By evaluating the recent data, the small businesses owned by women are growing at an exceptional rate. The surprising fact is that how women-owned businesses can develop at this outstanding rate while they have limited access to capital as compared to businesses owned by men.
As per the study carried out by the Women’s Business Council’s High Growth Women-Owned Businesses’ Access To Capital, small businesses owned by men get almost six times higher capital as compared to small businesses owned by the women. Yet without the external business financing as men business owners, women business owners are likely to look their small business have quick growth as compared to their male counterparts.
As women-owned businesses are making the most of their capital and women’s business resources that doesn’t indicate they are not searching out for some external funding to help with purchasing a business, getting equipment for business, helping to buy inventory for holiday season, hiring new workers and/or help with marketing things.
Considering that, take a look at some of the financing options available to help women-owned businesses start and develop their businesses.
- SBA Loans
Almost 14% of Small Business Administration (SBA) loans went to businesses with women making up over 50% of the ownership. Another 13% of SBA funding went to businesses owned by women with less than 50% possession. As everyone know that the SBA doesn’t loan money to businesses; however offering guarantee on a part of a lender’s risk, guaranteeing they get paid even in case the business or business owner defaults. By offering guarantee on a part of the loan, the SBA decreases the risk for the business lender.
The SBA covers interest rate a lender can charge making it most attractive of all the available business funding products. However you need to be organized to gather all pertinent documents, as the SBA loans require relatively more paperwork as compared to any other funding program.
- Bank Loans
Banks generally provide term loans and lines of credit to women-owned businesses. Bank loans and lines of credit are generally the most attractive business loan products, because they generally have best rates, normally 4-10%. While bank loans don’t require lots of paperwork as SBA business loans, the paperwork continues to be considerable, and the approval process is strict.
- Line of Credit
A business line of credit may be an excellent funding option for women business owners who need quick funding when the time comes. A business line of credit works almost the same as credit card, being that you are preapproved for a maximum amount of funding that you do not have draw upon, consequently you’re only paying interest at the amount you simply use.
- Asset Based Loans
Asset based financing enables businesses to leverage their business resources to get loans and lines of credit, when other type of traditional funding is unavailable.
With asset based funding, a lender will generally forward the business a percentage of the worth of the business’s ARs, inventory, business equipment and some other asset.
- Alternative Loans
For women business owners with not so good credit score, or for businesses that needs quick funding, an alternative loan can be an awesome preference. Alternative business loans have less stringent criteria for approval with a much quicker funding process as compared to a bank loan. The rates are usually among 9-16%, with repayment between 6 months and 5 years.
- Merchant Cash Advance
When traditional types of business funding aren’t available, many small business owners are using merchant cash advances instead. A cash advance isn’t a loan; however is instead the sale of future credit card. The approval and funding process of cash advance is quick and quite easy. However, since the lender is taking high risk, the rates related to a cash advance are quite higher as compared to traditional financing.
- Government Grants
These are the scarcest types of business financing resources. Simultaneously as the government doesn’t offer grants for women-owned businesses, the SBA does help women-owned businesses in finding grants for women-owned businesses.