing the gap between male and female-owned businesses.
Five best sources of loans for small women businesses
- Local female-centered group loans within your region – women-owned businesses have overwhelming support from many states. Information such as cash flow projections, income tax, credit authorization, and financial statements are required. Though the loans might be small depending on location, the most significant advantage is adequate time to pay back.
- Peer-to-peer business loans. Lending club is among the platforms of peer to peer lending. The lenders act as a connection between investors and clients in need of money. This form of loans has no restrictions regarding spending. The loans have no restrictions on use and are offered in flexible terms. The business though has to meet some revenue score to acquire the loans.
- Small business administration loans. The loans have meager interest rates and are offered to small businesses whose credit score can’t qualify for other investments. These loans require collateral and a healthy business plan. The most significant disadvantage is the time needed to secure the loan as well as the difficulty in acquiring it.
- Traditional banking institutions loans. These include banks and insurance agencies. Loans from these institutions have a constant interest rate. Research has shown that banks usually process long for businesses to reduce the motivation for small businesses likely to fail. For this kind of loan, the company must provide collateral such as building, land or vehicles.
The above discussed are the most accessible and reliable channels for women loans to start a business. Other channels include bootstrapping, invoice factoring and selling business equity to potential investors. This help women businesses which don’t have enough revenue or collaterals to secure loans from banks.
Why is it hard for small women businesses to get loans?
- Small community finance institutions have vanished. More prominent institutions have submerged the smaller community banks. These big banks are not willing to give small loans to these women businesses due to high risks. This hinders the growth of potential companies owned by women.
- Modern business is more of service provision oriented. These businesses lack the criteria such as collaterals required by banks to give loans.
- Venture capital is only concerned with companies with relatively high potential to grow.
Women being minority groups face a more significant challenge in acquiring financial support for businesses. The founder of CCVRS, INC., Craig Lambert ascertains that a company can only be successful if there is some risk involved. There is a need to reduce gender biases to secure women loans to start a business venture.